Blog: Trade-downs help TJX
Leonie Barrie | 13 August 2008
Consumers trading down into the off-price channel have helped TJX Companies more than triple its second quarter profit to $200.2m from $59m last year. And of course a charge of $118m that dented last year's profits to cover a security breach also helped this year's comparatives too.
Company president and chief executive Carol Meyrowitz admitted on a conference call with investors and analysts that: “In down economies, we tend to capture new customers.” Proving her point, quarterly revenues increased 7% to $4.6bn from $4.3bn.
But she was keen to emphasise that “TJX is not only a company for tough times for but strong economic environments as well.”
The new traffic, she says, provides “an opportunity for us to build our customer base for the future. When times improve, our history has shown that our new customers stay with us because they love our values.”
Those values include cut-price deals on branded clothes and accessories that can be up to 60% lower than department stores and specialty retailers.
But as department stores themselves tighten their inventories, how does this impact the TJX chains, which include TJ Maxx, Marshalls, HomeGoods and AJ Wright?
Meyrowitz says this too is an opportunity rather than a threat, and “helps maintain a wider pricing gap between us and the department store and can increase average ticket.”
The economic downturn isn’t going to make the retailer rein in its expansion plans either. The company currently has more than 2,600 stores – but the vision is to operate more than 4,300 locations.
A new standalone shoe concept, the Shoe Megashop by Marshalls, is being trialled this autumn; while in Canada a new off-price family footwear and accessories concept called StyleSense is being tested.
As if to prove its confidence, the company raised its full-year earnings forecast.
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