The last few years have not been kind to retailers. Inventory misalignment has dragged down revenue and working capital. Companies like Macy’s are closing locations and shrinking stores, while the physical presence of chains like Bed Bath and Beyond is gone altogether.
But that is not to say that all retailers have experienced the same challenges. The losses experienced by traditional retailers have been TJX’s gain. TJX, the company behind chains like TJ Maxx, Marshalls, and Home Goods, is one of the healthiest firms in the $900 Billion global off-price apparel and home fashion market. They haven’t just survived the last few years, they have thrived.
Making the Most of a Good Opportunity
Although bricks and mortar retailers are struggling, merchandise companies still want their products on store shelves. This has increased the competition for available shelf space and created better deals for TJX’s buying team.
The company closed their last fiscal year up 9 percent year-over-year, and industry analysts have taken note.
In April 2023, S&P Global analysts wrote, “The company’s sophisticated supply chain capability allows it to provide frequently updated merchandise at discounted prices, creating a treasure hunt shopping experience.”
In a research note, the Telsey Advisory Group wrote, “The training, experience and tenure of the TJX buying teams are a major competitive advantage. The teams are constantly shopping competitors, identifying opportunities, and communicating with the company’s 21K vendors in order to deliver value for the TJX customer.”
TJX is doing between 30 and 40 percent more business with most suppliers than they were just a few years ago, an upward trend that ties to other trends going on in retail. As other retailers offloaded mismatched or unwanted inventory, TJX seized the opportunity and bought up stock at reduced prices. At the same time, freight costs were falling, making it easier to transport merchandise.
A Resilient Operating Model
Part of this advantage is rooted in the business model of the TJ Maxx and Marshalls stores.
They have never provided a steady or expected supply of specific goods. TJX talks about their shopper experience as providing a “treasure hunt” experience for consumers. This experience appeals to customers in multiple demographics, making the company more resilient than other retailers as the economy shifts.
TJX is known for making quality, branded merchandise available at a discount and often serves as a retail “liquidation channel.”
Off-price retail is a large market. An August 2023 edition of the Market Wake-up Call Newsletter on LinkedIn estimated that the global off-price apparel and home fashion market is worth $900 Billion – an opportunity TJX has gone after.
They usually charge prices 20 to 60 percent below what full-price retailers charge for comparable items, and their advantage goes far deeper than the retail experience. TJX has a track record of disciplined inventory and expense management that has allowed them to report an impressive 9 percent operating margin.
Now Slowing Down
According to Retail Wire, department stores represent approximately 2 percent of the retail market, compared to 10 percent they held in 1992. They now hold one-fifth of the market share they held 30 years ago.
As then TJX CEO (now Chairman of the Board) Carol Meyrowitz wrote in a 2014 article published in the Harvard Business review, “Our long-term vision is to grow TJX revenue to $40 billion and beyond. Even with more than 900 merchants in our buying organization, to achieve that level of growth we need to expand our base of buyers and develop a larger talent pool in every area of our business.”
And how are they doing with those goals?
Today, TJX has 1,300 buyers and for the most recent fiscal year, which ended in January 2024, they reported over $50B in revenue.
It would be hard not to respect what they have accomplished, from building their impressive buying team to not having too much pride to allow suppliers to deny working with them while still building long term relationships.
The TJX team can talk about creating a treasure hunt-like experience, but it seems like understanding the inner workings of TJX is the real prize.
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