TJX Cos. on Tuesday reported that third quarter net sales rose 6% to $10.5 billion. The T.J. Maxx and Marshalls banners together (known as Marmaxx) saw net sales rise to $6.4 billion from $6 billion in the year-ago quarter, according to a company press release.
Consolidated comps rose 4%, on top of last year's 7% rise and above the company's expectations, the retailer said. By brand, Marmaxx U.S. comps rose 4%, HomeGoods U.S. comps rose 1%, Canada comps rose 2% and international comps rose 6%, the company said.
Net income in the quarter rose to $828 million from $762 million a year ago, as gross profit declined by 0.1 of a percentage point to 28.8%. During the quarter, TJX boosted its store count by 107 to a total of 4,519, increasing square footage by 4% year over year. The company also expanded internationally with a $225 million investment in privately held Russian off-pricer Familia, taking a 25% non-controlling minority stake.
Score another win for TJX, and, more broadly, off-price, which stands in stark contrast to the woes of department stores. In fact, the company's banners may be better at selling those retailers' inventory than they are themselves.
Inventory struggles at department stores are feeding the TJX inventory pipeline and continue to "fuel phenomenal access to goods," according to a note from MKM Partners analysts. "Structurally, we believe inventory access only gets better from here, which should support ongoing apparel growth," MKM Managing Director Roxanne Meyer said in emailed comments, in which she also called e-commerce, with its high rate of returns, another "catalyst for access to best-in-class merchandise."
In a statement Tuesday, TJX CEO Ernie Herrman also marveled at the quality of merchandise available to the company's buyers, noting the potential boon for the holidays.
Both Marmaxx and the company's international sales are also "benefiting from disruptive events" like tariffs and economic weakness in Europe, Meyer also said. Add to that perhaps a cloudier economy both here and abroad, which is sending more shoppers in search of deals, according to GlobalData Retail Managing Director Neil Saunders.
That is sparking price cuts at full-price stores, too, but many of those retailers are failing to provide a customer experience or level of merchandising to drive people into stores, he said. "By contrast, TJX's assortment is much better curated and resonates with shoppers," he said in emailed comments. "We also noted an improvement in the quality of TJMaxx's ranges compared to the second quarter, something that helped to ease up conversion and basket sizes."
HomeGoods is proving to be a weak spot, however, he warned. That's partly due to a softening of demand for home products, but also because the company is failing to provide enough merchandise turnover, which drives repeat visits to its apparel-based stores, he said.
Herrman noted that "customer traffic was the primary driver of the comp store sales increases at each of these four major divisions," and that, with a strong start to the current quarter, the company is poised to do well at the holidays and continue to take market share even beyond that, at home and abroad.
That would be a repeat of the past few years, when TJX took share at the holidays thanks to an appealing gift assortment, according to Saunders. "We expect this to be replicated again this year with the messages amplified by an increased desire among consumers to secure great value for money," he said.