Marshalls and T.J. Maxx have semi-cult followings. The companies more or less created the treasure hunt model which drives customers to stores even when they don't need something.
My wife and son will go to Marshalls simply to see if the local store has a good deal on a designer brand. They might go there with an idea in mind, like “I need a few more nice shirts,” or “I could use a new dress for that event in a few months,” but mostly they go as entertainment.
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Invariably, even when they don't need something my son finds some Polo socks or a T-shirt from a brand too trendy for me to know of its existence.
That's not unique to how my family shops at Marshalls, it's essentially the business model for all the brands under the TJX banner. Get people into its stores by offering an ever-changing selection of amazing deals.
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It's a business model that has spawned a lot of knockoffs, none of which has quite captured the magic of the two TJX Companies (TJX) sister sister companies. Marshalls and T.J. Maxx drive foot traffic which seems to results in that invariably leads to sales even when people had no plans to buy anything.
That has led to the #MarhsallsFinds hashtag where people share what they bough at what prices. Of course, for that to work, the company needs access to inventory.
Image source: Shutterstock
The retail apocalypse is good for TJX
T.J. Maxx and Marshalls buy retail inventory other retailers can't sell. Sometimes that means getting high-end brands at discount prices when the original manufacturer makes too much or misjudges demand.
The original seller would hurt sales of new merchandise if it offered massive sales right next to those items. Instead, those items get bought by TJX which generally can't advertise the brands it has (hence the viral hashtag.
Struggling retailers and even whole chains going out of business creates opportunities for Marshalls and T.J. Maxx. That might mean buying lots from a chain that has closed or taking on an order a manufacturer might have otherwise been stuck with.
TJX CEO Ernie Herrman is bullish about his company's positioning.
“I'd like to start with a few comments on the current environment and the reasons for our continued confidence in our business. We have a very long track record of successfully navigating through many types of challenging economic and retail markets,” he shared during the company's first-quarter earnings call.
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He believes that adversity has actually been a positive for the various TJX brands (which also includes HomeGoods).
“Each time, we've emerged as an even stronger company with greater market share opportunities. We have a very experienced leadership team that has worked together for multiple decades. While we're not immune to tariff pressure, we are laser focused on our initiatives to offset them by remaining flexible and executing our opportunistic buying approach,” he shared.
Here's why TJX is confident
Herrman explained why he thinks his brands are well-positioned.
“First is the value proposition we offer to our customers. For us, value is a combination of brand, fashion, quality and price. Our customer surveys tell us that we have an excellent reputation as a value leader in each of our geographies,” he said.
He also believes that the current market should deliver customers to his stores.
“As a trusted value retailer, we have historically attracted new shoppers to our stores in many different types of environments. Therefore, we are convinced that we will have an opportunity to gain market share if more consumers seek out value in the current environment,” he added.
Herrman also believes that TJX has a structural advantage over its rivals.
“Our team of over 1,300 buyers source goods from an ever changing universe of over 21,000 vendors from more than 100 countries around the world. We have a global buying infrastructure and supply chain that has been in place for multiple decades,” he added.
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CFO John Klinger also gave some color on inventory and market opportunities.
“Moving to inventory. Balance sheet inventory was up 15% and inventory on a per store basis was up 7% versus last year. We feel great about our inventory levels and have been taking advantage of the excellent deals we have been seeing in the marketplace. Availability of merchandise remains outstanding and we are set up very well to continue to flow fresh assortments to our stores and online,” he shared.
