Amid reports of struggling sales among other retailers, T.J. Maxx has benefited from the growing interest and support of Gen Z and millennial shoppers.
“We continue to attract an outside number of younger customers to our stores, including many Gen Z and millennial shoppers, which we believe bodes well for the future,” said Ernie Herrman, president, chief executive officer, and director of TJX Companies, during the companies Q1 2023 earnings call on Wednesday (May 17). Herrman further points out that T.J. Maxx has observed significant foot traffic in its stores from diverse consumer segments spanning different income brackets.
In light of this, the retailer has unveiled plans for a significant expansion of its global store network, aiming to open over 1,400 new stores in the long run.
Herrman emphasizes that the retailer’s increased confidence in expanding further is not solely derived from its current earnings report, but also from its adeptness in choosing prime retail locations.
“We don’t just go in and say, ‘Oh, we should do more of this category of business because that’s what Bed Bath & Beyond did,’” Herrman said. “We do it by location and by the category of businesses as we think they stood for. And we say, yeah, there’s more market share opportunity for us in those categories.”
Furthermore, Herrman notes T.J. Maxx’s strong confidence in the availability of ample inventory in the marketplace to support their growth plans. Over the past year, the company’s 1,200 global buyers have successfully procured merchandise from a wide range of about 21,000 vendors, including numerous new ones.
Over the years, T.J. Maxx has consistently maintained a steady flow of high-quality branded merchandise, never facing shortages. Participating brands are drawn to collaborate with T.J. Maxx due to its size, widespread presence, and buying power, as stated by Herrman. And with nearly 5,000 stores and continuous global expansion, the company’s outlook remains optimistic.
“We offer vendors a very attractive way to grow their business and clear their excess inventory quickly and discreetly,” Herrman said.
The retailer’s confidence in its strategy stems from its commitment to establishing a highly distinctive global business through its price point offerings as well as its investments in educating its staff. The company has dedicated efforts to cultivate specialized talent and teams, with many leaders boasting decades of experience. Moreover, there is a significant emphasis on developing younger associates and grooming the next generation of leaders within the organization.
“I truly believe that the depth of our off-price knowledge and expertise within TJ X is unmatched,” Herrman said.
As T.J. Maxx continues to lean into its pricing capabilities, consumers are responding, even if they don’t have the immediate funds to make purchases. This is particularly evident during a time of elevated inflation, where there has been a noticeable change in credit card usage patterns.
According to recent data, 33% of cardholders have increased their reliance on credit cards in the last six months, while only 15% have decreased their reliance. The upward trend in credit card usage is primarily driven by younger generations and high-spending revolvers— those who typically pay 40% or more of their expenses using credit cards and regularly carry a balance.
The impact of inflation directly influences a cardholder’s reliance on credit cards. For instance, individuals who experience very or extremely negative effects from inflation are significantly more likely to increase their credit card spending. In fact, 43% of those facing severe inflationary impacts tend to rely more on credit cards during such periods.
See also: Gen Z, Millennials Use Credit Cards 30% More Than the Average Cardholder
Bed Bath & Beyond’s bankruptcy filing has left a ton of opportunity for retailers, including T.J.Maxx, according to the company.
“We never like to name the other retailers where it’s happening, but we do strongly believe that creates market share opportunities and market grab for us,” Herrman said.
In the first quarter, HomeGoods, the second largest division of TJX, experienced a 7% decline in sales. The segment faced challenging comparisons as it tried to match the “outsized sales” it achieved during the pandemic, according to management.
HomeGoods generated about $1.97 billion in net sales for the quarter, representing around 16% of TJX’s total net sales. As Bed Bath & Beyond plans to close its 360 stores in the coming months, retail analyst Aneesha Sherman from Bernstein predicts that TJX, particularly HomeGoods, will reap the benefits.
And like T.J. Maxx, other retailers are looking to reap those benefits. The Container Store, for one, announced a discount promotion until May 31, offering customers a discount if they bring in a “competitor’s blue coupon.”
Similarly, Big Lots from April 27 to May 7 provided a 20% discount on purchases of $50 or more to customers who present a Bed Bath & Beyond coupon.
See also: Merchants Offering Discounts and Support to Bed Bath & Beyond Customers
Despite reporting a revenue miss in the latest quarter, Herrman claimed to be “very pleased” with the company’s performance during the first quarter.
TJX finished out Q1 2023 with $11.8 billion in net sales marking a 3% increase compared to the first quarter of the previous fiscal year. The company also experienced a 3% growth in overall comparable store sales. Net income for the first quarter of fiscal 2024 amounted to $891 million.
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