Low cost retail is making a comeback as consumers crave treasure hunts.
Buyers’ reflection can be seen in a window of a TJ Maxx store in Peoria, Illinois.
Daniel Acker | Bloomberg | Getty Images
Any doubts that shoppers would return to discounters to browse shelves in search of bargains were allayed this week when TJX Companies and Ross Stores reported their first quarter earnings.
Sales of both companies surged above analyst estimates as consumers returned to their stores to search for new outfits, shoes, luggage and housewares as the lockdowns caused by pandemics wore off.
TJX and Ross cited pent-up demand from buyers, many armed with additional stimulus dollars in the past few months, but also a desire from many people to keep looking for good deals. The so-called treasure hunt in stores could be something that many consumers are craving for more than they were before the Covid health crisis.
“We believe the appeal of our fun treasure hunt shopping experience provides consumers with a compelling reason to shop with us,” said Ernie Herrman, CEO of TJX, on a teleconference on earnings. “In-store shopping doesn’t go away.”
“We see our stores as a desirable destination for stress-relieving consumers,” said Herrman, “and also a great place to shop when they’re looking for inspiration and discovering new things that are difficult to replicate online.”
“Our business model is now getting more resonance than it was before Covid,” he said.
A year earlier, TJX had more than halved net sales and posted a net loss in the first quarter as the pandemic forced the company to temporarily close more than 4,500 stores in the US and abroad. It was a devastating blow to the company that relies on in-store purchases. TJX has an online shoppable platform for some of its brands, including TJ Maxx, but not all.
Ross also posted a loss in the year-ago period when all stores closed from March 20, 2020 through the end of the quarter.
But this week, TJX made a comeback in the first quarter as net sales jumped nearly 130% from $ 4.41 billion last year to $ 10.09 billion and, according to Refinitiv, Wall Street estimates 8, Exceeded $ 62 billion. TJX is the parent company of Marshalls and TJ Maxx.
Although stocks fell after the blowout quarterly report, it was largely due to the ongoing fighting the company is facing outside of the United States. Due to Covid, TJX has still closed around 300 stores in Canada and Europe. In the second quarter, TJX forecast that its Canadian and European locations would remain closed for 17% and 7%, respectively, of the period.
TJX shares are down around 1% since the start of the year.
A pedestrian walks past a now hiring sign at the Ross Dress For Less store in San Rafael, California on April 2, 2021.
Justin Sullivan | Getty Images
Ross revenue in the first quarter more than doubled to $ 4.52 billion, compared to $ 1.84 billion a year ago. That surpassed Wall Street’s estimates for $ 3.87 billion.
CEO Barbara Rentler said the company is particularly optimistic about its chance to gain market share from the growing number of retail store closures and bankruptcies that have occurred in recent years. In addition to his business with Ross Dress for Less, Ross also owns DD’s discounts.
For the full fiscal year ending January 29, 2022, Ross predicts comparable revenue growth of between 7% and 9% compared to 2019.
Ross stock has fallen less than 1% since the start of the year.
“We still expect a sequel [market] Stock gains who believe that off-price gains are winning because they don’t have e-commerce, not in spite of everything, “said Simeon Siegel, an analyst at BMO Capital Markets.
It is true that these companies faced more problems than other retailers during the pandemic due to their lack of online presence. The off-price business has traditionally been focused on the store experience, not the internet. Ross does not have an ecommerce site. The discounter chain Burlington Stores phased out its website in early 2020.
But now that consumers are regaining the freedom and confidence to leave the home and store, it may not matter so much.
“Hunting for a bargain and finding a bargain has returned with a little vengeance,” said Neil Saunders, managing director of GlobalData Retail, in an interview. “I think the value segment could actually find itself with a really good influx of customers.”
The positive results from TJX and Ross caused the Telsey Advisory Group to raise its expectations ahead of Peer Burlington’s earnings report, which is expected on May 27.
For the first quarter of 2021, Telsey now expects Burlington to post earnings per share of $ 1, after a previous forecast of 62 cents. Net sales grew around 127% year over year to $ 1.81.
While maintaining an outperform rating on Burlington shares, the company raised its target price from $ 320 to $ 370 in a statement to clients on Friday. Burlington stock closed at $ 321.44 on Thursday, up 22% year over year.
The department store chain Nordstrom, which operates the off-price chain Nordstrom Rack, will also publish its quarterly results after the bell on Tuesday.
– CNBC’s Michael Bloom contributed to this report.
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