The retailing industry is being disrupted by e-commerce shopping, but TJX Companies (TJX +0.94%) thinks it has the right strategy to keep expanding through the shift. In fact, CEO Ernie Herrman and his team say they're confident that the off-price retailer has a long runway for growth ahead, both in its store footprint and in sales at existing locations.
In a conference call with analysts, executives discussed how their recent quarterly results support that long-term optimism. Here are a few highlights from that presentation (all quotes are Herrman's).
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Sales gains
This quarter marks the 15th consecutive quarter of customer traffic increases for TJX Companies and [the TJ Maxx and Marshalls brands]. We believe that this consistency in our customer traffic increases speaks to the strength of our underlying business, our ability to succeed through many types of economic and retail environments, and our resiliency as online retail is growing.
The retailer's 3% increase in comparable-store sales (sales at existing locations), nearly matched its healthy holiday season results. Executives said the surprisingly strong gains were powered by robust customer traffic that they believe shows off the power and flexibility of the company's discount-focused retailing model. And sure enough, TJX outpaced full-price rivals like Target, which grew store comps by 2% in the period and suffered traffic declines as recently as last year. Peer Ross Stores, meanwhile, expanded comps at a similar 3% rate in the quarter.
Long-run optimism
The depth and breadth of our off-price knowledge in the U.S. and internationally is unmatched and extremely difficult to replicate. We are confident that our relentless drive to bring consumers an exciting, treasure-hunt shopping experience, both in stores and online, and an ever-changing mix of excellent brands at outstanding values will continue to be a winning strategy for us.
TJX added 17 stores to its base this quarter, equating to a 5% boost in a time when many retailers are reducing their footprints. The company's long-run outlook is far more optimistic and targets as many as 6,100 locations around the world -- up from 4,100 today.
TJX Revenue (Annual) data by YCharts.
Herrman outlined a few of the biggest reasons for that confidence, including the retailer's flexible store format and quickly changing product assortments, its appeal to younger shoppers, and its ability to source high-quality merchandise from vendors at an often dramatic discount to full retail price.
The rest of the year
We feel great about our strong start to the year and our plans for the second quarter and back half of 2018.
Slightly higher-than-expected results at Marshalls helped offset weakness in the European business to put TJX just ahead of its sales growth plan for the year. Yet management left in place their outlook calling for comps gains of between 1% and 2%. The earnings outlook brightened a bit, and adjusted profits should rise by between 5% and 6% despite higher wage expenses and a slight decline in operating profitability.
Importantly, executives say they're seeing plenty of inventory availability from retailers looking to offload excess apparel and home-goods products. TJX has lots of cash, too, so it is primed to capitalize on those buying opportunities. With all the resources it needs to keep giving shoppers reasons to return, and with disruption in the industry not likely to slow down, the retailer is on track to achieve its 23rd consecutive year of positive comps in 2018.
