Consumer

Shelly Banjo is a Bloomberg Gadfly columnist covering retail and consumer goods. She previously was a reporter at Quartz and the Wall Street Journal.

Contrary to popular belief, Amazon is not the only retailer racking up sales these days. 

Retail Split
There's a clear divide between the share performance in the haves and have-nots of retail
Source: Bloomberg

Stellar earnings reports from retail superstars Home Depot and T.J. Maxx parent TJX Cos. on Tuesday served as a reminder that consumers do want to shop, they're just being choosy about where they go. And so are investors: Shares in Home Depot and TJX are both up around 17 percent in the past year, compared to a 54 percent drop in Macy's shares during the same time. 

It's clear American consumers continue to prioritize spending on their homes and cars, rather than on clothing. Both Home Depot and TJX are benefiting from an ongoing housing recovery, which is prompting consumers to spend more on homes that keep appreciating in price. As Home Depot CFO Carol Tomé pointed out Tuesday, home equity values have increased 94 percent since 2011, helping shoppers see their homes as an investment, rather than an expense, and driving up big-ticket purchases.

Retail Winners and Losers
Year-over-year percentage change in sales, by retail category
Source: U.S. Census, Bloomberg

Sales at TJX's Home Goods segment increased by 9 percent from the year before. TJX is also being helped by the weakness in department stores and specialty clothing brands, which are flooding the off-price market with products they've recently struggled to sell. That means T.J. Maxx can scoop up inventory it might not have accessed before, often at lower-than-usual prices. 

Treasure Hunt
Home Goods and TJ Maxx parent TJX sales continue their march higher
Source: Bloomberg

The results also suggest both companies have figured out how to weather new competition online. The old conventional wisdom on both home-improvement and off-price retailers was that these sectors were "Amazon-proof." People would never buy actual bricks and mortar online, according to this thinking, so home-improvement stores were safe from the shift to Internet shopping. And consumers would keep going to T.J. Maxx stores to chase bargains on high-end brands they couldn't find online. 

Those truisms are no longer true. Amazon, online home-goods retailer Wayfair, and others have plunged deep into these formerly safe sectors. In response, Home Depot and TJX, which relaunched its T.J. Maxx website in 2013, have embraced Internet sales.

E-commerce now makes up nearly 6 percent of Home Depot's sales, up from less than 2 percent in 2011, according to Bloomberg Intelligence analyst Seema Shah. The company has been plunging billions of dollars into its website, warehouses, and shipping capabilities. Online sales grew by 21.5 percent in the latest quarter from the year before, contributing to the company's 7.4 percent jump in quarterly comparable sales from the year before. 

Bricks and Clicks
Nearly 6% of Home Depot's $90 billion in annual sales now comes from e-commerce
Source: Bloomberg Intelligence

Home Depot has also effectively merged its physical and Internet businesses -- 40 percent of online orders are picked up in stores -- which makes its stores more productive: Total sales per square foot for the first quarter were $377 in the quarter, up 6.5 percent from a year ago. 

Internet sales remain a small part of TJX; at one point it actually quit e-commerce for a while. And it plans to add another 2,000 brick-and-mortar stores to its 5,600 current locations. The company doesn't break out online sales in its results. But it bought online retailer Sierra Trading Post in 2012 and said Tuesday it's counting on digital to be a big growth driver.

If you can't beat 'em, join 'em. 

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

To contact the author of this story:
Shelly Banjo in New York at sbanjo@bloomberg.net

To contact the editor responsible for this story:
Mark Gongloff at mgongloff1@bloomberg.net