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.

Even retail's sweet spot is turning sour.

TJX Cos., the operator of TJ Maxx and Home Goods stores, on Tuesday reported first-quarter sales that fell short of forecasts. This surprised analysts who had expected the off-price chain to defy the struggles of the broader retail industry. Shares fell 5 percent in reaction to the company's first sales miss since the first quarter of 2014. 

Down, Not Out
Shares in TJ Maxx operator TJX Cos. fell 5% Tuesday after the company reported quarterly sales that missed forecasts; but its stock has outpaced department stores lately
Source: Bloomberg

Investors may be overreacting to what will likely be a short-term blip. After all, TJX's sales and earnings are still growing, which is more than traditional department stores can say. And the recent rash of store closings -- accompanied by liquidation sales and discounts at struggling chains such as J.C. Penney Co. Inc. and Sears Holdings Co. -- likely ratcheted up the competition for TJ Maxx's discount clothing and accessories business.

Something's Off
Sales at off-price retailer TJX Cos. increased at their slowest pace in three years
Source: Bloomberg
Note: Dates reflect fiscal year

But what if the worries are justified? 

TJ Maxx, along with other off-price operators such as Nordstrom Inc.'s Rack stores and Ross Stores Inc., have been stealing market share from department stores for years by offering fashion labels and home goods at discounted prices.

But now, department stores such as Macy's Inc., Kohl's Corp. and Hudson's Bay Co. are getting into the off-price game with their own versions of discount offerings. Better late than never, I guess, for them. But it's something TJX should take very seriously. 

Meanwhile, it's getting increasingly easier to find designer names such as Tory Burch and Rebecca Minkoff on Amazon.com and other websites, giving shoppers less reason to head to TJ Maxx to search for their favorite brands. And name brands are getting harder to find there, anyway, as Ralph Lauren Corp. and others pare sales to off-price retailers to shore up their luxury cache. 

Perhaps that's partly why year-over-year sales have declined at Nordstrom Rack in four of the past six quarters. 

And as TJX keeps building more stores, it risks further cannibalizing sales at its current store base. 

If You Build It...
As other brick and mortar retailers are closing locations, TJX continues to build stores. It now aims to get up to 5,600 stores worldwide.
Source: Bloomberg

Rather than offering plans to address the factors behind its disappointing quarter, TJX executives on the earnings call resorted to the age-old bad-weather excuse, saying a sales rebound started in April and continued into May.

Attention, all retail executives: It's never good to blame the weather. And if sales growth in the current quarter is progressing as well as executives described Tuesday, then why would sales guidance for the next quarter remain so muted. at 1 percent to 2 percent growth from the year before. 

Whether this is a one-time flub or TJX succumbing to what's afflicting the rest of America's retailers, this is a good reminder that retail moves fast, consumers are fickle, and even the best operators can't rest on their laurels. 

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

  1. TJX executives said they didn't see an impact from liquidation sales, though. 

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