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Dive Brief:
- As retailers like Macy’s continue shrinking their physical footprints, off-price retailer TJX Cos. expects to deepen its relationship with the industry’s supplier base.
- “One indirect byproduct ... that's happening with all the store closures is the importance to the vendor community keeps rising for our merchants amidst less brick-and-mortar competition, so to speak,” CEO Ernie Herrman said Wednesday on the company’s fourth quarter earnings call regarding Macy’s recently announced closures.
- Herrman also hinted at higher merchandise margins as other retailers’ store bases shrink and more vendors come to rely on TJX. “That is one of the things that probably will continue to allow us to buy a little bit better on an ongoing basis,” he said. “So it's indirectly related to the store closure question.”
Dive Insight:
During an era of store retrenchment, the footprint and fortunes of TJX — which owns T.J. Maxx, Marshalls, Home Goods and other banners — have expanded widely. The retailer closed out the fiscal year with annual sales up 9% year over year to $54.2 billion.
For suppliers, physical stores matter just as they do to a retailer, as both a sales channel and a way to put their brand in front of customers.
“I think as we continue to gain market share and the vendors see that they're just being placed in our store and an eclectic mix with even more and more better brands has been an incentive for them to continue to want to work with our buyers even more so than in the past,” Herrman said.
The retailer’s supply chain — which involves more than 1,300 buyers on its end and draws from a base of over 21,000 vendors, Herrman noted — is a source of competitive strength, S&P Global analysts noted in a report last April.
“The company's sophisticated supply chain capability allows it to provide frequently updated merchandise at discounted prices, creating a treasure hunt shopping experience,” the analysts said.
Analysts with Telsey Advisory Group also highlighted the company’s storied purchasing team.
“The training, experience and tenure of the TJX buying teams are a major competitive advantage,” they said in a December research note following a conversation with the retailer’s executives. “The teams are constantly shopping competitors, identifying opportunities, and communicating with the company’s 21K vendors in order to deliver value for the TJX customer.”
The Telsey analysts also noted that TJX is doing 30% to 40% more business with most vendors compared to three or four years ago.
Along with store closures, TJX has benefited from the macro climate in retail. As retailers and brands have worked to clean up their inventory, there have been plenty of acquisition opportunities for off-price retailers like TJX.
“Availability … is outstanding across the board,” Herrman said on the call. “As always, it varies by category and vendor. But at the end of the day, there's more goods out there than we can handle, and we're still holding our merchants back.”
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Ben Unglesbee, Khareem Sudlow
