TJ Maxx should terrify Macy's
In its most recent quarter, the company saw comparable sales rise by 4%. It's the company's 30th consecutive quarter of growth - practically an anomaly in the retail industry today.
As sales at stores like Macy's and Nordstrom lag, TJ Maxx is hitting its stride simply because it's a more rewarding place to shop.
"TJ Maxx at this point is getting some really great authentic brands," Gabriella Santaniello, analyst and founder of consulting firm A Line Partners, told Business Insider.
She described shopping at TJ Maxx as a "treasure hunt," where you can dig up authentic gems at heavily discounted prices. There are no sales or promotions triggering these bargain bin prices, the company notes on its website; it simply operates by selling designer apparel at 20-60% off. That's a huge draw for frugal, stylish consumers.
In a note to clients, retail analyst Håkon Helgesen at the consulting firm Conlumino, wrote that the store's "constantly changing assortment" is a huge draw:
TJ Maxx's success should be concerning for ailing department stores that are fighting to get people to pay full price. Between constant discounts and the success of low-price brands like Zara and Forever 21, it's harder than ever to get consumers to pay a premium.
In response, department stores are leaning heavily on their lower price outlets. Macy's has its Backstage stores. Nordstrom has Rack.
But at Macy's, an in-store off-price section called Last Act shows a brutal new reality of what the department store has turned into: total disarray, chaos, and lack of prestige.
Nordstrom's Rack stores have proven to be successful - in fact, they outnumber Nordstrom's full-line stores and have reported positive comparable sales when the full-line stores have reported dropping sales. But there's a problem: the line is getting blurred between the two brands due to the sheer proliferation of Rack stores.
TJ Maxx doesn't have to worry about this type of conflict: it never was a premiere retailer in the first place.
"[TJ Maxx] is doing off price right," Santaniello said, noting that the key difference between TJ Maxx and off-price stores like Backstage and Rack could be linked to the way consumers perceive the store.
"As we have said before, [TJ Maxx] is one of the reasons that US department stores cannot succeed at the discount game," Helgesen wrote.