Why TJX Is Winning Customers, In Sharp Contrast To Macy's
The TJX Companies reported above plan financial results for 2016, with sales soaring to $33.2 billion, a 7% increase over last year’s 6% increase. Comparable store sales increased a strong 5% on top of last year’s 5% increase. This is dramatic progress, especially when compared to the disappointing report that Macy’s announced Tuesday.
Macy’s reported a 4.8% annual decline in sales to $25.8 billion. Comparable sales on an owned and licensed basis dropped 2.9%. The company closed 66 stores and opened 27, mostly BlueMercury beauty units. In contrast, TJX opened 198 units in the U.S., Canada, Europe and Australia.
TJX CEO Ernie Herrman indicated that his company’s success was due to increased customer traffic. He said that customers like the eclectic merchandise mix and the amazing values in the stores. Because of the strong trends, TJX can continue to return capital to shareholders. The board authorized a 20% dividend increase as well as an expanded share buyback.
Earnings for TJX were $3.46 a share compared to $3.33 in the previous year, including the negative impact of $0.07 from a debt extinguishment charge and a pension settlement charge in the current quarter. For fiscal 2017 management is projecting earnings increase of about 4% to a range of $3.80 to $3.89 a share. Without the 53rd week in January 2018 earnings would have to be reduced by $0.11 a share. More unit openings are planned for 2017.
Macy’s, on the other hand, saw earnings per share drop from $3.22 in fiscal 2015 to $1.99 a share. Of course, this includes impairment charges, store closings, settlement costs, and other charges. The company is expecting better earnings in 2017, despite a continued drop in comparable sales. Earnings per share are targets in a range of $3.37 to $3.62 a share.
Comparable store sales are projected to decline 2-3%. I expect that the closing of 34 more store by Macy’s will hurt earnings.
Not too long ago, TJX's sales were smaller than Macy’s and no one believed it could reach $40 billion in sales in five years. Now that objective seems easy. The company has found great success in international markets while outpacing competitors in the U.S. For the fiscal year, Marmaxx (Marshall’s and T.J.Maxx combined) increased comparable sales by 6%, HomeGoods comparable U.S. sales rose 7%. TJX Canada increased 14%, and Europe and Australia combined for a 1% increase.
We are living in a different age. The customer, as I described in my February 21, 2017 blog, wants stores to think outside the box. We must accept the fact that we are living in the age of technology, where everything moves faster and new initiatives are necessary to excite the customer. TJX understands this and will attract more loyal shoppers. Macy’s must change to have a viable future.