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TJ Maxx Owner Falls as Treasure-Hunt Experience Disrupted

(Bloomberg) — TJX Cos., the owner of the T.J. Maxx and Marshalls chains, fell the most in more than four months after predicting that sales at opened stores will drop as much as 20% in the current quarter, casting doubts about its ability to lure discount-seeking shoppers back amid the pandemic.

The Framingham, Massachusetts-based company expects comparable store sales — a key metric for retailers — to decline by 10% to 20% at stores that are opened in the third quarter ending in November. Second-quarter results were hit by temporary closures for almost one-third of the period, the company said. TJX has since reopened more than 4,500 stores in nine countries. For more details on the results, see here.

Key Insights

TJX’s business model eschews e-commerce, instead targeting shoppers seeking an in-store treasure-hunt experience, a major disadvantage as Covid-19 cases continue to rise in the U.S.For a discount retailer like T.J. Maxx, excess inventory from department stores and specialty apparel shops is crucial. The weeks during the Covid-19 shutdowns led to piles of apparel that many clothing retailers were unable to sell. TJX knows that, noting that “overall product availability in the marketplace remains excellent.” The company said it has “significantly” increased its buying since the middle of July.The bright spot was the HomeGoods decor chain, whose comparable sales jumped 20% last quarter in stores that were opened.“Lean inventory, merchandise margin strength and HomeGoods’ 20% opened-store sales gain are encouraging, but guidance for 3Q shows a material deceleration in sales, which is a concern,” said Bloomberg Intelligence analyst Poonam Goyal.Analysts have questioned whether consumers, who have moved away from discretionary items like apparel in favor of buying groceries, would return to retailers like Marshalls and T.J. Maxx. TJX says shoppers are in fact returning and are pinning that fact to “pent-up consumer demand.”

Market Reaction

The shares fell as much as 7.6% Wednesday in New York, the biggest intraday decline since April 1. TJX was down 5.9% year to date through Tuesday.

(Updates share trading in final bullet)

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