America’s retail malaise has more weak reports with the previously strongly performing TJX Cos, the off-price retailer behind stores like TJ Maxx and Marshalls, (and TK Maxx in Europe, and now in Australia with 25 outlets) surprising with sales growth slowing to the lowest rate for three years.
On top of this, TJX told US investors overnight Tuesday that the outlook was for more of the same as it battles weak demand from consumers increasingly reluctant to spend, as did another chain, Urban Outfitters
A pernicious combination of falling mall traffic, shifting consumer shopping habits and intense price competition from online stores (the Amazon factor) and off-price retailers have wreaked havoc on the sector.
Department store giants, Macy’s and Kohl’s kicked off a another disappointing quarter for department stores when they reported last week. Now TJX Cos, which has tended to buck the troubles for retailers, is not immune, a sure sign of the depths of the pressures on the sector – which is one of the largest employers in the US.
Urban Urban Outfitters, which owns the chain of the same name and the Anthropologie chain reported a sharp 3.1% fall in same store sales which was above market estimates. On top of that topline sales fell 0.2%.
And big US retailer of clothing aimed at teenagers collapsed overnight, at least two others are on the edge of collapse and thousands of retailing outlets are being closed by them and much larger chains because of falling sales.
rue21 became the latest retailer to file for Chapter 11 bankruptcy with plans to shut roughly 400 stores across the US (more than 20% of its more than 1700 outlets), as it attempts to restructure its finances amid deepening woes that have prompted a string of defaults in US retailing.
A children’s clothing group in Gymboree is about to file for bankruptcy. Women’s fashion chain, Bebe is also on the verge of filing for Chapter 11 protection, while the massive Sears (which also owns Kmart) is tottering on the edge of collapse as suppliers increasingly slow their deliveries of stock.
Department store chain, JC Penney is struggling to keep its head above water and Credit Suisse said in a research report last month that as many as 8,600 brick-and-mortar stores will close in 2017.
The weak quarterly results from TJ Maxx Cos saw its shares fall more than 4% on Wall Street overnight after being down 6% in early trading. The shares had been up 2% so far this year up to the close on Monday. They are now down 2%, but that is far better than the 25% slide in the S&P 500 retail sub-index.
TJX Cos said comparable store sales (the key sales metric) rose by just 1% in the 13 weeks ended April 29, under market forecasts for a 1.5% rise and the weakest pace of growth since the first quarter of 2015. A year ago the figure was 7% as the company and its key chains, TJ Maxx and Marshalls boomed.
Directors blamed bad weather in parts of the US and Canada for the weak sales performance and added that they had seen better sales in the closing weeks of the quarter and into the current quarter.
Net sales rose 3% from a year ago to $7US.8 billion. Profits rose to $US536.3 million up from $US508.3 million.
TJX shares are up 2 per cent so far this year as of Monday’s close, following a near 9 per cent gain in 2016. That compares with a near 29 per cent drop year-to-date and 3 per cent last year for the S&P 1500 department store index.
