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THE TJX COMPANIES, INC.

(TJX)
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For U.S. stores it is ugly out there - in more ways than one

11/27/2013 | 01:17am EDT
A customer shops for turkey at a Walmart store in the Porter Ranch section of Los Angeles

CHATHAM, N.J./LOS ANGELES/WHITE PLAINS, NY (Reuters) - The 2013 holiday shopping season may end up being remembered for its ugly sweaters and, for many retailers, even uglier discounts.

With growing online competition, no fashion must-haves and weak consumer confidence, most U.S. retailers will have to offer both big discounts and stellar service to get consumers to spend freely, according to retail analysts who joined Reuters reporters on visits to stores in New York, New Jersey, California and Illinois ahead of the holiday season.

"People are being a lot more selective in where they spend their money," said Wedbush analyst Gabriella Santaniello while touring the Westfield Topanga mall in Canoga Park, California.

To be sure, with online sales increasing, store visits provide only part of the picture. Still, a trip to the mall with a trained expert provides vital clues ahead of the holiday season, which usually accounts for almost half of retailers' profits.

The battle for the consumer dollar is particularly intense in a year when taxes have risen, unemployment has remained stubbornly high, and confidence has taken a hit from the recent government shutdown and uncertainty over the introduction of President Barack Obama's healthcare reforms.

Offsetting those negatives has been the wealth impact of a rise in home prices and a rallying stock market, though that is more likely to help the luxury end of retailing.

Most industry estimates see sales growing modestly overall, with online retailers taking a bigger slice of the pie, and electronics stealing share from apparel.

SEASON OF SWEATERS AND XBOXES?

In a sign of intense competition, there has already been unprecedented price-cutting from the giant discount chain Wal-Mart Stores Inc (>> Wal-Mart Stores, Inc.), earlier-than-usual deals from online goliath Amazon.com Inc (>> Amazon.com, Inc.), and price-match promises from Best Buy Co Inc (>> Best Buy Co., Inc.), Target Corp (>> Target Corporation) and others, even before the season's unofficial kickoff on Thanksgiving Day.

Wedbush's Santaniello is betting on Urban Outfitters Inc (>> Urban Outfitters, Inc.), American Eagle Outfitters Inc (>> American Eagle Outfitters), and other purveyors of trendy sweaters featuring cutesy animals, phrases such as "totes amaze" (slang for totally amazing) in curly cursive, and "fair isle" patterns.

"This is going to be a Christmas of ugly sweaters. That's the hip thing now, bad sweaters are so cool," among 20- and 30-year olds, she said, eyeing an Urban Outfitters tan sweater with a pair of foxes knitted into the pattern of the garment, a technique known as intarsia.

New must-have gadgets such as Sony Corp's (>> SONY CORPORATION) PlayStation 4 and Microsoft Corp's (>> Microsoft Corporation) Xbox One gaming consoles and Apple Inc's (>> Apple Inc.) latest iPhones and iPads could take a bite out of other holiday gift purchases and hurt some apparel chains, according to analysts.

"There's a limited wallet, and there's going to be a lot of competition from outside the apparel space, which means teens are going to be spending much less money on clothes," said Bridget Weishaar, a retail analyst with Morningstar.

A visit to a Best Buy store in Chatham, New Jersey, gave analyst Scot Ciccarelli a reason to recommend the retailer's stock to investors this holiday.

At least four sales associates offered to help Ciccarelli within 20 minutes of entering the store, a huge improvement from last year, the analyst with RBC Capital Markets said.

"The simple fact that people are asking you, 'Can I help?' and are nice and friendly,' is the big difference," Ciccarelli said, showering praise on Best Buy's new management team for investing more in training its sales associates. Best Buy's share price has more than tripled since last holiday season as results have improved.

Wendy Liebmann, CEO of WSL Strategic Retail, expects teen apparel chains to offer bigger discounts closer to Christmas because fashions are "banal" this year and interchangeable, and teens have been trained to wait for the best deals.

TALE OF TWO DEPARTMENT STORES

Craig Johnson, president of consulting firm Customer Growth Partners, praised Nordstrom's (>> Nordstrom, Inc.) selection of jeans and shoes, and said he expects the department store chain to have an "okay" season, though not a blockbuster one because even wealthy shoppers are holding back and looking for sales.

During a visit to its store in Westchester Mall, in White Plains, New York, he said he was impressed by its new in-store signs that can be seen from afar and clearly tell shoppers where they can find "power" brands like "Theory," "Vince" and "Burberry Brit," which are especially popular with upscale shoppers.

Macy's hasn't raised its annual sales forecast, but Liebmann expects it to have a solid holiday season because of a good selection of products and because it is well ahead of some rivals in integrating stores and e-commerce, which includes filling online orders from stores.

Liebmann found the level of discounting at Macy's flagship Manhattan store muted, which he said would give it room later in the season to cut prices without going down to alarming levels.

"This is just the beginning, but they're not giving it away yet," said Liebmann, pointing to deals such as 25 percent off on Calvin Klein men's shirts.

At troubled department store chain J.C. Penney Co Inc (>> J.C. Penney Company, Inc.), analysts had mixed views about overstuffed racks of clothing, with some seeing it as a sign of weakness and others that the company was trying to prove to shoppers that it had overcome recent troubles - which included under-stocking of some store brands.

"What one may misconstrue as clutter is merely a strategic effort to meet high customer demand," said Penney spokeswoman Daphne Avila.

(Reporting By Dhanya Skariachan in New Jersey, Lisa Baertlein in Los Angeles, Phil Wahba in New York and Nivedita Bhattacharjee in Chicago; Editing by Jilian Mincer, Christian Plumb and Ken Wills)

By Dhanya Skariachan, Lisa Baertlein and Phil Wahba


© Reuters 2013
Stocks mentioned in the article
ChangeLast1st jan.
ABERCROMBIE & FITCH CO. 3.62% 37.16 Delayed Quote.76.52%
AMAZON.COM, INC. 0.15% 3481.05 Delayed Quote.5.93%
AMERICAN EAGLE OUTFITTERS, INC. 2.09% 26.795 Delayed Quote.30.24%
APPLE INC. -0.18% 148.7701 Delayed Quote.12.31%
BEST BUY CO., INC. 0.27% 109.53 Delayed Quote.10.40%
BEST INC. 1.56% 1.3 Delayed Quote.-37.25%
EXPRESS, INC. 4.47% 5.5971 Delayed Quote.490.11%
GIFT INC. 8.31% 2944 End-of-day quote.66.52%
LETS HOLDINGS GROUP CO., LTD. 3.40% 6.69 End-of-day quote.-14.01%
MICROSOFT CORPORATION 0.01% 304.97 Delayed Quote.37.05%
NORDSTROM, INC. 4.31% 28.0346 Delayed Quote.-14.80%
OLD COPPER COMPANY -1.31% 0.121 End-of-day quote.-17.97%
RISE, INC. 0.00% 25 End-of-day quote.4.17%
SEARS HOLDINGS CORPORATION -14.27% 0.2398 Delayed Quote.22.95%
SONY GROUP CORPORATION 0.82% 12270 End-of-day quote.19.30%
SPACE CO.,LTD. 0.72% 978 End-of-day quote.23.95%
TARGET CORPORATION 1.21% 247.1899 Delayed Quote.38.30%
TEAM, INC. -4.40% 3.48 Delayed Quote.-66.61%
THE GAP, INC. 1.91% 24.2696 Delayed Quote.18.03%
THE TJX COMPANIES, INC. 1.74% 70.685 Delayed Quote.1.74%
UNIBAIL-RODAMCO-WESTFIELD SE 1.36% 66.42 Real-time Quote.1.47%
URBAN OUTFITTERS, INC. 0.87% 32.87 Delayed Quote.27.50%
WALMART INC. 0.44% 145.21 Delayed Quote.0.28%
ZUMIEZ INC. 3.09% 39.55 Delayed Quote.2.12%
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Financials (USD)
Sales 2022 47 977 M - -
Net income 2022 3 382 M - -
Net cash 2022 2 966 M - -
P/E ratio 2022 24,7x
Yield 2022 1,50%
Capitalization 83 552 M 83 552 M -
EV / Sales 2022 1,68x
EV / Sales 2023 1,57x
Nbr of Employees 320 000
Free-Float 99,9%
Chart THE TJX COMPANIES, INC.
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The TJX Companies, Inc. Technical Analysis Chart | TJX | US8725401090 | MarketScreener
Technical analysis trends THE TJX COMPANIES, INC.
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Mean consensus BUY
Number of Analysts 26
Last Close Price 69,48 $
Average target price 83,13 $
Spread / Average Target 19,6%
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Managers and Directors
Ernie L. Herrman President, Chief Executive Officer & Director
Scott Goldenberg Chief Financial Officer & Senior Executive VP
Carol M. Meyrowitz Executive Chairman
John F. O'Brien Independent Director
David T. Ching Independent Director
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