International analysis: TJX plots ambitious store growth in US and Europe

In Europe TJX aims to have 399 stores under the TK Maxx banner and $3.5bn (£2.16bn) in sales at fiscal year-end 2014.

Longer-term, the retailer estimates growth potential in its German, Irish, Polish and UK markets of 875 stores and $7.5bn (£4.63bn).

Expansion in Austria, Belgium, the Czech Republic, France, Italy and the Netherlands is expected to lead to 925 more TK Maxx stores and another $7.5bn in sales.

Looking at the growth of TJX in the US, the business has been successful for a variety of reasons.

Firstly, stock is kept to a minimum to achieve high inventory turns. TJX turnaround can be as short as two weeks from the time a shipment is ordered to the time products are sold in stores.

Secondly, there is an increasing acceptance among US suppliers that off-price can be used as an insurance policy factored into planning. This enables TJX to source more product closer to, and often in, season.

For the budget-hungry but online-savvy consumer, TJX proffers a very clear message - leading brands at low prices. In
the US, this brand message has enabled TJX to win share from mid-priced department stores such as Kohl’s and Macy’s, which have focused on coupons and discounts - a strategy that creates a more confusing price message.

Shoppers have also been drawn to TJ Maxx’s stores because they often stock the same products as Kohl’s and Macy’s, but at a lower price because it sources in-season.

The department stores that have more successfully weathered the growth of off-price have either risen to the challenge by creating their own outlet stores, such as Nordstrom Rack, or become more nimble in their approach to online.

Macy’s is using more than 300 of its 850 stores for online fulfilment, an initiative that has boosted inventory turnaround and reduced clearance Sales. But reducing clearance is not really the answer when TJX shops reach out very successfully to a lot of shoppers who want low prices and don’t care about store profits.

Overlaps between off-price and department stores will only become greater as stock increasingly resembles what is available through more traditional channels. In the UK, TK Maxx is piloting food areas in its stores.

It shows the will of the company to experiment and perhaps take market share wherever it can.

• Isabel Cavill, senior retail analyst, Planet Retail.