Holiday shoppers are prioritizing value, as shown in the flurry of big-box earnings reported this week.
Sales at off-price retailers like Ross and TJX, parent company to TJ Maxx, Marshalls and Homegoods, soared while spending at Walmart increased and Target tumbled.
“When you look around the board here, at the opportunity to deliver a shopping experience and merchandise that is branded at tremendous value, … nobody’s really doing that,” said TJX CEO Ernie Herrman. “We try to appeal to all ages and all income demographics, and we never veer off that mission, really, for [challenging] times like this and for times when things get better.”
On Thursday, TJX reported a year-over-year net sales increase of 7% to $15.1 billion for the quarter ending on November 1. Meanwhile, Ross reported a 10% year-over-year sales increase to $5.6 billion for its quarter ending on November 2.
In August, Ross reported cosmetics as its top-performing category, which continued into this quarter. According to Ross CEO James Conroy, cosmetics, shoes and ladies’ clothing were the strongest merchandise areas, reported in that order, with the most sales coming from the Southeast and Midwest regions of the country.
Foot traffic was also up across both retailers, according to Placer.ai, a location analytics firm that leverages millions of devices to capture data on brick-and-mortar shopping patterns. Store visitors were up 8.1% at TJ Maxx and Marshalls and up 9.4% at Ross.
This is in contrast to Target, which saw a 2.7% decrease in foot traffic, according to Placer.ai, and a 1.5% drop in sales during its last quarter, which the company also reported during its earnings call on Thursday.
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The week’s results support growing chatter around what’s been called America’s “K-shaped economy” in financial circles. It points to the wealthiest Americans continuing to spend along the upward arm of the “K,” while cash-strapped shoppers follow the downward arm of the “K” as they tighten their purse strings.
According to the University of Michigan, consumer sentiment is still low, with November’s analysis down 29% YoY. “After the federal shutdown ended, sentiment lifted slightly from its mid-month reading. However, consumers remain frustrated about the persistence of high prices and weakening incomes,” according to the report’s authors.
Hermann confirmed that lower-income shoppers drove TJX’s sales this quarter, but TJX CFO John Klinger dismissed it as a trend. “For quite a long time, we’ve been seeing strong [sales] across all income demographics, [but] sometimes it’ll tip one way or the other, right?” he said during the call. “That’s what we’re seeing — it’s just a tipping, rather than a long-term trend.”
Walmart, known for its high-value proposition, also reported a strong quarter, gaining market share in its upper-income segment, Walmart CFO John David Rainey said in an interview with CNBC this week.
The company reported 5.8% sales growth to reach $179.5 billion in sales for the quarter, while foot traffic was up just 0.4%, according to Placer.ai.
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“It stands to reason, if there’s a little incremental strain on the consumer, … they’re going to look for more value,” said Walmart’s Rainey. “Consumers are looking to do business with those companies that are providing value, that are delivering the convenience that they’ve come to know and expect and that are executing consistently well.”
