Target and TJ Maxx Win Big By Keeping Prices Low

Now that’s a bullseye.

If last week’s data dump from the US Commerce Department showing white-hot consumer spending in July was the shot, this week’s news is the chaser. On Wednesday, both Target and TJ Maxx posted stellar earnings results on the strength of the incredibly resilient US consumer. Unfortunately, not every retailer is feeling the love.

Retail Therapy

It can be hard to get a grip on the economy; July’s spending numbers were generally seen as a happy surprise. But, also on Wednesday, the US Labor Department announced that it may have previously overestimated the amount of nonfarm payroll positions added to the US economy in the 12 months through March 2024 by as much as 818,000. Either way, there’s now plenty of evidence that the typical consumer is engaging in some serious shopping, whether they’re concerned about belt-tightening or not.

In fact, both Target and TJ Maxx may just be the beneficiaries of an overall trend of budget-consciousness:

• In May, Target announced it would be slashing prices on 5,000 different items. In its call with investors Wednesday, the company said decreased prices helped increase foot traffic to stores — fueling $25.5 billion in revenue and a 42% year-over-year net income spike.
• TJ Maxx, which owns Marshalls and HomeGoods, pegged their quarterly success in part on offering goods “at prices generally 20% to 60% below full-price retailers’ regular prices on comparable merchandise.” The company also said its consolidated comparable store sale increase of 4% was “entirely driven by an increase in customer transactions.”

Over in the mall, struggling big-box retailer Macy’s had another brutal day. Net sales were down roughly 4% year-over-year, missing expectations. Company leadership has at least one turnaround plan. In a call with analysts, CEO Tony Spring said Americans may turn toward the “escapism and entertainment” offered by shopping amid a potentially stressful election season. Hey, that actually sounds like a decent strategy.

The Great Walmart: While Target and TJ Maxx are enjoying US consumers, Walmart is frustrated by the increasingly tired Chinese consumer. On Wednesday, the big-box retailer dumped its roughly 10% stake in Chinese e-commerce player JD.com amid flagging sales.