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TJX continues to be one of the big winners in President Donald Trump’s trade war.
The parent company of off-price retail chains like T.J. Maxx, Marshalls, Home Goods, and Sierra said that while the company isn’t immune to the impact of this year’s tariffs, it does have several strategies that have helped soften the blow and keep sales and profits strong.
TJX beat expectations for the second quarter with 4% comparable sales growth and a pretax profit margin of 11.4%.
“This is one of those funky situations where we don’t top-down dictate prices,” said CEO Ernie Herrman in the company’s quarterly earnings call on Wednesday. He said the company relies on beating other retailers’ “out-the-door pricing.”
Since tariffs are effectively taxes on foreign goods imported into a country, and TJX mostly buys its merchandise from brands that have already paid those fees, the company has little influence over how the additional cost is handled.
Herrman said the company directly imports a small share — about 10% — of what it sells.
TJX’s focus on competitors’ pricing gives Herrman unique insight into how tariffs are rolling out through the consumer economy. Retailers like Walmart, Home Depot, and Macy’s have said they’ll have to raise prices on certain items due to tariffs.
He said some retailers don’t seem to be “moving the price directly with the first landing of the tariff” but rather doing so “in steps.””I think you’re going to see a more of a little bit of a gradual increase in pricing as the tariffs come in,” he said. “They don’t want to, I think, turn off customers immediately by seeing a dramatic price shift.”
What TJX does differently, Herrman said, is “aggressively” compare prices and promotions with other retailers for every item it sells, and then negotiate a price it is willing to pay based on what a shopper would spend elsewhere for similar items.
“It’s absolutely a deal-by-deal, SKU-by-SKU, brand-by-brand situation,” Herrman said.
“We’ve been navigating in the tariff environment by just staying simple and pure to that model,” he added.
That’s not to say TJX won’t ever raise prices, but this approach aims to keep TJX prices comfortably below what other retailers charge.
If tariffs prevent TJX buyers from negotiating a favorable deal on a particular product, Herrman said the company simply won’t carry as much of it.
While he gives TJX’s merchandising and buying teams a lot of the credit, Herrman said the unsung heroes in the TJX family are the brands’ planning and allocation teams, who determine what goods to put in which stores.
“Every planning and allocation division is so good at balancing our mixes by category, family of business — literally by district, by store,” Herrman said.
In other words, buyers find the good deals from suppliers, but it’s allocators who get those deals into the hands of shoppers.
Taken together, this strategy has served the company well through prior periods of retail disruption and has given it a welcome lift through this year’s uncertainty.
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