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T.J. Maxx and Marshalls parent company TJX has an advantage over its discount retail rivals, analysts said. TJX is an off-price retailer that sources much of its inventory from other retailers’ unsold products, meaning it doesn’t have to pay tariffs on the bulk of its goods. Moreover, consumers continue to pull back on discretionary goods from other retailers.
Off-price retailers like T.J. Maxx are staying strong amid tariff concerns and economic uncertainty thanks in part to their ability to nab inventory from other retailers’ unsold products—after the initial buyer already paid import taxes on them.
TJX, the parent company of T.J. Maxx, HomeGoods, and Marshalls, reported better-than-expected first-quarter earnings Wednesday, posting $13.11 billion in net sales for the quarter, compared to the estimated $13.01 billion, according to data compiled by LSEG. TJX’s share price was down about 3% as of Wednesday afternoon after CEO Ernie Herrman warned the company was “not immune to tariff pressure.”
“The availability of merchandise we are seeing is outstanding, and we are in a great position to take advantage of the plentiful opportunities that the marketplace is offering,” Herrman said in a call with investors on Wednesday. “We are confident in our ability to navigate the current tariff and macro environment in the short term.”
Off-price retailers are able to keep prices low by keeping an inventory of unsold items from other retailers, as well as brokering deals directly with manufacturers for brand name products in bulk. While logistics experts and economists warned of empty shelves as a result of tariffs causing companies to cut back on imports, Herrman shrugged off inventory concerns. The company reported a 7% increase in inventory per store.
“This is a typical remark, but is important at a time when investors are worried about empty shelves,” Bank of America analyst Lorraine Hutchinson said in a note to investors on Wednesday.
‘Insulated’ from economic uncertainty
Bank of America predicted earlier this month that off-price retailers would be able to use the strategy of sourcing unwanted inventory from other retailers to “insulate” themselves from tariffs.
“The theory is that inventory would have already been [subject to] the tariffs [absorbed] by the original purchaser,” Brian Mulberry, client portfolio manager at Zacks Investment Management, told Fortune. “Therefore, the discount retailers don’t pass on this, or they don’t experience the same level of tariffs.”
TJX sources about 60% of its products from other retailers, and about 40% from deals with manufacturers, Mulberry said. While the 40% of inventory bought directly from manufacturers are subject to tariffs, those products, often brand-name goods, have high appeal to consumers who may be otherwise skimping on discretionary purchases to save money.