As consumer sentiment fades, tariffs push prices higher and shoppers hunt for more value, Wall Street believes that TJX Companies is a clear winner. Consumers have grown increasingly more anxious about the state of the U.S. economy over the last few months. The University of Michigan’s consumer sentiment index came in at 58.2 in August, down from July’s reading of 61.7 and year-over-year decline of 14.2%. Businesses brought back recession specials earlier this summer, hoping to offset fear of a slowing economy. But the latest nod to bearishness may be signs of consumers flocking to more off-price retailers such as TJ Maxx, Burlington Stores and Ross Stores in an effort to stretch their dollars. TJX, which also owns the Marshalls and HomeGoods chains, is the corporate parent of TJ Maxx. Mid-tier and more upscale merchants from Target to Best Buy to Macy’s have been left behind, seeing declines in weekly foot traffic, according to a report from Piper Sandler using data from Placer.ai. Why off-price retailers are gaining ground While lower-income consumers have felt the most impact on their wallets from higher tariffs and a slowing economy, higher-income consumers too have grown pickier, despite having the means to continue to spend, according to Nancy Lazar, chief global economist at Piper Sandler. “The low-end consumer is getting squeezed, particularly by the tariffs … That said, the high-end consumer is worried. They’re worried about losing their jobs, and consumer confidence is a declining trend,” Lazar told CNBC in an interview. “As a result, they are looking for value, and that’s creating a bifurcation within the retail community where companies that appear to have some value or relatively lower price points are taking business away from companies that are perceived not to have lower price points.” Consumer expert Stacy Widlitz, president of SW Retail Advisors, also thinks that higher income consumers have traded some semblance of luxury status for value. “Shopping at Walmart is no longer something to hide, even for the higher income consumer,” she told CNBC. “People have changed the way they shop. Again, the tariffs and the level of inflation has really made every consumer, in every income bracket, consider how they’re spending their money.” Justin Brown, portfolio manager for American Century Investments, pointed to recent quarterly earnings and revenue beats from all TJX, Burlington and Ross Stores as proof of their appeal in a more challenging retail climate. “When the going gets tough, these guys tend to pick up [market] share,” Brown, who co-manages the $16-billion American Century Growth fund , told CNBC. “When we look back at prior recessions in 2001 and the Great Financial Crisis, in those periods of time [TJX] tended to accelerate share gains.” Treasure hunt Because these stores offer consumers a unique “treasure hunt” experience, they are more aligned with modern day shopping habits, which have tended to shift away from more traditional retail or department store experiences found at Target, Macy’s or Kohl’s , Widlitz said. Consumer enthusiasm for “treasure hunting” at stores like TJ Maxx is rampant on platforms such as TikTok, with creators raking up millions of views for such videos. “I think consumers love the treasure hunt. But also it has to be a good treasure hunt,” Widlitz added, pointing out that Big Lots, which offers a similar experience, hasn’t done well in recent years. “It’s just like Disneyland for decor and home. And it’s fun; you never know what you’re going to find. It’s unexpected. It’s all the things that the department stores have lost.” Adding to the shopping experience is off-price retailers’ “top-notch” execution, Widlitz said. Stores are clean, have ample inventory and are well laid out, making them easier and more pleasant to navigate. Notably, the stores are working despite having no online presence and little grocery selection. TJX is the clear winner in the subcategory of off-price retailers, both Brown and Widlitz said. Brown, the money manager at American Century, recently increased his fund’s position in TJX and sold out of his holding in Ross Stores. TJX strengths This year’s heightened global trade war has created a “very unique” macroeconomic environment that TJX is well-suited to navigate, Brown said. TJX boasts strong senior management and targets higher income shoppers than its rivals. “We’re not talking about luxury, but we’re talking about sort of like middle-income demographics,” he said. “They tend to play at a little bit higher income demographic, which has tended to be a better place to be in this cycle.” The “secret sauce” for these types of stores lies in their product offerings, an area where TJ Maxx excels, Brown added. The company’s buying process is flexible, allowing it to offer in-season items at a discount to department store prices even in times of supply chain disruptions. TJX has thrived even during periods of dislocation, whether due to sharply higher tariffs or the Covid pandemic, the portfolio manager said. TJ Maxx’s ability to reevaluate its needs and pounce on inventory when it spies value has made the stock attractive to investor Nancy Tengler, chief investment officer at Laffer Tengler Investments. She noted the company’s success at steadily acquiring a younger customer base, and skirting tariffs, at least in part. TJX is “buying inventory that other retailers have already purchased and have been unable to unload. So they have flexibility in their purchasing, and they’re purchasing things that have already been tariffed,” she told CNBC. The chain also has a certain cachet as a destination for consumers unable to find a specific product online, Tengler added. In these cases, TJ Maxx becomes the final destination for shoppers to “fill in the gaps.” TJX’s expanding global footprint as another catalyst behind the company’s growth. Brown said that between 20% and 25% of TJX’s stores are outside of the United States, with presences in Europe, Canada and Australia. “TJX does the best job out there. Whether it’s Home Goods or TJ, they absolutely do the best job,” Widlitz added. “TJ is a little more nimble in what they can do, and don’t forget, TJX is replicating what they’re doing here, in Europe … the customer universally has the same desires, and they’re able to translate that into the UK, and they’ve done a great job.”
