Ca$htag$: Strong Demand Meets an Execution Problem for Off-Price Retail

SPEAKER_1 (0:00)

Time now for our Cash Tag Segment. For that, let's bring in our next guest, and that is Landon Swan, co-founder of LikeFolio, with Fresh Sentiment Data on TJX, the parent company of TJ Maxx and Marshalls. And of course, just a look across discount retail.

So we're in between seasons right now, in between that back to school and holiday shopping season, but at the same time, we've got Prime Days coming up. So I guess we'll find any event to shop in the US. What does your latest sentiment data look like, Landon?

Landon Swan (0:27)

Yeah, it's interesting, because when we look at, you know, sentiment data that we can track at LikeFolio, that it's all pretty strong for TJ Maxx, and it has been for a little while. And so, you know, you can say we were wrong on that last earnings report where they just got absolutely crushed. But what it really came down to, which is interesting, is it really came down to execution. And you know, the management has talked about that specifically, because when we look across the entire sector, demand is very strong. I mean, people are trading down.

It is definitely a movement where this environment, where they should be supported, right? This company should be supported. They should have a tailwind. And, you know, their comps were up a little bit, but they weren't up as much as they should have been when you look at their competition. And so you can see here, off demand, I'm sorry, off price retail demand is up significantly on a year of year basis. People are into this.

There's no stigma with it. In fact, there's the opposite. I mean, there's treasure hunts on social media. People are having fun with it. You know, people are really enjoying making their dollar go further and finding good deals at places like TJ Maxx and Marshalls. The problem is execution. And, you know, on that last earnings call, management was pretty vague about that. They just said it was an execution problem. They didn't get into what it was. If it was, you know, buying the wrong mix or having inventory flow problems or maybe management at the individual stores or clean stores or attractive stores, we don't know exactly what it was. But they took, you know, they took responsibility for it and they're talking about turning it around. And so, you know, the stock went down. It was in a channel from like 150 to 165 for a long time, got crushed down to 122 or so and has since bounced back to 130 So, you know, I'm not sure if the bottom's in. I think it probably is. But, you know, when it comes time to announce the next earnings report, I think they better show that they have been executing because everything that, you know, the street is saying and everything that LikeFolio data is showing is that there is a lot of tailwind for companies like TJ Maxx, Marshalls and the rest that they have. And some of their competition are doing well. I mean, Ross Stores, we've got their demand up 45%, Burlington Coke Factory 39%.

And so, you know, TJ Maxx is doing well. It's not as doing as well as them, but they've got everything that they need to succeed. Now, it's just a matter of execution. So the data that we've got is strong, but the data that we've got only measures consumer demand. So demand for these products is strong. It's just a matter of getting it done on the execution side.

SPEAKER_3 (3:05)

Yeah, it seemed like the core parts of their business, Landon, their MarMaxx, TJ Maxx and Marshalls were the culprit this past quarter where the stock got hammered. But I just remember the last couple of times we've covered TJX, you guys always had really positive sentiment. You mentioned execution. But according to your data, are you seeing anything as far as retail spending where some of these are doing, like Macy's is making a resurgence. It's weird what's going on in retail right now. Nike is at multi-year lows, Lululemon continues to struggle. What's going on in retail, Landon? Are you guys seeing any specific trends or is this just a, you better hope you pick the right stock?

Landon Swan (3:47)

Yeah, it's almost like Bizarro World. I mean, if you take somebody from 10 years ago and tell them that Nike is getting crushed and Lululemon is at the bottom, I mean, it's all different. Everything is sort of flipped and it really comes down to managing your brand and executing. We are seeing that, and we've talked about this before, we've seen that definite, that split, the K-shaped economy is definitely a thing, but we're also seeing strength on both sides of it. So the upper half is rising, the lower half is rising. People are doing better than they were, at least they're talked like they're doing better on social media and the searches that they put into Google.