Danielle Bauter/Insider
T.J. Maxx is often considered the last resort retailer, taking inventory other stores couldn't sell. But one analyst said its reputation is changing.
Off-price retailers like T.J. Maxx and Marshalls, which are both owned by TJX Companies, buy excess apparel, accessories, and home goods from department stores and specialty retailers and sell them at discounted prices. Typically, brands send the merchandise to off-price retailers if they've purchased too much or when it's out of season. TJX generally marks down the items between 20% and 60% lower than the original retail price.
The price tags may seem like a good deal, but that doesn't mean everything in an off-price store is "cheap."
"TJX does not sell cheap clothing; they sell expensive clothing cheap," retail analyst Simeon Siegel told Yahoo Finance in a video interview. "So they are giving you a reason to be in their store; it's not simply to check the box on a need."
The company currently sources from about 21,000 global vendors, or brands that supply inventory, according to the company's latest earnings call.
Those vendors help TJX grab customer market share by providing lots of options for shoppers and giving shoppers that "treasure hunt" experience. Now TJX is taking an important market share from the vendors, Siegel said.
"They're becoming a very important destination in the retail ecosystem," he told Yahoo Finance. "This is no longer just a compendium of other people's mistakes. This is a go-to place that if you're a brand, you want to make sure you're selling into. That's going to continue to push up the valuation, and that's going to continue to push up the numbers."
In the company's third-quarter earnings, TJX reported stronger than expected sales and saw comparable store sales increase by 6%, which it attributed entirely to an increase in customer traffic.
"We believe many vendors want to work with TJX because we offer them a very attractive way to grow their business," chief executive Ernie Herrman said in Wednesday's earnings call. "All of this gives us great confidence that there will be plenty of quality branded merchandise available for us."
