Marshalls and Ross Have Outperformed Walmart and Target
I think I'm like a lot of people in that if you asked me, "Do you want to go to Walmart or Target?" the answer is a resounding no. I definitely do not want to go to Walmart or Target.
But if you ask me, "Do you want to go to Marshalls?" the answer is the complete opposite. Yes, I absolutely want to go to Marshalls. I'll even drive.
Why?
These stores basically have the same things for sale. And one is just as crowded as the other. None of them ever has good parking.
Still, going to Walmart or Target feels like a chore, whereas going to Marshalls feels like, at the very least, a good way to waste some time.
Maybe it's because we generally go to Walmart or Target for things we need and we go to Marshalls for things we want.
Or maybe it's because stores like Marshalls offer a chance to hunt for good deals.
Whatever it is, the popularity of Marshalls and its sister stores has paid off handsomely for investors.
Over the past 10 years, the TJX Companies (NYSE: TJX) - the parent company of Marshalls, TJ Maxx, and HomeGoods - has seen an impressive 90%+ increase in net sales. As a result, share prices of TJX have ballooned nearly 450%.
Ross Stores (NASDAQ: ROST), a similar discount apparel and home goods store chain, has seen even bigger growth. Its revenues have increased 123% in the past 10 years, moving share prices almost 560% higher.
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Now, when we compare TJX and Ross with the success Amazon (NASDAQ: AMZN) has had over the same period, their sales and stock wins are laughable. If you had bought AMZN 10 years ago, you'd be sitting on a 1,700% gain.
But compared with the consumer goods titans like Walmart (NYSE: WMT) and Target (NYSE: TGT), discount apparel and home goods stores are absolutely crushing it.
Walmart's sales have climbed some 28% over the past 10 years, resulting in a 164% increase in its stock. Of course, we have to consider that Walmart is a much larger company with hundreds of billions of dollars in net sales, and increasing sales on a percentage basis is much more difficult.
But what I find interesting is discount apparel and home goods store chains like Marshalls and Ross have had great success despite virtually no e-commerce sales.
With COVID-19 pushing consumers to shop online, Walmart and Target saw big leaps in online sales. In the third quarter of 2020, Walmart's e-commerce sales grew 79% year over year. Meanwhile, Target's e-commerce sales grew even faster during the first nine months of 2020; online sales ballooned 163%.
Despite these big jumps, however, e-commerce sales only represent a small percentage of both Walmart's and Target's revenue. Walmart's e-commerce sales accounted for 8% of Walmart's total revenue in 2019. It's expected that the company's e-commerce sales will account for about 11% in 2020. Meanwhile, online sales represent about 16% of Target's total retail sales.
Marshalls does have an e-commerce website. Marshalls.com just debuted in 2019 as a retail website. Ross, on the other hand, has a website, but it's not used for sales.
Do these companies really even need to try to venture into e-commerce?
Well, TJX certainly believed Marshalls needed to in 2019. But I'm not so sure.
For the past decades, discount apparel and home goods stores have been killing it without e-commerce. Whatever they've been doing is already working very well.
I can see really good reasons for people to use Walmart.com. But I can't really think of anything, aside from maybe furniture, that anyone would really want to buy from Marshalls.com.
Either way, the success of discount apparel and home goods store chains like those owned by TJX Companies and Ross Stores has been very impressive. I mean, TJX has a market cap now that's worth a third of Exxon Mobil's - it's doing quite well.
The TJX Companies and Ross Stores saw declines in sales numbers at the height of the COVID-19 pandemic, which have yet to fully recover. But as the country slowly reopens, I think the discount apparel and home goods store chains will easily see sales return even stronger than before.
Until next time, As an editor at Energy and Capital, Luke's analysis and market research reach hundreds of thousands of investors every day. Luke is also a contributing editor of Angel Publishing's Bull and Bust Report newsletter. There, he helps investors in leveraging the future supply-demand imbalance that he believes could be key to a cyclical upswing in the hard asset markets. For more on Luke, go to his editor's page.
Luke Burgess