Fresh economic data showed on Wednesday that U.S. consumer spending slowed during the holiday season, even as inflation eased, continuing to squeeze shoppers. The new year is likely to make off-price retailers like Club Holding TJX Companies (TJX) even more attractive to many Americans looking for cost-saving deals. The Commerce Department said on Wednesday that total retail sales in the US fell 1.1% month-over-month in December, the second consecutive monthly decline. Retail sales were down 1% in November. The monthly sales report, which has not been adjusted for inflation, showed declines in several categories, with department-store sales falling a whopping 6.6% and sales at gasoline stations down 4.6%. The retail data comes as the Labor Department’s producer price index, which was also released Wednesday, showed prices for wholesale goods and services came down in December at a faster rate than expected. This is a sign that the Federal Reserve’s interest rate hikes are working to slow inflation, which may benefit consumers. But with the state of the economy still uncertain — inflation remains high despite recession fears — Morgan Stanley on Wednesday rated TJX and off-price retailers like competitors Ross Stores (ROST) and Burlington Stores (BURL) as “defensive” of their Exposed to properties in the face of a recession.” Companies such as TJX, which operates stores such as TJ Maxx and Marshals, have benefited from the retail inventory excess that has plagued major department stores over the past year, allowing excess apparel and other items to be sold. buying at a discount and then passing it on to shoppers. Morgan Stanley analysts expect off-price retailers to benefit from a shift in consumers’ spending habits from high-end shopping to discount.” Looking to 2023, we Looks like TJX, ROST and BURL’s businesses should once again benefit from declining business, as well as see margin tailwinds as freight costs normalize.” [merchandise] “Margins to create an attractive setup for the sub-sector in a potentially challenging macro environment,” analysts wrote in a research note. by their over 20,000 vendor partners, while also attracting a higher-income demographic than competitors. Shares of TJX closed Wednesday down 2.13% at $79.81. The Bottom Line The second consecutive monthly decline in retail sales suggests that shoppers are increasingly wary about how and where they spend their hard-earned money. This trend could be a harbinger of slower growth in retail earnings ahead for the first quarter. Also, if inflation remains moderate, it could create room for more discretionary spending. But for the moment, inflation is still a challenge for many consumers, even as the economy slows. This makes TJX a favorite shopping destination during a potential economic downturn. Off-price retailers like TJX have a great opportunity to snag a wide range of merchandise with elevated inventory at much cheaper prices than big-box retailers. They can then sell items quickly, which allows for quick product turnover and a boost to their top lines. TJX also offers shareholders a dividend yield of 1.44%, further sweetening our investment case. TJX is set to report its fiscal fourth-quarter earnings on February 22. Receive trade alerts before Jim trades. Jim waits 45 minutes to send a trade alert before buying or selling stocks in his charitable trust’s portfolio. If Jim talks about a stock on CNBC TV, he waits 72 hours after the trade alert is issued before executing the trade. The above Investment Club information is subject to our terms and conditions and privacy policy, along with our disclaimer. No fiduciary obligation or duty exists, or is created, by virtue of your receipt of any information provided in connection with Investment Club. No specific results or benefits are guaranteed.
A shopper carrying a bag outside a TJ Maxx store in New York, USA
Victor J. Blue | Bloomberg | Getty Images
Fresh economic data showed on Wednesday that U.S. consumer spending slowed during the holiday season, even as inflation eased, continuing to squeeze shoppers. Off-price retailers like Club Holding are likely to become TJX Companies (TJX) is even more attractive to many Americans looking for cost-saving deals in the new year.