Company Profile

TJX Companies Inc.

United States

Consumer Discretionary – Specialty Retail

http://www.tjx.com

TJX Companies Inc. (TJX) is an off-price apparel and home fashion retailer with over 3000 stores worldwide. Unlike traditional apparel retailers, such as The Gap or H&M, TJX Companies earns just a small portion of its revenues from the sale of private label goods. Instead, the company purchases the majority of its apparel and a significant portion of its home fashion inventory opportunistically. According to the company’s 2013 Annual Report, “We take advantage of opportunities to acquire merchandise at substantial discounts that regularly arise from the production and flow of inventory in the apparel and home fashions marketplace, which include, among others, order cancellations, manufacturer overruns, closeouts and special production direct from brands and factories.”

Impacts and Opportunities for Companies in the Retailing Industry

Supply Chain Management

The majority of retail companies, specifically within the apparel sector, outsource their production to factories located in developing markets. These factories are often criticized for unjust labor management, poor health and safety standards, and environmental non-compliance.

TJX’s distinct business model limits the company’s exposure to complex supply chains. To manage the small portion of the company’s sales derived from private-label merchandise, TJX has developed a comprehensive compliance program for factory auditing. These audits are conducted by third-parties and, if necessary, corrective action plans are created to address concerns.

Energy Efficiency

According to the U.S. Department of Energy, retail buildings— including stand-alone stores, malls, and shopping centers— account for over 15% of commercial floor space and consume more than 18% of all energy used by commercial buildings.1

TJX set a greenhouse gas (GHG) emissions goal in 2011 to reduce emissions per dollar of revenue by 5% by 2013 relative to 2010. The company exceeded this goal and reduced its GHG emissions per dollar of revenue by 12.1%. This was accomplished in part due to the company’s lighting retrofits, establishment of energy efficiency standards for its heating ventilation and air conditioning equipment, and from its employee engagement programs that encourage energy conservation in TJX’s stores, distribution centers, and home offices.

Logistics

According to the U.S. Environmental Protection Agency (EPA), moving freight within the U.S. accounts for 20% of all the energy consumed in the transportation sector.  Together, U.S. rail and truck transport emits over 450 million metric tons of carbon dioxideannually.2

TJX prioritizes initiatives aimed at reducing fuel consumption and emissions through logistics optimization. In the U.S., TJX is a member of the EPA’s SmartWay program; in Canada, its carriers are Fleet Smart certified; and in Europe, TJX has made “green” agreements with its carriers. The company is also reducing fuel use and carbon emissions through the expanded use of rail and intermodal transport. In the U.S., the use of inbound intermodal methods to distribution centers increased from 30% of miles travelled in 2008 to 69% of miles travelled in 2013.

Areas for Improvement

Business Model Recognition

TJX operates within a distinct business model and Portfolio 21 believes this model limits the company’s exposure to certain environmental and labor issues facing the majority of TJX’s sector peers.  However, TJX does not publically recognize this advantage. Portfolio 21 has asked the company to discuss the embedded environmental and social advantages of its business model and how it could result in increased brand reputation.

Environmental Accounting

Despite the publication of a Corporate Social Responsibility report, the company has yet to set reduction goals across its key environmental performance indicators. Portfolio 21 has asked the company to establish targets for energy, water, and waste.

Greenhouse Gas Emissions

TJX exceeded its last reduction goal, however, the company has not set a goal for future improvement. Portfolio 21 has asked the company to continue to reduce its greenhouse gas emissions and establish a long-term reduction target.

 

  1. U.S. Department of Energy. “Retailer Energy Alliance 2012 Annual Report,” October 2012.  Accessed March 17, 2014.  http://apps1.eere.energy.gov/buildings/publications/pdfs/alliances/rea_annual_report_2012.pdf []
  2. Environmental Protection Agency. Transportation Logistics/Supply Chain webpage.  Accessed March 17, 2014.  http://www.epa.gov/retailindustry/transportation/index.html []

To the best of our knowledge the above information is accurate and was obtained from sources we believe to be reliable. Neither the information presented above nor any opinion expressed shall be construed as an offer to sell or a solicitation to buy the security. The views expressed are those of portfolio management as of 7/31/14 and may not reflect current opinions or subsequent events.

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