Tariffs will hurt most stores — but not TJ Maxx

CNN

07-02-2025

New York CNN —
US retailers have been stockpiling clothing, furniture and other goods to get ahead of President Donald Trump's tariffs kicking in and raising their costs. That's created a perfect scenario for TJ Maxx — and it's not because the company is selling all-American goods.
Tariffs are taxes placed on imported goods, designed to protect domestic manufacturers from foreign competition. Companies that import products pay the taxes and typically pass the extra cost on to customers in the form of higher prices. Trump enacted a new 10% across-the-board tariff on Chinese goods Tuesday morning. Trump also ordered 25% tariffs on Mexican and Canadian goods, but he delayed them just hours before the sweeping actions were set to go into effect until March 1.
TJX gains an advantage from the inventory pile up because, unlike most retailers, the company only imports a small percentage of its merchandise directly from factories overseas. TJX instead relies mostly on buying designer brands' excess merchandise from them, much of it after it's already been imported — and then selling it to customers anywhere from 20% to 60% below regular prices. And since the tariff is only paid once, when the product is initially imported, TJ Maxx doesn't have to pay its own tariffs on most of the things it sells.
After Trump was elected, businesses raced to grow their inventories and increased their orders from suppliers even further to get in front of potential tariffs. As a result, retailers' inventory levels were up 2% annually during the third quarter of 2024, according to the latest data from Jefferies. Companies also ordered more inventory to get ahead of potential crippling US port strikes, which ultimately were averted earlier this year.
'A storm is brewing' in the retail sector as inventories are rising for the first time in two years, Jefferies analyst Corey Tarlowe said in a report this week raising estimates for TJX, the owner of TJ Maxx, Marshalls and HomeGoods. 'TJX should be a significant beneficiary.'
TJX's 'opportunistic buying' strategy capitalizes on other companies' misfortune, scooping up items that have piled up due to supply chain disruptions, canceled orders and overproduction. TJX predicted November that that the 'chaos' Trump's tariffs may bring to the retail industry plays right into its business model.
UBS analyst Jay Sole also said tariffs will benefit TJX and discount clothing retailers in a report this week.
'Tariffs likely create meaningful supply chain dislocation,' Sole said. 'This is another reason to buy (TJX and Burlington) stocks since these companies typically outperform in times of dislocation.'
TJX is one of the few retailers that appears to benefit from tariffs.
Steve Madden, Boot Barn, Skechers and other companies have the most negative exposure to tariffs, Sole said. Boot Barn sources an estimated 55% of its goods from China, Mexico, and Canada.
Boot Barn said on an earnings call last month that if there are 'significant' tariffs, the company will pass on some of the price increase to customers.
Walmart and other retailers have also said that they may have to raise prices, while companies like Steve Madden are speeding up plans to move production out of China.
'Our model is everyday low prices. But there probably will be cases where prices will go up for consumers,' Walmart finance chief John David Rainey said in an interview with CNBC after the presidential election last year.
TJ Maxx could reap the benefits of supply chain distruptions for a long time. The chain has been one of the strongest retailers over the past decade, in times of both economic growth and downturns. The company has also pressured traditional department stores like Macy's and Kohl's, which stand to lose out from tariffs because department stores rely heavily on imported merchandise.