Apparel Retailers

This group has shuffled a bit under the new parameters. With its extensive overseas operations no longer included, Gap drops to the runner-up position. The new category leader is TJX – primarily due to its Marmaxx division, which is comprised of T. J. Maxx and Marshall’s, off-pricers that have performed above average during the prolonged recession and slow recovery.

TJX has benefited from the woes of full-price rivals forced to cut back on inventory when their customers stopped shopping. TJX was able to buy up those canceled orders from vendors relieved to be able to unload the goods at any price; in fact, TJX has added some 2,000 new suppliers during the recession.

And TJX may well retain many of its bargain-hunting customers when the economy improves, says Richard Jaffe, a retail securities analyst for Stifel Nicolau. “Good times are better for TJX than tough times,” he says, noting that when business picks up at TJX’s competitors, there will be fewer markdowns, making it easier for TJX to improve its own margins.

While Gap has ventured abroad for growth and an earnings boost, things are starting to look a little better at home. The company reported a 40 percent profit increase in this fiscal year’s first quarter, and Old Navy was a major contributor. While there was top-line growth across all Gap brands, the budget division’s 7 percent same-store sales gains led the way. “We are prudently building low-risk inventories,” says CFO Sabrina Simmons. “Unlike most of our competitors, we have been cutting inventories for four straight years. From an absolute perspective, inventories are still quite lean.”