Fresh economic data showed on Wednesday that US consumer spending slowed during the holiday season as inflation, while easing, continued to weigh on shoppers. That’s likely to make off-price retailers like Club holding TJX Companies ( TJX ) even more attractive to many Americans looking for cost-saving deals in the new year. Total U.S. retail sales fell 1.1% month-on-month in December, the Commerce Department said Wednesday, the second straight monthly decline. Retail sales fell 1% in November. The monthly sales report, which is not adjusted for inflation, showed declines across a number of categories, with department store sales plummeting 6.6% and gas station sales down 4.6%. The retail data comes as the Labor Department’s producer price index, also released Wednesday, showed prices of wholesale goods and services fell faster than expected in December. This is a sign that the Federal Reserve’s rate hikes are working to slow inflation, which could benefit consumers. But with the state of the economy still uncertain — inflation remains high even as recession fears linger — Morgan Stanley on Wednesday singled out off-price retailers like TJX and rivals Ross Stores ( ROST ) and Burlington Stores ( BURL ) for their “defensive qualities in the face of a recession.” Companies like TJX, which operates stores like TJ Maxx and Marshalls, have taken advantage of the glut of retail inventory that has plagued major department stores over the past year, buying excess clothing and other items at a discount and then moving to shoppers. Analysts at Morgan Stanley expect off-price retailers to benefit as consumers shift their spending habits away from luxury purchases and toward discounters. “Looking to 2023, we think TJX, ROST & BURL businesses should benefit from the trade decline again, as well as seeing a reduction in the margin to normalize shipping costs and [merchandise] margins, creating an attractive setup for the subsector in a potentially challenging macro environment,” the analysts wrote in a research note. Analysts identified TJX as the only off-price retailer to successfully raise prices over the past few years. their more than 20,000 sales associates while also attracting a demographic higher-income groups compared to their peers. TJX shares closed up 2.13% on Wednesday at $79.81 apiece.The Bottom Line The second straight monthly decline in retail sales shows shoppers are becoming more cautious about how and where they spend their money. hard-earned dollars. This trend could portend slower first-quarter retail earnings growth ahead. At the same time, if inflation eases further, it could create room for more discretionary spending. inflation remains a challenge for many consumers even as the economy slows .This makes TJX the preferred shopping destination during a potential economic downturn.Retail Off-price retailers like TJX have a great opportunity to get a wide variety of merchandise from wholesalers with increased inventory at very cheap prices. They can then quickly sell the items, allowing for quick product turnover and boosting their top lines. TJX also offers shareholders a dividend yield of 1.44%, making our investment case palatable. TJX will report its fiscal fourth quarter earnings on February 22. (Jim Cramer’s charitable trust is long TJX. See here for a full list of stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you’ll receive trade alerts before Jim executes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling shares in his charitable trust’s portfolio. If Jim was talking about stocks on CNBC TV, he waits 72 hours after the trade alert is issued before he executes the trade. THE ABOVE INVESTMENT CLUB INFORMATION IS SUBJECT TO OUR TERMS AND PRIVACY POLICY ALONG WITH OUR DISCLAIMER. NO FIDUCIARY OBLIGATION SHALL EXIST OR CREATE BY YOUR ACCEPTANCE OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTMENT CLUB. NO PARTICULAR RESULT OR PROFIT IS GUARANTEED.
A shopper carries a bag outside a TJ Maxx store in New York, USA
Victor J. Blue | Bloomberg | Getty Images
Fresh economic data showed on Wednesday that US consumer spending slowed during the holiday season as inflation, while easing, continued to weigh on shoppers. This is likely to cause lower price retailers to have Club holding TJX Companies (TJX) even more attractive to many Americans looking for cost-saving deals in the new year.
