Stop blaming Amazon! Retail's blame game shows some cracks

Home Depot beats Street, raises guidance
Home Depot beats Street, raises guidance

Retail's blame game is starting to show some cracks, as big first-quarter revenue beats from Home Depot and TJX proved that consumers are still willing to shop at a physical store — so long as you give them a good enough reason.

Home Depot on Tuesday said its comparable sales jumped 6.5 percent in the first quarter, beating Wall Street estimates, as the number of transactions in its stores increased 4.1 percent. The amount of transactions in a given quarter is a metric retailers often cite to identify traffic trends.

Meanwhile, T.J. Maxx, Marshalls and HomeGoods parent TJX blew past consensus same-store sales estimates of 3.2 percent, reporting 7 percent growth in that metric. The company even called out strength in apparel, a category that contributed to the weak results released by department stores last week. CEO Ernie Herrman credited the off-price chain's big beat to "very strong customer traffic, which drove the comp increases at every division."

"This tells us that our strategies to bring consumers exciting values on an eclectic and ever-changing mix of the right fashions and brands, sourced from across the globe, are working," he said.

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Women try on shoes at a J.C. Penney store at the Gateway Shopping Center in the Brooklyn borough of New York.
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Herrman's comments hit right on what many analysts contend is a key difference for TJX, which along with Home Depot, has not seen its business model crumble during the rapid rise of Amazon.

Each company has its own defense against the online retailer. For TJX, its constant flow of new merchandise and the thrill of the hunt continues to appeal to bargain-hungry shoppers who want name-brand goods — particularly millennials. At Home Depot, many of its products are bulky to ship, making its merchandise categories less appealing to potential competitors. Its stores also offer a few extra features that can't be replicated online.

"Generally speaking you need service," Brian Nagel, an analyst at Oppenheimer, told CNBC. "If I'm going to Home Depot, I need people to tell me what to buy."

He added there's often an immediacy to the company's products, explaining that many shoppers visit its stores when something in their home has broken, or when they're in the middle of a project and quickly need more supplies.

Home Depot executives did acknowledge that about 25 percent of the company's merchandise is at greater risk to online competition due to its easy-to-ship small packaging and high value. That includes power tools and faucets. However, management said these categories continue to generate solid sales.

Jeff Bezos, Amazon
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Perhaps even more notable is that both Home Depot and TJX have managed to increase sales, even as their online penetration remains small. Home Depot, which grew its online business by 21.5 percent during the quarter, generates only about 5 percent of its sales online, according to data from eMarketer.

Meanwhile, online sales accounted for only 1 percent of TJX's revenue last year, according to the company's 10-K. Profitably expanding online operations is a bigger challenge for off-price retailers, as the average price of their goods tends to be lower than their full-price competitors'.

That's not to say Amazon hasn't been gobbling up share. Even as traditional retailers increase their online sales, a recent report by Forrester Research found that Amazon's U.S. retail business made up 60 percent of total online growth between 2014 and 2015.

In addition to Amazon's ascent, retailers and analysts (to some degree of truth) have blamed everything from unseasonably cool weather to the impending election as reasons why consumers didn't spend during the first quarter.

Despite these headwinds, both Home Depot and TJX on Tuesday raised their full-year earnings and comparable-sales guidance, adding that second-quarter sales trends are off to a solid start.