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Trump's tariffs could send shoppers into the arms of discount stores

Business Insider logo Business Insider 5/21/2019 Mary Hanbury

TJ Maxx and Marshalls are preparing to benefit from tariffs. 

In a call with investors on Tuesday, the CEO of TJX Companies -- the retail giant behind TJ Maxx, Marshall, and HomeGoods -- said that while the company is closely monitoring the negative impact of tariffs, they could also create some opportunity for the company.

Historically, off-price brands have benefited from "disruptions in the market," TJX CEO Ernie Herrman said.

In this case, Herrman said that if tariffs are imposed on another $300 billion worth of Chinese goods and retailers are forced to raise prices to cover the costs, shoppers could flock to off-price stores for value.

"There's a lag, but there is a silver lining for us," he said.

Related video: Tariffs could cost $40 billion in sales, analyst says (provided by CNBC)

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Read more: We shopped at TJ Maxx and Ross to see which was a better discount store - and the winner was clear

TJX Companies reported strong first-quarter earnings for fiscal 2020 on Tuesday. Same-store sales were up 5% overall for the company, and they were up 6% for its TJ Maxx and Marshalls brands.

Meanwhile, J.C. Penney and Kohl's, which also reported earnings on Tuesday, saw same-store sales drop by 5.5% and 3.4%, respectively.

Discount stores such as TJ Maxx and Ross Stores are known as one of the few bright spots in retail. These stores have been benefiting from a disappearing middle class and a higher demand for budget options - two factors that have been hurting department stores.

TJ Maxx has also been able to avoid the effects of declining foot traffic to shopping malls as most of its stores are located in suburban strip malls rather than enclosed shopping malls.

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