Abs Tranccoo

Kohl’s and TJ Maxx are consumer discretionary retailers competing in the discount apparel and home soft goods markets. Founded in 1962 and 1956 respectively, both companies operate a large number of outlets in the US. While both are considered to sell their inventories at a discount, Kohl’s has developed merchandising agreements to be able to carry top brands. Through strict cost control, Kohl’s is able to profit from these relationships. Kohl’s stores are set up like a department store, with all items available by department under one roof. In contrast, TJ Maxx divides their sales segments by physical stores, with a mix of different items across their outlets (TJ Maxx, Marshalls, and HomeGoods in the US) (1). In 2012 Kohl’s operated 1,127 stores, while TJ Maxx operated 2,241 stores (2).

Industry

The retail industry has experienced significant volatility over the last few years due to consumer spending driving demand and a decrease in consumer income. With an economic recession in 2008 that continues to resonate through 2012, growth and profitability for both companies experienced an impact. However, through stringent management techniques, both companies were able to maintain a strong Net Operating Profit Margin increase over the last four years. The main competitors for both companies include Ross (ROST) and Target (TGT) (3). With year over year increases in discretionary income and a correlated increase in spending on nondurable goods, this industry appears to have weathered the recession and be ready for future growth (4). Additionally, the industry faces high levels of competition with the seven largest companies occupying nearly 100% of the market share, thereby reinforcing the necessity of keeping costs low (4).

TJ Maxx versus Kohl’s

Both companies have produced consistent revenue growth and Net Operating Profit Margins (NOPM). However, a key distinguisher between the two companies financial health is their Return on Net Operating Assets. Kohl’s is able...