HomeGoods chain makes surprising store closure decision

HomeGoods chain makes surprising store closure decision

Certain retailers have struggled with taking their brick-and-mortar business model and translating it to the internet. In some cases, there are logistical concerns.

Home Depot and Lowe’s, for example, had limited online selection in some areas because it’s not practical to ship somebody lumber or drywall. The same has largely been the case for the big furniture chains which continue to drive their business mostly through in-store sales.

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That makes sense because couches, beds, kitchen tables, and many other furniture items are expensive. Many consumers don’t like spending the kind of money those items cost without actually seeing them, sitting on them, and putting them through their paces a bit. 

Costco (COST) – Get Free Report might be the retailer most famous for going very slow when it comes to internet sales. That’s because the membership-based warehouse club was built around customers shopping in its warehouses. Adding e-commerce meant adding expenses, which would impact the company’s ability to keep prices low.

Adding sales on its website also removed a key part of Costco’s business, the treasure hunt. That’s the idea that part of the fun of shopping at the chain is not knowing what merchandise will be on its shelves.

You might visit the warehouse club for its excellent prices on food and household items, but leave with a new winter coat, a kayak, or a bucket of high-end candy. That’s also the business model for the TJX Companies (TJX) – Get Free Report, Marshalls, TJ Maxx, and Homegoods.

Those chains have struggled with e-commerce, which CFO John Klinger addressed during the company’s second-quarter earnings call.

“As to e-commerce, overall, it remains a very small percentage of our business. We continue to add new merchandise to our sites so that shoppers can see something new every time they visit,” he said.

That’s a pretty low bar but at least all three TJX brands have e-commerce websites, That will abruptly change, however, on Oct. 21 when the HomeGoods website will disappear. 

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Costco has a website, but most of its sales take place in its stores.

Image source: Brooks Kraft LLC/Corbis via Getty Images

HomeGoods closing its website 

TJX Companies sent an email to customers on Oct. 18 sharing the news, Parade first reported. The move comes only two years after the “Home Decor and More” retailer opened it.

“We’ve made the decision to focus our resources on our brick-and-mortar stores,” the email read in part. 

The company also promised “many new store openings” over the next few weeks. 

Oct. 21 will be the last day to shop at HomeGoods.com while the website’s e-commerce functions will shut down on Oct. 22. The company will continue to offer a store locator and some other basic functions on its website.

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Marshalls and TJ Maxx will continue to operate e-commerce stores. HomeGoods gift certificates are accepted at its own stores as well as its sister stores.

HomeGoods has been performing well

Klinger shared that HomeGoods second-quarter same-store sales rose by 4% in the second quarter. The brand also reported “a significant increase in our end customer traffic.” 

The CFO also shared some color around how the brand has performed and how he expects it to do going forward.

“HomeGoods second quarter segment profit margin was 8.7%, up 600 basis points and entirely due to benefit — a benefit from lower freight costs. We remain confident in the long-term opportunities we see to grow both our HomeGoods and HomeSense banners and capture additional share of the U.S. home market,” he added.

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Klinger also shared that TJX Companies would be taking advantage of recent bankruptcies like Bed Bath & Beyond to fuel its expansion.

“As far as the real estate opportunity, we’ve been on this from the beginning of when retailers start to close stores, and we take the best locations that fit our profile. And we’ll continue to do that as we see stores close,” he added.

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