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During an Oct. 11 campus visit, Kellogg alum and TJX executive Jeff Naylor '82 explained his company's buying strategies.

Discount retail leader highlights atypical strategy

Jeff Naylor ’82, TJX chief administrative officer, visits Kellogg to talk fashion

By Adrienne Murrill

10/22/2007 -

Serious shoppers love a bargain, and even those who are less fond of walking the malls still probably like to save money. Either way, TJX Companies has a value proposition to attract each segment.

TJX, the leading off-price apparel and home fashions retailer, includes T.J.Maxx, Marshalls, HomeGoods and A.J. Wright in the U.S.; Winners and HomeSense in Canada; and T.K. Maxx in Europe. TJX Companies reported more than $17 billion in revenue in 2006 in its 2,400-plus stores.

The business’ target customer is similar in profile to a department or specialty store shopper, someone in the middle to upper-middle income range who is fashion and value conscious. However, TJX stores sell brand name merchandise at 20 to 60 percent less than department and specialty stores. With a mission that is contrary to the norm in retail, the company has created its own operational strategies to foster growth. Jeff Naylor ’82, the chief administrative officer of TJX, shared some of these insights with Kellogg and Northwestern University students during an Oct. 11 visit to Evanston.

Naylor, who is also a 1980 graduate of Northwestern’s Weinberg College of Arts and Sciences, explained that one difference at TJX is its buying strategy. “A typical retail store turns [its inventory] three to four times a year,” he said, “but our stores turn nine times a year. We buy opportunistically, meaning that we buy very close to the time that we have the goods in the store.” As of mid-October, he said, the company still had merchandise to purchase for the end of the month, which is contrary to typical buying practices.

Purchasing merchandise so close to when it will be in the store can give the company an advantage in price and style, Naylor said. This strategy also allows TJX to shift buying to different categories according to what is selling well at any time.

“At the beginning of the season, we go in with a view of what we want the store to look like, say 12 percent sweaters, 20 percent handbags, etc., and then we convert that into units,” said the Kellogg graduate. Each week, the company reviews what percentage has been purchased and makes necessary changes, Naylor explained: “Dresses, which were dead for the longest time, for example, were hot this year. We took 2 million units that we had planned for other areas, and we gave that to the dress buyer.” Again, this strategy is possible because TJX buys so close to when the products are placed in stores.

Another unique factor in TJX’s strategy is that buyers often purchase unknown goods. “Over 50 percent of what we sell is off-price buys, things that are excess goods and you may not have a lot of information about,” Naylor said. To handle this, the company’s distribution centers sort through the goods and then split them among many retail locations, which is atypical. “We want to have a very wide mix with as many SKUs as possible and as little depth,” he said. In turn, this keeps merchandise fresh for customers.

Naylor’s visit was part of the Fashion, Lifestyle and Design Lecture Series through Northwestern and was held at the Kellogg School’s Donald P. Jacobs Center. The series is co-sponsored with the Business Institutions Program and newly formed Northwestern Fashion and Design Club. Students in the Kellogg Retail Club and the Master of Management and Manufacturing program attended the event.

"More and more Kellogg students are looking in the retail industry for their post-MBA career, so it's great to hear from alumni working in the field," said Kelsey Doub '08, the Kellogg Retail Club development co-chair. "Mr. Naylor showed the strategic value of TJX's buying strategies and why the company has been able to perform so consistently in such a volatile industry."