The Supply Side: TJX banners, other off-price retailers doing well in early 2024

Consumers continue to spend on discretionary items at off-price retailers like Burlington, Ross Stores and TJX banners such as T.J. Maxx, Marshalls and HomeGoods. The off-price retailers are outperforming department stores and continue to expand their U.S. store footprint.

Ross Stores reported that fourth-quarter net income was up 36.4%, sales revenue was up 15.3% and comparable-store sales were up 7%. CEO Barbara Rentler said that while inflation has moderated, housing, food and gasoline costs remain elevated and continue to pressure low-to-moderate-income customers looking for bargains.

“Our strong sales were driven by customers’ positive response to our improved assortments of quality branded bargains throughout our stores,” said Rentler. “Fourth quarter operating margin grew to 12.4%, up from 10.7% in the prior year. This improvement was mainly due to the strong gains in same-store sales and lower freight costs partially offset by higher incentives.”

The company said it expects to open 90 new locations this year, up from 75 last year.

“As we look out over the long term, we remain confident that Ross can grow to 2,900 locations and DD’s Discounts can become a chain of 700 stores given consumers’ ongoing focus on value and convenience,” COO Michael McGillis said.

BURLINGTON, TJX GROWTH
Burlington Stores Inc. also continues to outperform with expectations for future growth. CEO Michael O’Sullivan said the company hit a significant milestone in 2024, opening its 1,000th store, and strengthened its pipeline for new store openings through its acquisition of Bed Bath & Beyond leases. Burlington expects to open approximately 100 net new stores in 2024.

Revenue grew 14% for the holiday quarter, with comp sales increasing 2% and a 46.2% rise in gross margin, topping off a strong year. O’Sullivan said the company could reach $16 billion in total sales within five years.

The leader in share among the off-price segment is TJX, the parent company of T.J. Maxx, Marshalls and HomeGoods. TJX reported a 13% jump in sales during the holiday quarter, with net income growth of 34% from the year-ago period. Comp sales grew by 5%, outpacing the 4.6% forecast.

“We feel there is a lot of opportunity in retail,” said TJX CEO Ernie Herrman. “From our sales momentum, the customers are responding extremely well.”

All of the TJX companies outperformed expectations. HomeGoods bucked the downward trend of home furnishing sales with comparable sales growth of 7% in the holiday quarter. T.J. Maxx and Marshalls grew sales by 11.7% compared to 7% attained last year. TJX said it plans to open 100 new stores in the U.S. this year, with 10 new locations slated for Canada.

“We continue to see opportunities for store growth around the world,” Herrman said. “We believe we can grow our global store base by at least another 1,300-plus stores over the long term with just our existing banners in our current countries.”

During the fiscal year ending Feb. 3, TJX increased its store count by 119 to 4,954 and increased square footage by 2% compared to the prior year.

‘HIDDEN GEMS, EXCLUSIVE DEALS’
According to analysts at UBS, the biggest reason off-price retailers are outperforming department stores is deep discounts on luxury brands, everyday items, and iconic brands that appeal to all ages and ethnic backgrounds.

A survey by PYMNTS Intelligence in late 2023 found that 72% of consumers said price and discounts influenced their decision to make non-discretionary purchases. Price was the top factor in buying, followed by convenience.

R.J. Hottovy, head of analytical research at Placer.ai, said that even though inflation has cooled in recent months, value-seeking behaviors remain prevalent, which will benefit the off-price retailer segment.

“This is one of the most popular channels right now,” Hottovy said. Seeing the macro pressures, many consumers are focusing on value, and it makes sense that they’re gravitating towards off-price retail.”

He said middle-to-lower-income consumers are focused on stretching the household budget and getting the best deals possible. Hottovy said most off-price retailers have done a good job of merchandising and bringing in new products while clearing out older inventory.

“Off-price retailers are resonating with fashion and cost-conscious consumers alike and are stealing department store business for good reason,” said Marshal Cohen, chief industry analyst with The NPD Group. “Off-price is second only to the online channel in terms of growth rate.”

Debra Weinswig, CEO of Coresight Research, said off-price retailers should win market share this spring and summer as consumers will update their wardrobes at a value.

Coherent Market Insights reports that the global off-price retail segment was valued at $315.7 billion at the end of 2023. They predict the market to grow to $558.97 billion by 2030, at a compound annual growth rate of 8.5%.

According to Coherent, the off-price retail market appeals to price-conscious consumers who seek discounts and deals without compromising on product quality.

“Off-price retailers also benefit from the ability to create a sense of urgency and excitement among customers through limited-time offers and frequent merchandise turnover. This creates a treasure hunt shopping experience, where customers enjoy the thrill of discovering hidden gems and exclusive deals,” the Coherent report noted.

Editor’s note: The Supply Side section of Talk Business & Politics focuses on the companies, organizations, issues and individuals engaged in providing products and services to retailers. The Supply Side is managed by Talk Business & Politics and sponsored by Firebend.