While department stores are suffering from waning foot traffic and reduced store counts, off-price retail is thriving.
The three largest off-price chains are TJX Cos. (parent company of TJ Maxx, Marshalls and HomeGoods), Burlington and Ross Stores, all of which are reporting robust sales and aggressive store expansions.
The U.S. off-price retail sector remains a bright spot in the turbulent retail environment plagued with bankruptcies and store closings.
Off-price chains continue to buck the trend that’s negatively impacting many flailing bricks-and-mortar retailers. They boast rising same-store sales and growing physical footprints, and many are even looking to grow online.
The basic idea behind the off-price retail model is to provide over-produced items at a discounted price, which means scale of the company can play a significant role and make it easier to compete and operate with lower costs.
Off-price is the shining star of the physical retail industry right now, and it looks like it’s set to continue for the next five to seven years in terms of new store openings and consumers shifting to it.
The sector remains strong and there’s no indication that will change over the midterm and probably the long term.
Same-store sales for TJX Cos. increased by 4.0 percent year-to-date as of November 2019, according to S&P Global. Ross Stores’ same-store sales increased by 3.0 percent and Burlington’s rose 2.2 percent.
TJX Cos. opened 107 stores in fiscal third quarter 2020. The retailer is continuing to expand its fleet with plans to be at roughly 6,100 stores long term.
Burlington announced it would open 50 new stores in 2019 and now operates 726 stores.
Ross Stores added 98 stores to its bricks-and-mortar footprint in 2019 and now has 1,550 locations.
With so many stores opening, at some point retail experts say there could be some oversaturation in the sector.
Apparel sales at off-price retailers increased by 3.0 percent, while total apparel sales fell by 3.0 percent in the 12 months ending in November 2019.
Discounter sellers have replaced the off-price department store because they have mastered the art of the “treasure hunt”.