Off-price looks stable as a target and Walmart flounders amid inflation – Footwear News


As consumers grapple with higher prices in several categories, the off-price sector is doing better than some traditional retailers.

In recent days, big-box retailers Target and Walmart have reported lost revenue, largely due to decreased spending in discretionary categories as consumers absorb steep price increases for essential items like the food. On the other hand, discount retailers like TJX Companies seem to be able to take advantage of value-driven consumers.

TJX Companies, parent company of Marshalls, TJ Maxx and Home Goods, reported upbeat quarterly results, with earnings 0.68% better than estimates of 0.6%. Net sales were $11.4 billion, up 13%. However, US offset store sales were flat from last year’s 17% increase.

Shares of TJX rose more than 8% on Wednesday afternoon.

The results, while unspectacular, represent a strong result in a quarter characterized by high costs and inflation.

Consumer prices rose 8.3% in April from a year ago, according to the monthly report from the Bureau of Labor Statistics. Specifically, the food index rose 9.4%, marking the largest 12-month increase since the period ending April 1981. Across retailing, first quarter results reflected these trends as consumers are more deliberate in their spending.

“Some customers have also shifted to the off-price channel as consumers react to inflation and rising prices,” GlobalData chief executive Neil Saunders said in a statement. “As positive as these two things are, they are offset somewhat by a conservative consumer who is more cautious about spending money as other costs rise.”

Analysts at Jane Hali & Associates (JHA) LLC noted that this consumer reacting to inflation will likely also benefit other non-price players, such as Ross Stores and Burlington Coat Factory.

“As prices rise, off-prices are positioned to benefit from inflation as consumers seek bargains,” JHA analysts said in a note.

At the same time, Saunders noted that the off-price channel is likely to face increasing competition from resale platforms that continue to gain momentum. The US used market is expected to more than double by 2026, reaching $82 billion, according to a recent report by ThredUp and GlobalData. Overall, resale is expected to grow 16 times faster than the U.S. retail apparel sector by 2026.

In the report, ThredUp cited a GlobalData survey of 2,000 American adults in April, which found that 44% of consumers said they were cutting back on their clothing purchases. 80% of consumers said they bought the same or more second-hand clothes and 25% said they would consider buying even more second-hand clothes if prices continued to rise.

“Consumers now have many more value channels to turn to in times of financial pressure – including used and resale and ultra-cheap players like Shein,” Saunders said. “TJX will still gain apparel market share, but it will have to share the gains with more competitors.”


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