Even as much of the retail world continues to have challenges in a tough business environment, one channel has consistently outperformed all others. Off-price retailers have generally been booming, especially post-pandemic when shoppers have become particularly price-sensitive and are on the hunt for bargains...real and perceived.
TJX, the parent company of TJMaxx, Marshalls, and Home Goods, has been leading the way, but competitors like Ross Dress for Less and Burlington have also been doing above average. TJX is opening hundreds of stores and is starting to ramp up expansion plans for its smallest brand, HomeSense, which will have 70 locations by the end of the year.
Jessica Ramirez, a senior research analyst for Jane Hali & Associates, recently told CNBC it’s the nature of their models that make them successful. “They have trusted brands at a cheaper price. They’re more on-trend, they’re designer-led, they lean into categories that the customer is much more interested in.”
She said that because of their formats, they can expand certain product classifications and reduce others based on demand and customer interests.
But even as these brands are doing well, not everything is rosy in the off-price channel. One high-flyer in the space, Five Below, has suddenly hit the wall. In July the retailer, which bridges the line between off-price and dollar store, took down its forecast for its next quarter, forecasting as much as a 7 percent drop in same-store sales. It also reduced its earnings per share estimate from as much 69 cents to possibly as low as 56 cents. With the bad news came the announcement that long-time CEO Joel Anderson was leaving the company. It blamed slower consumer spending due to inflationary concerns and increased security costs.
Another large retailer in this channel, Big Lots, is facing an even more dire situation. Following several quarters of lower sales and losses it said it would be closing as many as 300 stores – possibly more – and warned it might not be able to continue to stay in business if things didn’t improve.