The Department Store Loss Is Off-Price’s Gain
As the department store sector continues to closely resemble a graveyard, with nothing but bad news coming out of companies like Macy’s and JCPenney, there seems to be at least one silver lining: The off-price sector is booming. According to a report released by equity research firm Wedbush today, stores within the off-price sector, like T.J. Maxx and Burlington, could benefit as much as $1 billion from the department store crisis. “Department store door closings and revenue losses have been a consistent theme post-2008, with off-price reaping the benefits of reduced competition,” writes Wedbush analyst Morry Brown. “In the medium-term (3-5 year time horizon), we view the ongoing consolidation and share shifts as entirely positive for the off-price channel.” So far, 240 Macy’s and JCPenney stores are scheduled to close this year, which Brown believes would account for $1.6 billion in revenue, and approximately $1 billion of it will likely go to off-price over the next 12 months. Brown estimates this is because of proximity, as Burlington and T.J. Maxx have stores that are right next to these shuttering locations. But off-price is also benefiting because of the basic evolution of shopping. While neither the department store nor off-price has evolved all too much over the last decade, only one promises merchandise at a steep discount. Shoppers today have been conditioned to hunt for discounts; it’s why fast fashion is thriving, and why Amazon, with its promise to undercut every price, is becoming the largest retailer in the country. Read more at Racked.
