Is Off-Price The Next Retail Sector To Go Off The Rails?

Amidst all the pain that most of the retail industry has endured during the past few years, the “off-price” sector has been one of the few shining stars. While most retailers struggle to eek out any top-line growth at all, the segment’s big four–TJX, Ross, Burlington and Nordstrom Rack–have delivered solid growth. While many retailers are closing stores in droves, the off-price leaders have been opening new outlets at a brisk pace while announcing plans to open hundreds of stores over the next several years. TJX–the parent company of T.J. Maxx, Marshalls, HomeGoods and Sierra Trading Post–added nearly 200 stores this past year alone. So while it’s easy to blame Amazon for all the trouble the department store category is now experiencing, there is ample evidence that it’s been the major share grab on the part of the off-price and outlet sector that’s inflicted a great deal of the pain. Of course, the bifurcation of retail has been going on for some time. Consumers have been steadily shifting their spending toward more price-oriented brands since the recession. In some cases, it has been driven by an economic need to spend less. In other cases by a realization that strong value can be obtained at a lower price, whether that is from a traditional retailer (e.g. Walmart), a leading fast fashion brand (e.g. H&M and Zara), a newer business model (e.g. Gilt and Farfetch) or, of course, Amazon. Yet there is growing evidence that the segment is beginning to mature and that future results may be quite different from the boom of recent years. In the most recent quarter TJX saw same-store sales growth slow to 1%. Arch rival Ross posted better results but struck a decidedly cautious note. Nordstrom Rack, which has been the star within Nordstrom, has seen its growth slow to below the industry average. Read more at Forbes.