The trend: Despite unseasonably warm weather and severe storms dampening their Q3 results, off-price retailers are still outpacing the broader apparel market as consumers hunt for the best bang for their buck.
- Shoppers in Q3 flocked to TJX-owned T.J. Maxx and Marshalls, as well as Burlington. The three retailers’ foot traffic grew 5.1%, 5.5%, and 6.4%, respectively, during the quarter, per Placer.ai.
- While Ross Stores’ traffic fell slightly over the same period, its YoY visit gap remained significantly smaller than that of the wider apparel category.
The bigger picture:
- While warmer-than-usual temperatures in the US hurt Burlington’s sales of cold-weather items such as coats, the retailer’s sales still rose 10.6% YoY in Q3 to $2.53 billion, and its adjusted earnings per share (EPS) jumped 40.9% YoY to $1.55. The retailer’s comparable sales grew just 1% YoY, but if you strip out cold-weather categories, its comparable sales grew about 4% YoY, per CEO Michael O’Sullivan.
- Unexpected weather also hurt Ross Stores’ results: Sales rose 3.0% YoY to $5.07 billion, but comparable sales edged up just 1.0%. Yet by boosting margins, the retailer lifted EPS 11.3% YoY to $1.48. Even as its low- to moderate-income customers pull back on discretionary spending, Ross continues to build a loyal customer base—over half its monthly visits came from shoppers who visited at least twice a month, easily outpacing other off-price retailers, per Placer.ai.
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Nordstrom Rack’s net sales increased 10.6% YoY to $1.27 billion, and its comparable sales grew 3.9%. The retailer attributed its gains to a compelling assortment that resonated with consumers.
Our take: Shoppers’ desire to hunt for bargains should put off-price retailers in a strong position to win share this holiday season.
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