The Off-Price Retailer Sector Is Hot – Even In Physical Space

During the next five years, the off-price retailer sector is predicted to continue to outperform and build momentum in the apparel retail segment. According “Off-Price Retailers Continue to Build Momentum on Value Appeal,” latest report by Moody’s Investors Service, off-price retailers are anticipated to experience apparel revenue growth of 6 percent to 8 percent, outperforming the broader apparel segment by a collective 4 percent in the timeframe.

Christina Boni, a VP and senior analyst at Moody’s highlighted that “TJX Companies, Ross Stores and Burlington continue to outpace overall apparel, which are growing at a much slower pace. In contrast, the department store industry is losing share to off-price and other areas of apparel spending, as online competition increases and mall traffic continues to decelerate.” The off-price segment’s market share in sales are expected to grow to nearly 10 percent of apparel sales by 2018 from 8.8 percent, according to Moody’s. Moody’s also estimates the home category grew almost 13 percent relative to overall growth of 3 percent for the off-price retailers.

With brick-and-mortar growth expected to contribute to off-price sector growth as demand for its goods drives a healthy traffic pattern, Boni also stated that “The off-price model has proven that the customer will still shop physical locations when given the right value and store experience.” The sector is also coming down hard on it’s competitors such as Macy’s and Nordstrom. Last year the Dow Jones United States Apparel Retailers Index fell by 6 percent. Shares of Ross and TJX rose by 15 percent and 4 percent. Ross has now become the single largest clothing shop in America.

Department stores are turning more to outlets and leaving shopping malls. Upscale chains such as Neiman Marcus have launched their own off-price divisions. Saks Fifth Avenue’s “Off 5th,” Neiman Marcus’ “Last Call,” and Bloomingdale’s have also been launching its own outlet stores. “In our opinion, there has been a secular shift toward price sensitivity in apparel purchases following the Great Recession,” stated Bridget Weishaar, senior equity analyst at Morningstar. “People now value price more than other retail attributes like customer experience. Compounding this is the fact that the quality of customer service and store environment seems to have fallen in some department stores, making the experience not that much different from shopping at an off-price retailer.”

 

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Jennifer Lynn

Jennifer Lynn

Jennifer is a business journalist and has over 15+ years of professional experience working in technology, financial, hospitality, real estate, healthcare, manufacturing, not for profit and retail sectors. Specializations in the field of analytics, management consulting serving global clients from medium & large scale organizations. She is a proficient and passionate business executive; manager utilizing analytics data to drive smart business decisions. Technology, Finance, Investments, Retail, Management, Consulting, Strategy. Have published on Forbes.com, Investing.com, and many others. Currently the Commercial Real Estate Contributor for Retail Solutions Advisors.