Ross Stores COO: Shoppers’ Cost-Cutting Behaviors Fuel Off-Priced Retail Growth

With consumers cutting back on discretionary spending while trading down to value-focused merchants, Ross Stores is seeing these belt-tightening behaviors prove to be a mixed bag.

The company, which operates more than 2,000 off-price stores across the country under its Ross Dress for Less and DD’s Discounts banners, reported in its first quarter fiscal 2024 financial results that it saw sales rise 8% year over year. However, the retailer continues to face challenges, as its target demographics face ongoing budgetary pressures.

“Ongoing uncertainty in today’s macroeconomic and geopolitical environment, including prolonged inflation, continue to squeeze our low- to moderate-income customers’ purchasing power,” executive vice president and CFO Adam Orvos stated.

Indeed, many shoppers are cutting back on discretionary spending, per findings from the February/March installment of the PYMNTS Intelligence “New Reality Check: The Paycheck-to-Paycheck Report” series. The study’s survey of more than 4,200 U.S. consumers revealed that 60% of consumers have cut back on nonessential spending in response to inflation, with that share rising to 69% for consumers who make less than $50,000 annually.

That being said, with Ross Stores’ focus on affordability, it has been well positioned to seize on consumer trade-down and loyalty to lower-priced merchants.

“The silver lining for our business is customers seeking value more than ever, and we’re in a position to deliver that,” Michael Hartshorn, the company’s group president and COO, noted.

To that point, supplemental findings from the same PYMNTS Intelligence report reveal that low- and middle-income consumers are considerably more likely to be switching to less expensive merchants for the same reason. Specifically, 55% of those who make less than $50,000 annually and 57% of those who make between $50,000 and $100,000 reported having done so, versus just 45% of those who make more than $100,000.

Retailers with a focus on value have been seeing some benefits from this trend. Off-price apparel and home goods retailer TJX, parent company of TJ Maxx, Marshalls, HomeGoods and others, shared in its first-quarter fiscal 2024 earnings results Wednesday (May 22) that comp store sales were on the rise.

Plus, “The Pessimism About Pay Rises Offsets the Effect of Falling Inflation” installment of the “The Paycheck-to-Paycheck Report” series found that 83% of consumers say they are at least somewhat concerned about near-term economic conditions. Another PYMNTS Intelligence report that found 46% of retail shoppers are deal chasers, willing to go wherever they will get the best price.

Against this backdrop, some major retailers are lowering prices in categories where the competition is particularly strong. Take Target announcing cuts to the prices of about 5,000 “frequently shopped items,” such as milk, meat, bread, produce, coffee, paper towels and pet food, or Walmart touting its nearly 7,000 price reductions on its latest earnings call.

“Many retailers have been soft on traffic and transactions,” TJX CEO and President Ernie Herrman said on Wednesday’s call. “My prediction would be we’re going to see more of that talk about lowering prices on certain commodity items for them to try to get customers back.”

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