Ross and TJX Ride the Discounter Wave as Consumers Seek Low-Priced Clothes

It may be a bad time for consumers and their wallets, but it’s proving to be a good time for the discounters and off-price retailers that cater to the growing demand for deals.

With bargain hunting and budget sensitivity at record highs amid ongoing inflation and economic gloom, discount chains are ruling the roost right now thanks to aggressive price wars among their normally full-priced competitors. Add in a glut of unsold inventory that is keeping wholesale apparel prices under pressure alongside the belt-tightening buying environment and the stage is set for brands that stand for value and savings.

“Our top priority is and always will be delivering fresh and exciting named brand merchandise at compelling discounts every day in our growing store base of over 2,000 locations,” Ross Stores CEO Barbara Rentler told investors Thursday afternoon (Nov. 17) during the company’s third-quarter earnings call. “With consumers’ heightened focus on value and convenience, this bodes well for our ability to expand our market share and profitability in the future.”

Investors have bid up the retailer’s stock price by 50% since July 1 compared to a 3% gain for the S&P 500.

While she acknowledged that ongoing inflationary pressures are having a larger impact on lower-income customers at its dd’s brand, Rentler said the discounter was not slowing the chain’s plans for location growth for both of its brand banners.

See also: Ross Opens 2,000th Location as Customers Seek Relief From Inflation

TJX Embraced by ‘Treasure Hunters’

In a similar sentiment from off-price segment leader TJX, whose portfolio includes the T.J. Maxx, Marshalls, and HomeGoods chains, CEO Ernie Herrman credited the retailer’s better-than-expected United States comp sales growth with “excellent performance” within its two apparel-focused businesses during its Q3 earnings call.

“As I’ve been saying all year long, the marketplace is absolutely loaded with quality branded merchandise across good, better and best brands,” Herrman said, adding that through the holidays, TJX plans to “flow fresh product to our stores and online multiple times a week,” which he called a key differentiator versus many other retailers.

“We see many opportunities to drive sales and traffic as we attract a wide range of customers across many income demographics, which we believe is a key advantage of our business,” Herrman said. “In a retail environment where overall pricing has been reset higher, we believe our value proposition will be even more compelling and visible to consumers, and that our treasure hunt shopping experience will hold tremendous appeal.”

Shares of TJX were up on the news and are up 35% since July 1.

Read also: TJX Finds ‘Tremendous Advantage’ in Off-Price Offerings

Sign of the Times

To be sure, the gains being seen by discounters are not being felt industrywide. Big brands like Target and Kohl’s are being extra aggressive in their markdowns, but their efforts have not triggered the same consumer response.

However, the performance of discounters aligns with PYMNTS research on the value of discounting in the current environment.

Per the study “Consumer Inflation Sentiment: Consumers Buckle Down on Belt-Tightening,” “Cutting back on ‘nice to haves’ is the most common way consumers are seeking to save money, but it is not the only way. More consumers are also seeking cheaper merchants and buying lower-quality products to cut costs on grocery and retail purchases.”

For all PYMNTS retail coverage, subscribe to the daily Retail Newsletter.