The Seven Expanding Off-Price Chains

Off-price retailers enjoy tremendous loyalty from bargain hunters and they have successfully turned that devotion into one of the strongest sub-sectors of retail operating today.

They have a no-frills approach to merchandising. Their customers wheel purchases around in bulky plastic carts and sift through densely packed racks and shelves to unearth often high-quality items at significantly lower prices than full-price retailers.

Off-price retailers enjoy tremendous loyalty from bargain hunters and they have successfully turned that devotion into one of the strongest sub-sectors of retail operating today. In 2016, off-price retailers followed by research firm Morningstar captured 19 percent of overall clothing and accessories sales in the U.S., up from 15 percent in 2012.

“The category is taking massive amounts of share,” says Bridget Weishaar, a senior consumer discretionary equity analyst with Morningstar, referring to T.J. Maxx, Marshalls, Home Goods, Ross, Burlington and Nordstrom Rack. “It is a trend that we don’t see turning around in the near future.”

The trend is enough to support brick-and-mortar expansion, say industry experts, a welcome change in an industry that is experiencing an accelerated pace of store closings.

Sales cannibalization from e-commerce operations is not an issue with off-price retailers, according to Steven Gartner, managing director, retail, for the greater Philadelphia region with commercial real estate services firm CBRE. The companies typically derive just a small percentage of overall sales from online channels, owing to an in-store treasure-hunting experience.

Framingham, Mass.-based TJX, the company that operates Marshalls, T.J. Maxx and HomeGoods, derived 1 percent of its revenues from e-commerce in 2016, according to the company’s annual report for the fiscal year ended in January.

As off-price retailers continue to keep loyal shoppers streaming into their stores, some operators are asking landlords to agree to restrictions on leases, including refraining from leasing nearby space to perceived competitors, says Daniel Taylor, CBRE’s managing director of retail for Texas and Oklahoma. That is not a uniform trend across the country, he adds. In some markets landlords are less inclined to do that.

In-store sales remain favorable for the sector, and current trends suggest that off-price retailers will expand at a healthy clip. Here is a roundup of the chains that landlords should keep a close eye on as they look to backfill vacant spaces or anchor new developments.

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