Truth by Numbers: TJMaxx

The recent failure of Hudson’s Bay and Gilt Groupe’s union is a bleak indicator to luxury full-price retailers: off-price is no longer the safety net boosting weak performing mainline sales. It’s been a growth streak for years, but the momentum is decelerating, and fast. During this year’s first quarter, Saks Off 5th’s were down 3.5 percent...not to mention Neiman Marcus’ announcement to close 10 of its Last Call discount shops.

However, not all off-price should be considered equal. The differences between off-price channels for department stores versus pure play off-price are important. Department stores often use off-price channels to off-load (pardon the pun) merchandise that didn’t sell, while pure play retailers like Burlington and TJMaxx operate a mixed model of branded and white labeled products (generic product from third parties) - and this is important - primarily through physical store locations - whose inventory can vary widely door-to-door.

So if we look at what’s happening today, pure play off-price retailers like T.J. Maxx and Marshalls, well, they are thriving. Exactly how well is TJMaxx doing at the moment? We took to the data to see what’s happening with the off-price giant.

The white-label strategy has been working, as off-price players including T.J. Maxx, Burlington Coat Factory and Ross owned 13 percent of the country’s $261 billion apparel and accessories market last year. In comparison to apparel, accessories like bags have a higher sell out rate among consumers, as our data from TJMaxx shows.

We, along with investment banking firm Cowen & Co, can agree the off-price retail is still a strong channel, but we still question the overall market sustainability for department stores looking solely to offload under-selling merchandise in their off-price channels. Cannibalization and the degradation of their name brand vendor partners are certainly a very real risk.

Click here for our in-depth analysis of off-price retailers’ online efforts.