Off-pricers on third quarter analyst calls claim their business model still works in periods of constrained inventory levels and high inflation.

The quarter marked a continued strong recovery for off-pricers. Compared to 2019, same-store sales rose 14 percent at both TJX Cos and Ross Stores and 16 percent at Burlington Stores.

Michael O’Sullivan, Burlington’s CEO, told analysts one reason Burlington’s growth has accelerated since 2019 is because leaner inventories in the marketplace are driving more full-price sales at branded retailers. “The delta between the price of an item at Burlington and the price of a like item at a full price store has never been greater,” he said.

If full-price stores continue to limit promotions in coming quarters, off-pricers will likely capture additional market share, raise their retail prices or do both, he said. If they return to being more promotional, he suspects “another wave of consolidation of marginally profitable” full-price stores. Mr. O’Sullivan added, “In either scenario, we think that the long-term implications for Burlington are very favorable.”

Regarding inflation pressures, Mr. O’Sullivan said, “In an environment of rising prices, we think shoppers will be even more attracted to the great value that we offer.”

From a supply standpoint, Ernie Herrman, TJX’s CEO, said off-pricer’s flexible model offers a “tremendous advantage” in managing shortages. He said, “We have been able to expand and contract categories and merchandise in our stores so that customers have full racks and shelves to shop when they visit.”

The retailers are using packaway inventories to help make up for shortfalls and are expected to take advantage of opportunistic buying opportunities. Longer term, the current aggressive pre-orders are eventually expected to turn scarcity into abundance.

Mr. Herrman believes wholesalers are counting on the off-price channel “for the cleanup” in case of pre-order over-buys.

He also believes off-pricers have become “probably more important” to the marketplace as they have bailed out many brands during the pandemic. “When you look at the amount of volume that we’re doing with those upstairs brands, I believe that we will continue to be able to leverage those relationships well through ’22,” he said.



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