Off-price retailers poised to benefit from pressure on consumers, per analysts
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Off-price retailers are promising picks in 2023 as bargain-hunting consumers trade down, according to Cowen.

Equity analyst John Kernan told clients in a note on Tuesday that TJX Companies (NYSE:TJX), Ross Stores (NASDAQ:ROST), and Burlington Stores (NYSE:BURL) each saw strong holiday sales. Additionally, the chains were aided by easing supply chain constraints and the availability of in-season merchandise on shelves.

âOur checks with industry consultants indicate effective execution with high-quality branded seasonal merch within TJX's banners which bodes well for traffic, conversion and margin,â Kernan told clients. âROST and BURL, both exposed to more mid and lower income consumers, have less flexibility on their pricing structure, and may have more work to do on inventory normalization.â

Nonetheless, he raised EPS and same store sales expectations for each chain. As such, price targets for Burlington Stores (BURL), TJX Companies (TJX), and Ross Stores (ROST) were hiked to $236 from $177, $88 from $85, and $126 from $103, respectively. TJX Companies was assigned an Outperform rating while both Ross Stores (ROST) and Burlington (BURL) were rated at Market Perform.

Cowenâs channel checks on off-price were supported by recent data from Placer.ai. According to the data analytics firm, the three aforementioned retailers as well as Citi trends (CTRN) âmanaged once again to draw in the crowdsâ in 2022. Positive traffic trends have continued into the new year, per the data, as traffic into Marshallâs, TJ Maxx, and Burlington have each jumped by double-digit percentages in January 2023 as compared to the year prior. 

Citi Trends (CTRN) was also cited as a standout for pre-pandemic comparisons. December 2022 traffic increased 19.3% as compared to December 2022. TJ Maxx saw an 8% jump in foot traffic for the same comparison while Ross and Burlington saw 3.9% and 6.5% rises, respectively.

âThe positive traffic trends highlight off-priceâs promise in the current economic climate. The sector was on the upswing before the pandemic, and despite the obvious challenges posed by lockdowns, the period was hugely successful for the segment,â the analysis concluded. âNow, a year after the last COVID surge and as many consumers continue to pull back on spending, off-price is proving it can not only withstand the challenges but thrive despite them.â
Read more on why Wells Fargo named Burlington a âtop buyâ for 2023.