If you offer good value in retail, you’re winning. Everyone else is in trouble
A wave of good and bad retail earnings reports in recent days highlights one key theme for the industry: Value is winning.
Target, Walmart, T.J. Maxx owner TJX and Nordstrom’s off-price Rack business were bright spots in a tumultuous landscape that’s been beaten down with bankruptcies, store closures and management upheaval.
The results from Macy’s, Kohl’s and J.C Penney were much less merry.
“The off-price and discounters are here to stay,” Retail Metrics founder Ken Perkins told CNBC in an interview. “These are going to be the names that fair well here. I don’t see that changing at all.”
Big-box chains Target and Walmart both hiked their full-year profit outlooks, building on their strong quarterly showings. While Walmart found strength in grocery, Target proved its apparel business is booming. And as more sales shift online, the pair are on solid footing. Both companies logged e-commerce sales growth of more than 30%.
TJX’s same-store sales surged past analysts’ expectations, as more shoppers flocked to its stores including Marshall’s and HomeGoods during the quarter to scour aisles for deals. TJX also raised its full-year outlook, sending its stock to a record intraday high of $61.69.
“The modestly more cautious consumer mindset has been helpful here as it drove more shoppers to TJX’s stores to look for bargains,” GlobalData Retail Managing Director Neil Saunders said.
There used to be much more of a stigma around shopping off-price channels, or hunting for bargains.
That was about a decade ago, when department store chains were fairing better. Traffic was healthier at shopping malls. Buying goods at full price was more of a status symbol.
But Retail Metrics’ Perkins says the millennial generation, which includes people born between 1981 and 1996, was somewhat “traumatized” by what their parents faced during the Great Recession, in 2008 and 2009, pivoting their mentalities toward wanting to save money however possible.