Nov 20, 2019

Discount stores woo bargain-hunters

Off-price retailers are cashing in on consumers who are increasingly demanding more bargains.

Why it matters: The consumer is emboldened by a steady economy with a low jobless rate and spiking wages. But even with more money in their pockets, shoppers are increasingly turning to retailers that prioritize deals.

One example: TJX Companies — the parent of discount chains TJ Maxx, Home Goods and Marshalls — is drawing more customers into its stores now than in the past. Sales are growing, too.

  • The company has seen increased foot traffic for 21 straight quarters, per the latest financials released by the company on Tuesday.

Other retailers that traditionally haven't been known for deals are struggling to draw in shoppers. To fix that, they're following discounters' lead.

  • Urban Outfitters, which released quarterly results on Tuesday, blamed its profit drop on price markdowns on clothing it couldn't get customers to buy, per Barron's. It's at least the second quarter in a row the company, which also owns Anthropologie and Free People, said it had to cut pricing to entice customers to buy.
  • Kohl's, too, said it stepped up promotions to spur demand for its products.

Yes, but: This strategy isn't fool-proof. "...[M]uch of the discounting is occurring at the weaker retailers which consumers are not inspired to visit,” Neil Saunders, managing director of research firm GlobalData Retail, tells WSJ.

Of note: Analysts say off-price retailers are banking on lower-income shoppers' renewed economic confidence, who are likely to visit their stores.

  • That cohort, which has experienced the fastest pay increases, is opening up its wallets at a faster clip, according to Bank of America.

By the numbers: The report, which analyzed aggregated debit and credit card data of Bank of America cardholders, found that spending growth among consumers who make less than $50,000 a year jumped 5% year-over-year.

  • The uptick "significantly favors market share gains and customer traffic trends at value-oriented retailers," Bank of America analysts wrote.

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