TJX and Ross won’t be slowing down anytime soon — here’s why

Off-price retailers like TJX Companies and Ross are still posting sales gains and taking market share from rivals, but it’s not just because consumers are under pressure and hunting for value. 

Persistent inflation and rising prices for essentials like food and gas have pushed shoppers to trade department stores like Macy’s and Kohl’s for discounters like TJ Maxx and Ross. But they’ve also become cooler places to shop, particularly among younger consumers, and their assortments have gotten better because brands increasingly view them as a growth channel as department stores continue to shrink and lose share. 

“They have trusted brands at a cheaper price. They’re more on-trend, they’re designer-led, they lean into categories that the customer is much more interested in,” said Jessica Ramirez, a senior research analyst with Jane Hali & Associates. “In terms of categories that maybe are not resonating as well, they pull back from them and they have that ability because of their … strategy. A department store doesn’t have that.”

TJX and Ross both reported fiscal first quarter earnings last week that came in better than Wall Street expected, even as both companies lapped outsize growth from the prior-year period. 

TJX, which runs brands like TJ Maxx, Marshalls and Homegoods, saw sales grow 6% to $12.48 billion, compared to estimates of $12.46 billion, according to LSEG. That’s on top of the 3% sales increase the retailer saw in the prior-year period. 

Ross, which runs Ross Dress for Less and dd’s Discounts, posted an 8% jump in sales, bringing revenue to $4.86 billion, compared to estimates of $4.83 billion, according to LSEG. That’s on top of the 3.7% gain it posted in the prior-year period. 

Both companies have grown substantially since 2019 and posted banner results throughout 2023.

The particularly strong performance last year led some Wall Street analysts to wonder if they’d be able to continue to grow sales up against tougher comparisons. They’ve managed to do just that – and the party isn’t expected to end anytime soon. 

As consumers contend with persistent inflation, rising debt and stubbornly high interest rates, they’ve been more selective about where they’re spending their precious discretionary dollars. Value has been top of mind. 

“We think that the off-price sector is still healthy and we think that results this quarter, both for [TJX] and Ross, are showing consistent traffic-driven comp increases, which indicate that the consumer is still looking for value and the consumer still finds off price’s business model of branded goods at value prices as an attractive buying opportunity,” Goldman Sachs analyst Brooke Roach told CNBC. She said she expects both companies to continue to grow this year, on top of the sales increases they saw last year.

The low-to-middle income consumer has been feeling the burn a bit more acutely than their…