Discount retailers’ sales rebound as eager shoppers look for deals

Value retailers are resisting a broader pullback in spending, as lingering anxiety about the economy and a weakening labor market drive shoppers to look for discounts and deals.

Even with holiday spending growth seen falling to its lowest level in five years, off-price retailers TJX Cos., Ross Stores Inc. and Burlington Stores Inc. will report higher sales in their upcoming third-quarter reports. This is in stark contrast to luxury and high-end names such as LVMH Moet Hennessy Louis Vuitton and Tapestry Inc., which have reported slowing growth.

“Whenever we see consumers under pressure, we tend to see a flight to value,” said Jennifer Bartashus, senior analyst at Bloomberg Intelligence.

Cost-conscious consumers will continue to fuel discount retailers’ sales recovery throughout the year. Ross Stores and TJX, operator of TJ Maxx and Marshalls, are on track to achieve their first double-digit sales growth in seven quarters for the October-December period. Burlington Stores is expected to post double-digit sales growth in two consecutive quarters, beginning in the third quarter.

Despite the start of holiday sales promotions, US retail traffic fell in October, and the resumption of student loan payments that month compounded the impact of higher interest rates and a cooling labor market said senior BI analyst Mary Ross Gilbert.

However, households’ growing reluctance to spend on big-ticket items is less likely to affect retail chains such as Dollar Tree Inc., Five Below Inc. and Miniso Group Holding Ltd., which offer lower-priced products compared to brand departments. stories.

Five Below, which sells snacks and personal accessories to teenagers, is forecast to increase sales by 19% in the fourth quarter, up from an estimated 13% in the prior period. Miniso, which sells small electronics and toys, is also expected to see an acceleration in sales, with an estimated increase of 34% in the third quarter of 2023 and 45% in the following quarter. Analysts see discount store operator Dollar Tree nearly doubling revenue growth to 13% in the fourth quarter compared to the average estimate for the prior three months.

No doubt the value-seeking mentality among consumers will also help big chains like Walmart Inc., Target Corp. and Dollar General Corp. These stores sell groceries along with more general merchandise and will appeal to shoppers looking to control a quantity. limited products. budget in multiple categories, Bartashus said.

“These retailers have an everyday low-price stance,” he added.

However, the broader range of its offerings will prove a drag on earnings comparisons due to base effects from last year’s high food prices.

Walmart’s quarterly revenue growth is expected to slow at least through the end of this year, while Target’s sales will contract in the third quarter before expanding 1.4% in the next. Dollar General, which sells more fresh produce than rival Dollar Tree, will see its revenue grow 2% in the third quarter before contracting 4.2% in the next.