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Moody's: Off-price retailers will outperform industry next five years


New York -- The nation’s three largest off-price retailers (TJX, Ross Stores and Burlington) will see above-average growth, in the 6%-8% range, over the next five years, compared with 4% growth for the broader retail industry, according to a new report by Moody's Investors Service. The leaders in the space have thousands of vendor relationships and significant scale, so supply constraints aren't likely to hinder their growth, the report noted.

"Off-price retailers have become too big to ignore for most large vendors, including high-end brands that don't want to be associated with bargains," said VP — senior credit officer, Scott Tuhy. "Their willingness to address high-end stores' brand concerns has led to deeper and broader relationships, while at the same time the quality of their merchandise has improved."

The report, “The Off-Price Apparel and Home Retailers to Remain One of Leading Retail Groups," forecasts that the off-price apparel and home sector will continue to outperform other areas of the retail industry, including through economic cycles, as it builds a loyal customer base.

TJX, Ross Stores and Burlington will continue to lead the way as their significant scale helps them expand their market share, according to the study. These companies have the advantage of an established, flexible business model and adaptable real estate strategies, in addition to strong vendor relationships. And fast-moving inventory limits their exposure to fashion risk as styles change.

Also, these retailers picked up new customers during the financial crisis and have been able to hold on to them as the economy improves.

"Whether it's a middle- or upper-income consumer finding fashion at lower prices or a lower income household trying to stretch their dollars, we think consumers that shift to off-retailers become increasingly loyal," Tuhy says.

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