Moody’s: This retail sector is on fire — even in physical space

The off-price retailer sector will continue to build momentum and outperform the apparel retail segment during the next five years.



That’s according to a new report, "Off-Price Retailers Continue to Build Momentum on Value Appeal,” by Moody's Investors Service. Off-price retailers are anticipated to experience apparel revenue growth of 6% - 8%, outperforming the broader apparel segment by a collective 4% in the timeframe.



"TJX Companies, Ross Stores and Burlington continue to outpace overall apparel, which are growing at a much slower pace. In contrast, the department store industry is losing share to off-price and other areas of apparel spending, as online competition increases and mall traffic continues to decelerate," noted Christina Boni, a VP and senior analyst at Moody's.



Moody's expects the off-price segment's market share in sales to grow to about 10% of apparel sales by 2018 from 8.8% in 2015, as new store development and healthy same-store sales gain more traction.



For the off-price retailers, the home category has been pivotal to fueling sales growth, as well as diversifying their portfolios, in an effort to meet customer demand. Moody's estimates the home category grew almost 13% relative to overall growth of 3% for the category.



The brick-and-mortar growth is also expected to fuel off-price sector growth as demand for its goods drives a healthy traffic pattern. Many other apparel retailers have slowed and or diminished their brick-and-mortar presence, as their online channels grow at a more rapid rate, albeit at an additional cost.



"The off-price model has proven that the customer will still shop physical locations when given the right value and store experience," added Boni.