“Off-price is a last resort,” said Susan Anderson, a retail analyst at B. Riley Securities. She said discount stores could suffer in the long term if brands keep their inventories tighter.
Clothing and footwear brands have increased their efforts during the pandemic to pull away from discount stores. They’re able to pull it off right now because of the huge imbalance between supply and demand.
“We have reduced the amount that we’re selling to the third-party off-price channel,” Under Armour chief financial officer David Bergman said on an earnings call this month. “Those partners would like more product.”
When Under Armour does sell to discount chains, they are “going to pay a little bit more to us” because Under Armour has less product to ship, Bergman said.
Instead of delivering to discount chains, Carter’s will rely on its own stores and website when it has excess inventory to unload — or it will hold onto products and selling them during a different season, a spokesperson said in an email. Carter’s is also cutting back on the number of different products it sells overall, leaving less room for off-price stores to pounce.
Ralph Lauren has “significantly reduced” the amount of inventory it’s sending to discount chains, including T.J. Maxx, a spokesperson said in an email. In particular, Ralph Lauren has pulled back on the amount of products it makes specifically for T.J. Maxx.
Steve Madden is also dialing back on unloading inventory to off-price stores because it has to allocate its limited supply of goods.
“Our first priority is always feeding full-price channels,” CEO Edward Rosenfeld said on an earnings call this month.
T.J. Maxx says not to worry: Stores will be “frequently updated with new and on-trend items” and customers will be able to find a strong selection of gifts and home decor during the holiday season from its “ever-changing mix of merchandise,” a spokesperson for the company said in an email. Burlington declined to comment. Ross Stores did not respond to requests for comment.
Still, “quantities of seasonal goods look lower than normal” at off-price chains, particularly at Ross and Burlington, UBS retail analyst Jay Sole said in a November 8 research note. Top brands’ sportswear was less available than usual, he noted.
Off-price chains’ stocks have trailed the S&P 500’s retail index, which has increased 18% in 2021. TJ Maxx parent TJX’s stock is flat this year, Burlington has inched up 2%, and Ross has declined 6%
Goods are scarcer at some companies’ own outlet stores, such as outdoor equipment retailer REI.
REI is seeing strong demand for outdoor goods, so there’s “very little product leftover” to sell at its outlet stores, Ben Johns, REI’s general merchandising manager for action sports, told CNN Business.
Historically, half of REI’s cycling business — bikes, helmets, apparel, parts and maintenance products for cycling, car racks — come from full-price sales. This year, that’s climbed above 90%.
Johns said: “What we have we just simply sell full price.”