Apr 26, 2017
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Bargain stores like T.J. Maxx could benefit from Macy's closures

Apr 26, 2017

Major department stores like Macy’s and JCPenney’s have been forced to close stores as revenues fall, but their losses present a unique opportunity for the off-brand sector. Stores like T.J. Maxx and Burlington could pick up some of that lost revenue.

According to research equity firm Wedbush, massive store closures from Macy’s and JCPenney’s could funnel as much as $1 billion in revenue to off-price stores like T.J. Maxx. Though neither category has significantly changed their structure, major department stores have seen their profits plummet steadily over the past decade, while in that same time period, off-price stores have seen major increases. TJX, the company that owns T.J. Maxx and Marshall’s, grew sales from $12 billion to $21.2 billion between 2007 and 2016, while over that same period JCPenney saw sales drop from $19.9 billion to $12.5 billion.
Part of that change is attributed to shoppers’ growing interest in bargain hunting. Fast fashion chains and online stores such as Amazon have thrived in the past decade as they offer consumers the chance to find the best deals.

Wedbush analyst Morry Brown speculates more department stores will consolidate, benefitting the off-price market, in the near future. However, Brown says massive closures from department stores could eventually force the off-price market to entirely change its model. Stores like T.J. Maxx and Burlington typically determine their prices by knocking 20 to 60 percent off the department store prices and often include the original department store price on the sales tag. If department stores continue to decline, they may no longer have anything to base their pricing off of.  

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