Why Recession-Worried Shoppers Aren’t Shopping at TJ Maxx, Ross, or Nordstrom Rack – Vophs

Speaking of record inflation and recession this summer, it seems like it’s discount stores’ time to shine. A survey conducted in June by marketing firm NCSolutions found that nearly half of Americans (45%) feel they can no longer afford their old lifestyles, and 66% are more mindful that How are they spending their money?

But at TJ Maxx, Ross, and Nordstrom Rack, which reported its second-quarter earnings last week, business is slowing.

At Ross, total sales are forecast to be down 4% to 7% from last year. Part of the problem was the implementation and not the macro environment. The retailer admitted it was slow to pivot merchandising beyond casual products for work and occasion wear. But fellow discounter TJ Maxx also expects a full-year decline of 2% to 3%, and Nordstrom downgraded its off-price arm Nordstrom Rack in its outlook for the year, also lowering its overall performance. pointed out.

According to Nordstrom CEO Eric Nordstrom, the challenge is because of how hard the smallest consumer is affected. Although some customers who normally shop at high-end stores are shifting to value outlets, this is not enough to offset the number of customers who have stopped visiting stores altogether. .

The CEO said the company “saw a significant decline in customer demand at the end of June, primarily at Nordstrom Rack and among our lowest-income customer group.”

To counter that, Nordstrom plans to offer more premium brands on the rack, while Ross said it will go the other way and be more aggressive with markdowns and buy more affordable brands.

Clothing and household expenses were soft this summer.

Overall, spending on clothing and home goods, which these off-price retailers focus on, was lower over the past few months as consumers turned their budgets toward services this summer, namely travel. Although Target and Walmart haven’t had the easiest of times over the past few months, higher gas prices have helped drive some customer traffic to them. Instead of making multiple car trips to different stores, some customers will go to just one place to get everything they need, from groceries to clothing and home goods.

However, discount retailers are somewhat optimistic about the rest of the year. Back-to-school season is focused on clothing and travel is expected to cool down.

Another tailwind is the sheer amount of inventory out there. Unlike full-price retailers who order their goods from factories, discount stores largely obtain their stock from products not sold at full-price stores. Supply chain challenges have left many retailers, including Walmart and Target, facing an inventory glut that would take months to work through, meaning more and better product that would normally sell for a price Can go to more shops than

Ross Stores CEO Barbara said they are now “receiving product from both new vendors or vendors that, maybe, we haven’t seen availability in a long time. There’s just so much inventory in the country.”

Meanwhile, TJ Maxx CEO Ernie Herman described the availability of inventory as “phenomenal.”

“We’re going to be able to pick and choose from the market because there’s so much availability,” Herrmann said. “I think we’ll have a mix that will have even more brands and some new vendors that we didn’t even have last year in some of our most popular categories.”

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