T.J. Maxx, Ross, Burlington growing at faster rate than retail industry

The three largest off-price retailers, TJX (NYSE:TJX), Ross (NASDAQ:ROST) and Burlington, will grow by 6 to 8 percent in the next five years, compared to an average growth rate of 4 percent for the rest of the retail industry. According to Moody's Investors Service, the discounters have strong vendor relationships and sizable scale, so supply constraints are not likely to hinder growth.

"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 Scott Tuhy, VP, senior credit officer, of Moody's Investors Service. "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."

Off-price apparel and home sectors will continue to outperform other areas of the retail industry, according to Moody's recent report.

Large, established brands such as TJX, Ross and Burlington enjoy an advantage because of their flexible business model, adaptable real estate strategies, strong vendor relationships and fast-moving inventory. Ross continually shows up on NRF's STORES Hot 100 Retailers chart, which tracks retailers with the greatest increase in U.S. sales. The retailer plans to open 95 new stores by the end of 2014.

"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 said.

Beyond the scale and market share advantages, these discounters are set to grow. The retailers plan to open 230 stores in total by the end of 2014, reported Forbes.

Higher-end retailers are trying to capture some of the off-price market with stores such as Nordstrom Rack (NYSE:JWN) and Saks Fifth Avenue's Off 5th (NYSE:HBC) store. While these offshoots will help the companies' top lines, it's the names synonymous with discounts that will truly be most successful.

For more:
-See this Moody's press release
-See this Forbes article

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