Are off-pricers holding a glass that is half-full or half-empty?
TJX, Ross Stores and Burlington Stores all reported sales shortfalls in the first quarter, but they remain confident they will eventually benefit from consumers trading down in a potentially tougher and more promotional marketplace.
Burlington blamed its first-quarter sales miss on late deliveries and gave cautious second-quarter guidance due in part to inflation’s impact on lower income customers. Michael O’Sullivan, CEO, also said many retailers are “overinventoried and overbought” and that may drive a “very promotional environment” later in the second quarter. He said, “This kind of environment tends to hurt our business.”
On the positive side, he said the buying environment is “better than it has been for years” and inflation and a possible broader economic slowdown should lead to consumers trading down for value. Mr. Sullivan added, “Clearly, there is a lot of focus and concern about the lower income customer right now.”
Ross Stores cut its annual guidance due to a below-plan quarter and macroeconomic pressures.
“We knew 2022 would be a difficult year to predict, especially the first half when we were facing last year’s record levels of government stimulus and significant customer pent-up demand as COVID restrictions eased,” Barbara Rentler, CEO, told analysts. “The external environment has also proven extremely challenging as the Russia-Ukraine conflict has exacerbated inflationary pressures on the consumer not seen in 40 years.”
Ross Stores inferred that any benefit from trading down by customers may be offset by pressures on lower-income shoppers. Michael Hartshorn, COO, said, “Obviously, with higher fuel and food prices, discretionary spending for the lower-end customer is being squeezed.”
Fairing best was TJX, which raised its earnings guidance while slightly lowering its comp guidance for 2022 as first-quarter earnings exceeded expectations. Ernie Herrman, president and CEO, told analysts, “In today’s highly inflationary environment, we believe our value proposition is as appealing as ever.”
Mr. Herrman also said he isn’t concerned about rampant promotions returning to full-price retailers in the fashion and brands space. He said, “If anything, we continue to watch their prices go up and promotions be decreased which continues to favor our selective pricing retail strategy as we look out here, I think, for a number of years.”
- Ross Stores Reports First Quarter Earnings – Ross Stores
- Ross Stores, Inc. (ROST) Q1 2022 Earnings Call Transcript – Seeking Alpha
- Burlington Stores, Inc. Reports First Quarter 2022 Earnings – Burlington Stores
- Burlington Stores, Inc. (BURL) Q1 2022 Earnings Call Transcript – Seeking Alpha
- The TJX Companies, Inc. Reports Q1 FY23 Results; Marmaxx Comp Store Sales Increased 3% – TJX Companies
- TJX Companies Inc (TJX) Q1 2022 Earnings Call Transcript – Seeking Alpha
- Will inflation be positive or negative for off-pricers? – RetailWire
DISCUSSION QUESTIONS: Will off-pricers see greater headwinds or tailwinds for the rest of 2022? Are inflationary pressures, the return of widespread promotional selling or a broader economic slowdown the wildcard for off-pricers?