TJMaxx: Designer brands are moving away from discount stores like Marshalls and Burlington due to supply chain issues and increased demand

Too bad for bargain hunters: it can be harder to find designer clothes at TJ Maxx, Burlington and Ross.

These discount chains thrive when there is a glut of clothing on the market. They can salvage and purchase excess inventory from high-end clothing and footwear brands at low prices and then resell them to customers at bargain prices. The problem right now: there are very few unsold clothes lying around.

Supply chains are strangled and brands don’t have as much, if any, extra stuff to throw away. And with inventory running low and customer demand soaring, brands don’t need to discount merchandise as much — they can easily sell items at full price.

Under Armour, Ralph Lauren, Carter’s and Steve Madden are among the brands that have said in recent weeks that they are pulling out of discount chains, sometimes called “off-price” stores. Levi’s is also moving away from discount stores.

Even before the pandemic, these brands were trying to steer away from off-price businesses as these are the least profitable outlets for the brands. Offering too many discounted products also dilutes brands’ image and erodes their pricing power over customers. These brands want to sell their products through their stores, websites, premium wholesale partners, or outlet stores, all of which are more profitable.

“Off-pricing is a last resort,” said Susan Anderson, retail analyst at B. Riley Securities. She said discount stores could suffer in the long run if brands restrict inventory.

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Clothing and footwear brands have stepped up efforts during the pandemic to pull out of discount stores. They are able to get away with it right now due to the huge imbalance between supply and demand.

“We have reduced the amount we sell to the off-price third-party channel,” Under Armor chief financial officer David Bergman said in an earnings call this month. “These partners would like more products.”

When Under Armor sells to discount chains, they “are going to pay us a little more” because Under Armor has less product to ship, Bergman said.

Carter’s is shipping fewer baby items to TJ Maxx, Marshalls, Burlington and Ross this year. Compared to 2019, Carter’s has reduced sales to off-price stores by nearly 50%, CEO Michael Casey said during an earnings call last month.

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 products and sell them during a different season, a spokesperson said in an email. Carter’s is also reducing 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 sends to discount chains, including TJ Maxx, a spokesperson said in an email. In particular, Ralph Lauren has reduced the amount of products it manufactures specifically for TJ Maxx.

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Steve Madden also revisits unloading inventory at off-price stores as he needs to allocate his limited supply of merchandise.

“Our first priority is always to power the channels at full price,” CEO Edward Rosenfeld said on an earnings call this month.

TJ Maxx says not to worry: Stores will be “frequently updated with new and trending items” and customers will be able to find a wide selection of gifts and home decor during the holiday season thanks to its ” ever-changing merchandise mix,” a company spokesperson said in an email. Burlington declined to comment. Ross Stores did not respond to requests for comment.

Still, “quantities of seasonal products appear to be lower than normal” at off-price chains, particularly at Ross and Burlington, UBS retail analyst Jay Sole said in a Nov. 8 research note. Sportswear from major brands was less available than usual, he noted.

Shares of off-price chains tracked the S&P 500 retail index, which rose 18% in 2021. The stock of TJ Maxx’s parent company, TJX, is flat this year, Burlington is up 2% and Ross were down 6%.

Merchandise is scarcer at the outlet stores of some companies, such as outdoor gear retailer REI.

REI is seeing strong demand for outdoor gear, so there’s “very little product” left for sale in its outlet stores, Ben Johns, REI’s general manager of action sports merchandising, told CNN. Business.

Historically, half of REI’s bike business – bikes, helmets, apparel, bike parts and maintenance products, car carriers – comes from full-price sales. This year, it went above 90%.

Johns said, “What we have we just sell at full price.”

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