On a year-to-date basis, Ross Stores’ (ROST) stock price has appreciated more than that of other off-price retailers. As of December 3, Ross Stores’ stock price has appreciated by 12% since the beginning of the year, while The TJX Companies’ (TJX) stock price has appreciated by 2.8%. As of December 3, Burlington Stores’ (BURL) stock price has declined by 2.7% since the beginning of this year.
As of December 3, the Consumer Discretionary Select Sector SPDR ETF (XLY), which has 0.9% exposure to Ross Stores, has appreciated by 11.2% since the start of the year, while the S&P 500 has declined by 0.4%.
Impact of 3Q15 results on stock prices
TJX’s stock price appreciated by 3.9% on November 17, the day the company announced its third quarter results. TJX beat analysts’ sales and earnings estimates in the third quarter. Ross Stores, which announced its upbeat 3Q15 results after the close of financial markets on November 19, appreciated by 10% on November 20. Burlington Stores’ stock price was up by 7.2% on November 24, as the company beat analyst earnings estimates and was in line with the sales estimates for 3Q15.
Geared up for more competition?
With more and more consumers showing their preference for the value deals offered by off-price retailers, department stores are seeking to be a part of this growth market. Nordstrom (JWN) already has considerable presence in off-price retailing through its Rack stores and continues to add more Rack stores. Macy’s (M), which piloted its first three off-price Macy’s Backstage stores in September 2015, has now announced further expansion plans.
TJX, Ross Stores, and Burlington Stores are well established in off-price retailing and have strong, low-cost business models. As of October 31, 2015, TJX had 3,594 stores across the United States, Canada, and Europe. The company plans to raise its store count by over 50% to ~5,500 stores in the long term. Ross Stores has added 84 new stores this year, net of closures, and ended 3Q15 with 1,448 stores. Burlington Stores added 25 new stores this year and ended 3Q15 with 566 stores.
We’ll discuss the valuation of these off-price retailers in the next part of this series.