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A Look at Off-Price Retailers’ Store Expansion Plans

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Extensive reach

As of fiscal 3Q16, which ended on October 29, 2016, TJX Companies (TJX), the largest off-price retailer, was operating 3,785 stores in the United States, Canada, Europe, and Australia. In the same period, Ross Stores and Burlington Stores operated 1,535 and 591 stores, respectively, in the United States. Ross Stores (ROST) and Burlington Stores (BURL) don’t have an international presence.

Upscale department store Nordstrom (JWN) operated 215 off-price Nordstrom Rack stores at the end of fiscal 3Q16 and 123 full-line stores in the United States and Canada.

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Long-term growth plans

As we saw in the previous part of this series, off-price retailers are experiencing better sales growth than major department stores such as Macy’s (M) and Kohl’s (KSS). To capture growth in the off-price space, Macy’s opened its Macy’s Backstage stores in 2015, and Kohl’s opened its Off/Aisle stores. But their off-price presence is quite small compared to established players such as TJX Companies and Ross Stores.

Over the long term, TJX Companies sees the potential to operate 5,600 stores around the world, which is an additional 1,800 stores from the current number. The company might also enter new countries through internal expansion or inorganically. In October 2015, TJX Companies expanded into the Australian market with the acquisition of off-price retailer Trade Secret. In Europe, the company expanded into Austria and the Netherlands in 2015.

Ross Stores plans to expand its Ross Dress for Less stores to 2,000 locations compared to 1,342 locations at the end of fiscal 3Q16. It also plans to expand its dd’s Discounts stores to 500 compared to 193 stores at the end of fiscal 3Q16.

Burlington Stores’ long-term plan is to operate 1,000 stores. The off-price retailer plans to open about 30 net new stores in 2017.

In the next part, we’ll take a look at the valuations for these off-price retailers.

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