As retail rebounds and consumers put the pandemic behind them, physical stores are set to see a welcome uptick in business. Amongst them, off-price retailers are particularly well positioned as not only are consumers returning to physical stores, but rising inflation is making even middle to upper middle class shoppers more price conscious. The last time markets were hit by financial volatility was in 2008. That kicked off a decade of strong growth for off-price retailers. Seeking Alpha pointed out that “in an environment where prices are rising everywhere, a bargain is not to be taken for granted.” Off-price retailers are set to capitalize on this opportunity with ambitious plans for new store openings. <h3><b>Optimistic Signals</b></h3> Off-price retailer Century 21, which closed its New York City flagship and its 12 other stores when the company declared bankruptcy in 2020, is now returning to New York. The new store will span 4 floors offering men’s, women’s and children’s designer apparel, footwear, outerwear, handbags, accessories and fragrances. TJX is the leading off-price apparel and home fashions retailer worldwide. The company has over 4,500 stores in the US, Canada, Europe and Australia that offer products at prices 20-60% below full-price retailers’ regular prices on comparable merchandise. <blockquote> “In an environment where prices are rising everywhere, a bargain is not to be taken for granted.” <footer> <cite>- Seeking Alpha</cite> </footer></blockquote> Net sales for the first quarter of Fiscal 2023 were $11.4 billion, up 13% year-on-year. The company plans to open 170 new stores this year, and foresees adding 1,600 in the long term. Ross Stores is planning to open 100 new stores this year, while Burlington has plans for 120 new stores. Beyond opening more stores, off-price retailers are raising dividends. TJX Companies, which owns T.J. Maxx and Marshalls, raised its quarterly dividend by 13%, while Ross’ raised it by 9%. Burlington’s total sales increased 18% from 2019 in the fourth quarter ended February 3, 2022. <h3><b>Where Off-Price Could Hit a Speedbump</b></h3> Since off-price relies on leftover inventory from brands. However with logistics logjams making it harder for retailers to reorder, they might be more inclined to hold onto excess stock rather than offer to off-price retailers. <blockquote> In 2022 we will plan our business conservatively but then be ready to chase and take advantage of opportunities <footer> <cite>- Michael O’Sullivan, CEO, Burlington</cite> </footer></blockquote> Still, in a year when inflation - or at least fear of inflation - is likely to make consumers spend more cautiously, many retailers could be in a situation where they stocked up on inventory to avoid stock outs, only to find that sales were below expectations. “We think the outlook for retail spending in 2022 is extremely unpredictable especially as we lap government stimulus programs, and as general price inflation begins to bite. This kind of unpredictability has, in the past, tended to favor off-price. In 2022 we will plan our business conservatively but then be ready to chase and take advantage of opportunities,” said Michael O’Sullivan, CEO, Burlington. Ross CEO Barbara Rentler agreed. “Fiscal 2022 is extremely difficult to predict, especially early in the year,” said during an earnings call. For the 52 weeks ending January 28, 2023, comparable store sales are forecast to be flat to up 3% versus a 13% gain in fiscal 2021. Earnings per share for fiscal 2022 are projected to be $4.71 to $5.12 compared to $4.87 in the prior year. This guidance reflects our expectation for sales and profitability to improve as we move through the year.” Longer term, Ross believes it can open 2,900 new locations from its previous target of 2,400. However, as rising prices continue to impact consumers, more will shop at off-price retailers when they do decide to make discretionary purchases. “This will favorably impact TJX in the immediate future. In the longer-term, the company should benefit from the shopping habits of the Gen-Z generation, who focus on value and the in-store experience,” said Justin Purohit at Seeking Alpha.