(CNN) – Disappointment 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 pick up and buy excess inventory of high-end clothing and footwear brands at low prices, then sell them to customers at bargain prices. The problem right now: there is very little unsold clothes lying around.
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Supply chains are suffocated and brands don’t have as many extra things to throw away. And since inventory is low and customer demand is soaring, brands don’t need to discount merchandise as much – they can easily sell items at full price.
Under Armor, 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 referred to as âoverpricedâ stores. Levi’s is also moving away from discount stores.
Even before the pandemic, these brands were trying to move away from low-cost businesses because these are the least profitable outlets for brands. Offering too many products at reduced prices also dilutes the image of brands and erodes their pricing power over customers. These brands want to sell their products through their stores, websites, premium wholesale partners or outlets, all of which are more profitable.
âOverpricing is a last resort,â said Susan Anderson, retail analyst at B. Riley Securities. She said discount stores could suffer in the long run if brands keep stocks tighter.
Clothing and footwear brands have stepped up efforts during the pandemic to pull out of discount stores. They are able to get by now because of the huge imbalance between supply and demand.
âWe have reduced the amount we sell to the third-party non-price channel,â Under Armor chief financial officer David Bergman said on an earnings call this month. “These partners would like more products.”
When Under Armor sells to discount chains, they will “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 cut sales in low-cost stores by nearly 50%, CEO Michael Casey said on a conference 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 the products and sell them in a different season, a door said. -speak in an e-mail. Carter’s is also reducing the number of different products it sells overall, leaving less room for low-cost stores.
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Ralph Lauren has “dramatically 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.
Steve Madden also talks about offloading inventory at low cost stores as he has to allocate his limited supply of merchandise.
âOur first priority is to always feed the chains at full price,â CEO Edward Rosenfeld said on an earnings conference call this month.
TJ Maxx says not to worry: stores will be “frequently updated with new and trendy items,” and customers will be able to find a wide selection of gifts and home decorations during the holiday season from its’ ever-changing commodity mix. A spokesperson for the company said in an email. Burlington declined to comment. Ross Stores did not respond to requests for comment.
Still, “quantities of seasonal produce appear below normal” at non-price chains, particularly in Ross and Burlington, UBS retail analyst Jay Sole said in a Nov. 8 research note. Sportswear from big brands was less available than usual, he noted.
Shares of non-price chains tracked the S&P 500 retail index, which rose 18% in 2021. Share of parent company TJ Maxx, TJX, is flat this year, Burlington edged up 2% and Ross fell 6%
Goods are rarer in the outlet stores of some companies, such as outdoor equipment retailer REI.
REI is seeing high demand for outdoor gear, so there are “very few products” left for sale in its outlet stores, Ben Johns, general manager of action sports merchandising, REI told CNN Business .
Historically, half of REI’s cycling activities – bicycles, helmets, clothing, spare parts and maintenance products for bicycles, luggage racks – have come from full-price sales. This year it has climbed above 90%.
Johns said, “What we have we just sell at a high price.”
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