Discount stores

TJMaxx: Designer Brands Exit Discount Stores Like Marshalls And Burlington Due To Supply Chain Issues And Increased Demand

Disappointment for bargain hunters: It can be more difficult 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 at low prices and then sell them to customers at bargain prices. The problem right now: there is very little unsold clothes lying around.

Supply chains are suffocated and brands don’t have as many extra things to throw away. And since inventory is meager 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 “overpriced” 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.

“Overpricing 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 keep stocks tighter.

MORE: Why inflation in the US is so high and when prices will stop rising

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.

“We have reduced the amount we sell to the third-party non-price channel,” Under Armor CFO 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 fewer products 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, one said. spokesperson in an email. Carter’s is also reducing the number of different products it sells overall, leaving less room for low-cost stores.

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.

SEE ALSO: Will Supply Chain Issues Impact Holiday Shopping? Here’s what the experts say

Steve Madden also talks about offloading inventory at low cost stores as he has to allocate his limited supply of merchandise.

“Our first priority is to always feed the chains at full price,” said CEO Edward Rosenfeld 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 his. “Ever-changing mix of merchandise,” a company spokesperson 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 low-cost 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. Shares of parent company TJ Maxx, TJX, are flat this year, Burlington is 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 strong 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, cycling spare parts and maintenance products, 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.”

The-CNN-Wire ™ & © 2021 Cable News Network, Inc., a WarnerMedia Company. All rights reserved.

The video in the media player above was used in a previous report.