Paul Morigi/Getty
- Many retailers are bracing for a bleak holiday shopping season.
- Reports say Americans will spend more this year, but that doesn't mean every retailer will benefit.
- Off-price retailers stand to gain the most from cash-strapped shoppers.
Shoppers are finally feeling the weight of inflation and many retailers are bracing for a bleak holiday season.
But off-price retailers stand to gain the most as they continue to deliver value to cash-strapped Americans.
The US National Retail Federation expects holiday retail sales to increase between 3% and 4% this year, less than half of last year's 9% increase. The trade association said this year's outlook has returned to pre-pandemic levels, with an average annual holiday increase of 3.6% from 2010 to 2019.
Reports show that Americans plan to spend more this year, with the NRF predicting holiday spending will hit a record high. But inflation adds another layer to the outlook, Business of Fashion reported.
"Spending is going to be up, of course, because everything is more expensive," Bluefin Research analyst Rebecca Duval told the trade publication. "But if you look at it from a unit perspective, everything is down significantly. When I'm out and speaking to consumers, people are feeling it, the pinch of everything costing them so much."
And many retailers are beginning to see that pinch play out in their third quarter results. Kohl's comparable sales were down 5.5% and Target's were down nearly 5%.
Department stores have been hit especially hard. Macy's comparable sales were down nearly 8% on an owned basis, Bloomingdale's were down 3.2%, and Nordstrom reported a 9.4% drop in net sales, excluding Nordstrom Rack.
Meanwhile, off-price retailers are going strong and exceeding quarterly sales projections. In their third quarter earnings, TJX Companies and Burlington reported comparable store sales gains of 6% and Ross reported a gain of 5%. TJX attributed its gain entirely to an increase in customer traffic.
Analysts say the positive same-store sales from quarter to quarter suggest that the off-price retailers are gaining market share.
"They are seeing some of that trade down volume as the middle income consumer that's squeezed is trading out of department stores and into off price," Bernstein analyst Aneesha Sherman told Yahoo Finance.
TJX stores, which include TJ Maxx and Marshalls, have become increasingly valuable for brands to supply to. Meanwhile, customers continue to visit the retailer for bargains.
"TJX does not sell cheap clothing; they sell expensive clothing cheap," BMO Capital Markets analyst Simeon Siegel told Yahoo Finance. "So they are giving you a reason to be in their store; it's not simply to check the box on a need."
If you are a TJ Maxx, Marshalls, Ross, or Burlington employee and would like to share what it's like working there, please email this reporter at jortakales@insider.com or text (646) 768-4742.