Bummer for bargain hunters: It may be harder to snag designer clothes at T.J. Maxx and other discount retailers.
Discount retailers like T.J. Maxx generally acquire inventory by scooping up the excess products from premium brands such as Gucci, Adidas, and Steve Madden.
However, this time clothing has been selling at a much faster pace than over the last few years. Yes, people are buying a lot right now.
With this, some brands are moving away from TJ Maxx and other bargain stores because they’re no longer having problems with their inventory.
Meaning there is no more excess in their inventory to accommodate Discount retailers. Noteworthy brands like Levi’s jeans have been making moves to distance themselves from “off-price” stores like TJ Maxx. Because they don’t make much money when their inventory goes onto the shelves at these stores, they’re the least profitable way for brands to make money.
In reality, they’re just a last resort place for the companies to offload any extra supply they might have.
Susan Anderson, a retail analyst at B. Riley Securities said that “Off-price is a last resort.”
Under Armour, Ralph Lauren, Carter’s, and Steve Madden are among the brands that have said in recent weeks they’re retreating from discount chains, sometimes called “off-price” stores.
Even before the pandemic, these brands were trying to move away from off-price companies because they are the least profitable outlets for brands. Offering too many products at a discount also dilutes brands’ image and erodes their pricing power over customers. These brands want to sell their stuff through their stores, websites, premium wholesale partners, or their factory stores, which are all more profitable.
Clothing and footwear brands have increased their efforts during the pandemic to pull away from discount stores. They’re able to pull it off right now because of the huge imbalance between supply and demand.
“We have reduced the amount that we’re selling to the third-party off-price channel,” Under Armour chief financial officer David Bergman said on an earnings call this month. “Those partners would like more product.”
When Under Armour does sell to discount chains, they are “going to pay a little bit more to us” because Under Armour has less product to ship, Bergman said.
Ralph Lauren has also “significantly reduced” the amount of inventory it’s sending to discount chains, including T.J. Maxx. In particular, Ralph Lauren has pulled back on the number of products it makes specifically for T.J. Maxx.
Source: AWM