TJ Maxx, Ross, and Burlington are popular discount retailers that offer quality items at a more affordable price. These stores buy up excess clothing when it is available in the market, and shoppers love them for their great deals. However, some brands are now distancing themselves from these stores because they are no longer having inventory problems.
Due to the COVID-19 pandemic and supply chain issues worldwide, there is a clothing shortage. As a result, people are buying clothing at a much faster pace than in the past, leading to great success for brands such as Steve Madden, Under Armour, and Ralph Lauren. While these popular brands were once available at TJ Maxx and other off-price stores, they will be harder to find there due to the current shortage.
Brands like Levi’s jeans are making moves to distance themselves from discount retailers like TJ Maxx because it is the least profitable way to make money. These stores are a last resort place for companies to offload their extra supply at a discount, giving them low-profit margins.
According to Susan Anderson, a retail analyst at B. Riley Securities, “off-price is a last resort.” Many brands prefer to sell their items directly to consumers online or through premium outlets where they can get higher profits. These companies are able to accumulate more money from buyers this way rather than giving their extra supply to discount stores like TJ Maxx and Ross.
The COVID-19 pandemic has caused a significant shift in the balance between supply and demand. People are eager to buy products, but companies are struggling to produce enough products to meet the high demand. As a result, companies are not stuck with excess inventory at the end of the quarter, which they need to offload to retailers like TJ Maxx. By distancing themselves from these off-price stores, brands are able to sell their products at a premium price to consumers willing to pay.
Under Armour’s Chief Financial Officer, David Bergman recently stated on an earnings call that they have reduced the amount of stock they sell to off-price stores like TJ Maxx. Instead, they are selling their clothing directly to consumers and premium outlets. Although Under Armour may still sell some extra stock to off-price retailers, they will have to pay a little more because the company simply does not have as much inventory available in their warehouses.
Steve Madden CEO Edward Rosenfeld also spoke on an earnings call, stating that their first priority is always to feed full-price channels. These channels offer premium prices and are more profitable than off-price retailers.
Indeed, the COVID-19 pandemic has caused a major shift in supply and demand that has affected the retail industry. Popular brands like Steve Madden, Under Armour, and Ralph Lauren are now distancing themselves from discount retailers like TJ Maxx to sell their products directly to consumers or through premium outlets. By doing so, they are able to accumulate higher profits while providing customers with quality products.
Source: AWM
