Off price apparel sales to outperform category: Moody’s

Off price retailers are anticipated to experience apparel revenue growth of 6-8 per cent, outperforming the broader apparel segment by a collective 4 per cent in the next five years.

“The off-price retailer sector, which delivers discount name brands at significant discounts, will outperform the apparel retail segment over the next five years,” Moody's Investors Service said in a report.

"TJX Companies, Ross Stores and Burlington continue to outpace overall apparel, which are growing at a much slower pace,” Christina Boni, a senior analyst at Moody's said.

“In contrast, the department store industry is losing share to off-price and other areas of apparel spending, as online competition increases and mall traffic continues to decelerate," Boni observed.

Moody's expects the off-price segment's market share in sales to grow to about 10 per cent of apparel sales by 2018 from 8.8 per cent in 2015.

According to the report, for off-price retailers, the home category has been pivotal to fueling sales growth, which it estimates grew 13 per cent relative to overall growth of 3 per cent for the category.

“The brick-and-mortar growth is also expected to fuel off-price sector growth as demand for its goods drives a healthy traffic pattern,” the report said.

“Many other apparel retailers have slowed and or diminished their brick-and-mortar presence, as their online channels grow at a more rapid rate, albeit at an additional cost,” it noted.

"The off-price model has proven that the customer will still shop physical locations when given the right value and store experience," Boni added.