Off-price apparel was a pandemic winner, exhibiting remarkable imperviousness to some of the wider brick-and-mortar challenges. And now that the economic situation has shifted, off-price retailers remain an attractive option as consumers seek to refresh their wardrobes without breaking the bank.
We took a look at the latest foot traffic data to understand how the combination of inflation, supply chain woes, and residual pandemic effects are continuing to drive visits to the sector.
Return to Growth
Off-price apparel was one of the only brick-and-mortar apparel sub-sectors to thrive during COVID, with visits to the category remaining close to or exceeding pre-pandemic levels ever since retail reopenings.
Q1 2022 saw a unique confluence of post-holiday shopping fatigue as a result of a Delta and Omicron wave, poor weather, and the beginning stages of a spiraling inflation and fuel crisis; but the latest visit data shows off-price apparel is continuing to prove its remarkable resilience, with visits to Ross Dress For Less, Burlington, Marshalls, T.J.Maxx, and Citi Trends trending upward once again in Q2 2022.
Year-Over-Year Visits Normalize Following COVID Surge
While online apparel sales skyrocketed during COVID, off-price apparel brands – many of which choose not to operate e-commerce channels – saw their brick-and-mortar visits surge in 2021.
But since March 2022, rising inflation and gas prices have slowed this growth significantly, as consumers cut out discretionary spending to focus on essentials such as food and medication.
Another factor that may be driving fewer visits to these retailers may well be the growing role that Walmart and Target play in the clothing and home decor sectors. The two megastores anticipated that the high demand of late 2021 would continue in 2022 and brought more inventory than ever into their stores – but the economic shifts kept many consumers away. This led to both chains slashing prices in a bid to offload excess merchandise, creating direct competition to traditional off-price apparel retailers.
One standout chain, however, saw its foot traffic increase in all but one of the months analyzed. Citi Trends, a Georgia-based off-price retailer, saw July 2022’s foot traffic overperforming year-over-year (YoY) by 2.8%, while other retailers such as Marshall’s and T.J. Maxx saw their foot traffic dip into the negative numbers, with 11.8% and 11.3% fewer visits than seen in July 2021, respectively.
Comparisons to Pre-Pandemic Visits Reveal Categories True Strength
Since the YoY dips are in the context of particularly high 2021 visit levels, focusing on YoY trends fails to show just how much the category has grown since the pandemic. Analyzing year-over-three-year (Yo3Y) foot-traffic trends reveals that nearly all leading off-price players are now seeing elevated visit levels when compared to pre-pandemic.
Citi Trends and Burlington have experienced the most consistent Yo3Y growth, seeing higher visits across all months analyzed. Burlington saw some of the strongest foot-traffic trends, likely due to its expanded store fleet – the company grew from 675 locations in 2019 to 873 in 2022. And Citi Trends saw its visits rise every month from March 2022.
And although the impact of inflation and tightening consumer budgets appears to have hit Ross, T.J. Maxx, and Marshalls a little harder, the visit gaps for all three brands had narrowed or disappeared by July 2022. As inflation began to slow and gas prices continued to come down, excess inventories started making their way to the off-price racks, and Back-to-School shopping kicked off. Ross and T.J. Maxx saw their July 2022 visits increase by 3.2% and 4.2%, respectively, while Marshalls lagged behind the other chains slightly, but narrowed its visit gap significantly, seeing only 1.6% fewer visits compared to three years ago.
The latest July data shows how off-price is rallying in a time of economic uncertainty. With the Back-to-School season kicking into high gear and last season’s excess inventory continuing to make its way downstream to off-price retailers, the category is poised to return to growth in the second half of 2022.
For more data-driven insights, placer.ai/blog/.
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