The off-price retail industry has achieved significant growth over the past year amid 40-year-high inflation rates. The foot traffic at off-price apparel shops has surged as customers seek affordable alternatives. In addition, the sector seems extremely promising, thanks to sky-high consumer loyalty.

According to Valuates Reports, the global off-price retail market size is projected to reach $450.54 billion by 2027, growing at an 8.7% CAGR. We think fundamentally strong off-price retail stocks are thereby worth investors’ attention now.

Off-price retail stocks The TJX Companies, Inc. (TJX) and Ross Stores, Inc. (ROST) are well-positioned to generate significant ROI in the coming months and could thus be wise bets for now.

Click here to checkout our Retail Industry Report for 2022

The TJX Companies, Inc. (TJX)

TJX, together with its subsidiaries, operates as an off-price apparel and home fashions retailer. It operates through four segments: Marmaxx, HomeGoods, TJX Canada, and TJX International.  TJX is headquartered in Framingham. Mass.

On Feb. 23, 2022, Ernie Herrman, CEO, and President of TJX, stated, “Our home businesses across all of our divisions delivered phenomenal open-only comp store sales performance, and overall apparel open-only comp store sales increased [in the] high-single digits in fiscal 2022. While freight and wage cost pressures remain elevated, we are pleased that our retail pricing strategy is working very well.”

For its fiscal fourth quarter, ended Jan. 29, 2022, TJX’s net sales increased 26.6% year-over-year to $13.85 billion. The company’s net income came in at $940.20 million, up 188.8% year-over-year, while its EPS came in at $0.78, up 188.9% year-over-year.

TJX’s revenue is expected to be $52.87 billion in its fiscal year 2023, representing an 8.9% year-over-year rise. The company’s EPS is expected to increase 12% per annum for the next five years. Also, it surpassed the Street’s EPS estimates in three of the trailing four quarters. The stock closed Friday’s trading session at $62.54.

TJX’s strong fundamentals are reflected in its POWR Ratings system. The stock has an overall B rating, which indicates a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 distinct factors, each with its own weighting.

In addition, it has a B grade for Quality. TJX is ranked #27 of 66 stocks in the A-rated Fashion & Luxury industry. Click here to see the additional POWR Ratings for TJX (Growth, Value, Momentum, Stability, and Sentiment).

Ross Stores, Inc. (ROST)

Together with its subsidiaries, ROST in Dublin, Calif., operates off-price retail apparel and home fashion stores under the Ross Dress for Less and dd’s DISCOUNTS brands. It operates approximately 1,900 off-price apparel and home fashion stores.

On Nov. 18, 2021, Barbara Rentler, CEO, said “Third quarter sales and profitability significantly exceeded our expectations as consumers continued to respond favorably to our broad assortment of great bargains. We achieved these results despite waning government stimulus and uncertainty related to the spread of COVID variants.”

ROST’s sales increased 21.8% year-over-year to $4.57 billion for its fiscal third quarter, ended Oct. 30, 2021. The company’s net income came in at $385.03 million, up 193.5% year-over-year, while its EPS was $1.09, up 194.6% year-over-year.

Analysts expect ROST’s revenue to be $19.90 billion in fiscal 2023, representing a 5.2% year-over-year rise. The company’s EPS is expected to increase 47.7% per annum for the next five years. It surpassed the Street’s EPS estimates in each of the trailing four quarters. The stock closed Friday’s trading session at $89.44.

Under the POWR Ratings, ROST has a B grade for Quality. It  is ranked #49 in the Fashion & Luxury industry. Click here to see the additional POWR Ratings for Growth, Value, Momentum, Stability, and Sentiment for ROST.

Click here to checkout our Retail Industry Report for 2022

TJX shares were trading at $58.66 per share on Monday afternoon, down $3.88 (-6.20%). Year-to-date, TJX has declined -22.45%, versus a -10.98% rise in the benchmark S&P 500 index during the same period.

About the Author: Riddhima Chakraborty

Riddhima is a financial journalist with a passion for analyzing financial instruments. With a master's degree in economics, she helps investors make informed investment decisions through her insightful commentaries. More...

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