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Cowen believes the trade down across retail is accelerating, analysts told investors in a research note Tuesday.
The Cowen analysts also said off-price is well-positioned, with Cowen’s checks suggesting that trends across off-price post the holiday season are strongest at MarMaxx, with the buying environment also favoring TJX Cos. (NYSE:TJX).
“Our checks with industry consultants indicate effective execution with high-quality branded seasonal merch within TJX’s banners, which bodes well for traffic, conversion and margin,” wrote the analysts. “ROST and BURL, both exposed to more mid and lower-income consumers, have less flexibility on their pricing structure and may have more work to do on inventory normalization.”
The analysts stated that the availability of goods in the marketplace remains significant, with their checks suggesting large shipments from key athletic apparel/footwear vendors ramping in the spring, with inventory balances in apparel and footwear reaching new highs.
“Data from our monthly Cowen Consumer Tracker indicates traffic trends turned positive y/y in Nov-2022 and surged further in Jan-2023 following a decrease in Dec-2022 which may be reflective of the heightened promotions across traditional retail for Holiday. For Q4:22, the data implies visitation was down -2% y/y, improving from -13% in fiscal Q3:22,” the analysts added.
“We raised our SSS and EPS estimates for TJX, ROST and BURL. If Jan. trends hold, comps should inflect through 2023. Pressure on low income consumers is balanced with an environment that is seeing trade-down to value.”
