Aggressive tariffs that remain on Chinese goods coming to the United States could benefit off-price retailers, including TJ Maxx and Ross, which would likely sidestep the major impacts thanks to their inventory management and sourcing strategies, according to a report from Reuters.
TJ Maxx, Ross Stores and Burlington often acquire merchandise, including clothing and accessories, from other retailers and middlemen in the United States rather than importing directly from factories overseas, said the report.
"They're just buying unsold inventory from other places," Brian Mulberry, client-portfolio manager at Zacks Investment Management, told Reuters. That means tariffs already will have been paid by the retailer who imported the clothing or shoes from China, he said.
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Typically, less than 10% of merchandise purchased by TJ Maxx is directly imported from China, according to Reuters. The retailer reported it bought products from at least 21,000 vendors across more than 100 countries. Off-price stores also tend to purchase opportunistically when they find a favorable deal.
These retailers could also benefit indirectly from tariffs as bargain-seeking shoppers look for deals as prices on clothing and shoes rise at other retailers. They typically offer discounts of between 20% and 60% by purchasing low-priced, off-season merchandise from manufacturers and retailers, said Reuters.
"The resounding sentiment from the off-price [executives'] C-suites is that the sector is well-positioned to take advantage of any dislocation in the market due to the nature of the business model," Jefferies analyst Corey Tarlowe said.
In addition, President Trump curtailed an exemption on duty-free imports of $800 or less, which benefited Chinese competitors such as Shein, Temu and AliExpress, said Reuters. This could push shoppers to off-price stores for alternatives for cheap, fast-fashion products.
Off-price retailers tend to maintain lean inventory levels, unlike traditional retailers that order goods far in advance. This creates another possible buffer to tariff disruption. The average days for stock to be sold at TJ Maxx and Burlington decreased in 2023, this mostly increased at Kohl’s and Macy’s during the same period, according to data from LSEG IBES.
Placer.ai found shopper traffic was up in March at all three off-price retailers, while visits dropped at Nike stores and Kohl’s and rose at a smaller rate at Macy’s.
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Kristen Smithberg
Kristen Smithberg is a Colorado-based freelance writer who covers commercial real estate, insurance, benefits and retirement topics for BenefitsPRO and other industry publications.
