Off-Price Retailers Surge as Tariffs Begin to Bite

Recent earnings reports highlight a divided retail landscape. Value-driven formats are gaining traction, while discretionary categories continue to face headwinds. The current environment underscores how scale, pricing power, and digital agility are shaping winners and laggards across the sector.

Recent earnings reports highlight a divided retail landscape. Value-driven formats are gaining traction, while discretionary categories continue to face headwinds. The current environment underscores how scale, pricing power, and digital agility are shaping winners and laggards across the sector.

Off-Price Retailers: The Big Winners

Off-price chains are thriving as consumers trade down and seek value in the face of rising costs.

• Burlington posted a 10% sales increase

• TJ Maxx saw +4% comparable sales

• Ross grew comps by +2%

This shift reflects shoppers prioritizing affordability and perceived bargains, reinforcing the resilience of the off-price model even in challenging economic times.

Warehouse Clubs & Discount Grocers Gain Ground

Beyond apparel, value-oriented formats in food and essentials are also seeing momentum.

• Costco reported +7% comps

• BJ’s Wholesale Club delivered +3.2% comps

• Aldi and Lidl continue expanding their U.S. presence

As households cut back on dining out, warehouse clubs and discount grocers are capturing more market share by offering bulk savings and everyday low pricing.

Discretionary Retail Faces Headwinds

While value-driven categories grow, discretionary spending is cooling.

• Target saw same-store sales decline 1.9% with traffic down 1.3%

• Nike, Crocs, and Under Armour all reported softer U.S. sales

This pullback signals consumers are prioritizing essentials over discretionary items, particularly in apparel and branded goods.

Tariffs Begin to Bite

One looming challenge for retailers: tariffs.

• Dollar Tree, Burlington, and others flagged higher input costs

• Margin pressure is expected to intensify in upcoming quarters

Even strong performers are not immune, and how well retailers manage pricing strategies will play a critical role in sustaining momentum.

The Takeaway

The retail sector is undergoing a clear bifurcation:

• Winners: Off-price retailers, warehouse clubs, and discount grocers, buoyed by consumer demand for value.

• Laggards: Discretionary and apparel categories, weighed down by weaker spending and traffic declines.

🔑 Key Insight: In today’s environment, scale, pricing power, and digital agility are separating leaders from laggards. Investors and operators alike should focus on formats that deliver consistent value while remaining flexible in the face of shifting consumer behavior and rising costs.