As more shoppers bargain-hunt, TJ Maxx and Marshalls grow while “in-between” retailers suffer

Found a $30 Michael Kors bag… under a shoe rack. TJX — the discount retailer behind TJ Maxx, Marshalls, and HomeGoods — is humming along as consumers scour its aisles for cute deals. This week, TJX beat quarterly sales expectations and boosted its outlook, because there’s no better feeling than finding perfectly fitting Levi’s for $11 after hours of scavenging.

• The “exciting treasure-hunt shopping experience” is still resonating, TJX’s CEO said. Same-store sales at Marshalls and TJ Maxx were up 3%. And while the S&P 500 is down nearly 18% for the year, TJX stock is also up 3%.
• Dress for less: Yesterday, rival rack-rummaging destination Ross also delivered better-than-expected results, despite declining sales and profit. Shares popped 13% after it issued higher-than-anticipated guidance for the holidays.

It’s the “affordable splurge” vibes for me… and the unaffordable splurge for others. While discount retailers are banking on low prices, luxury retailers are enjoying resilient demand. Bloomingdale’s owner Macy’s raised its annual profit forecast as higher-income shoppers scooped up designer blazers and fancy beauty products. Macy’s isn’t the paragon of luxury, but it does stock more luxe goods than department rivals like Kohl’s. Interestingly:

• While Macy’s same-store sales were down for the quarter, its higher-end brands grew. Bloomingdale’s revenue was up 5%. Meanwhile…
• Its luxury beauty retailer, Bluemercury, enjoyed 14% sales growth as shoppers splurged on pricey serums and designer foundations.

THE TAKEAWAY

The middle is an awkward spot… during an economic downturn. Lower- and middle-income consumers are moving downmarket to discount retailers like TJX and Walmart, while wealthier consumers are sticking with luxury brands. Meanwhile, more middle-of-the-road retailers are hurting: this week Kohl’s withdrew its annual forecast after sales fell 7% and Target cut its holiday outlook as demand slackened.