The supply chain bottlenecks that have hampered large retailers are proving to be a boon for discount apparel sellers.
Executives at discount stores, including Burlington Stores Inc.
and Ross stores Inc.,
say their buyers bought clothes and other goods that arrived late as their full-price counterparts deal with backlogs at congested U.S. ports.
Ross Stores has been “able to capitalize on supply chain volatility”, including clothing inventory held for specific selling seasons, Ross Stores chief executive Barbara Rentler said on the call. to the company’s results on March 1.
“We see more potential opportunities in front of us through the fences,” Ms. Rentler said. “There are a lot of these goods that sellers still move [that] is not necessarily even in the country.
The bargain shopping opportunities are the result of a trend in the retail industry in which big-name stores are selling excess inventory, especially clothes that are past their selling season, to discount chains. reduced like TJ Maxx and Marshalls or move the items to factory outlets with deep price cuts. During the pandemic, retailers’ rush to restock inventory has overwhelmed major gateways like the ports of Los Angeles and Long Beach and caused major delays in deliveries.
“The disruption creates a unique buying opportunity for off-price retailers, primarily for packaged inventory,” Bank of America analysts Lorraine Hutchinson and Melanie Nuñez wrote in a Feb. 1 research note. “As supply chain disruptions persist, full-price retailers will have to decide whether or not to accept late orders.”
Supply chain issues “presented unique availability of merchandise for Saks OFF 5th,” a discount chain owned by Hudson’s Bay Company, a spokesperson said in a statement. “Our team has a significant ability to be opportunistic in today’s market and expand brand access.”
The pool of ships awaiting discharge at Southern California ports has dwindled this month, but delays have arisen at other ports. Freight forwarder Flexport Inc. recently estimated that it still takes more than 100 days to move a container from Asia to a US destination via the West Coast, compared to less than 50 days two years ago.
Many retailers have advanced orders and major merchants have chartered ships to circumvent bottlenecks, and delays threaten to leave spring goods in limbo.
CEO Sonia Syngal said during the retailer’s March 3 earnings call that delays at west coast ports and the closure of Vietnamese factories last year led to delays of eight to 10 weeks for its goods. seasonal. The company declined to comment further.
Clothing retailer based in Columbus, Ohio Express Inc.
is packing and holding $12 million in inventory for sale at its outlet stores next fall due to shipping delays, interim chief financial officer Matthew Moellering said during the chain’s earnings call. clothes last week.
Bottlenecks also affect the purchasing efforts of discounters themselves.
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Longer delivery times and an increase in goods in transit drove up inventories at Dublin, Calif.-based Ross stores last quarter, Ms Rentler said on the earnings call. Ross Stores reported a 23% increase in annual inventory, to $2.26 billion for the 12 months ending Jan. 29, from $1.83 billion for the comparable period two years ago, before the pandemic. The company declined to comment.
Inventory in Burlington hit $1.02 billion for the year ending Jan. 29, up from $777 million two years earlier. The company, based in a New Jersey town of the same name, also reported late deliveries during its fourth fiscal quarter.
“The flip side of the coin — the silver lining, if you will — is that shipping issues have happened in the retail industry,” CEO Michael O’Sullivan said on the call to discount chain results on March 3. These issues, he said, have created “a very strong buying environment for off-price.”
Burlington shoppers have had “really great buying opportunities” over the past few months, including for fall merchandise the retailer will pack later this year, he said. The company did not respond to requests for comment.
The struggle to restock from low stock levels at the start of the pandemic appears to be gaining momentum. Retailers’ inventory-to-sales ratio has increased recently, suggesting inventory is increasing. But the measure remains at historically low levels.
That’s not dampening discounters’ prospects for more goods entering their supply chains.
“It is important, and I cannot stress this enough, that the availability of quality branded products is excellent among the good, the best and the best brands.” Ernie Herrman, CEO of TJ Maxx Owner, TJX Inc.,
said during the retailer’s earnings call on Feb. 23. TJX declined to comment further.
Write to Lydia O’Neal at [email protected]
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