Customers loyal to discount brands even as economy recovers

Gregory Warner May 15, 2012

David Brancaccio: Retailer TJX — owner of Marshalls and TJ Maxx — posted strong quarterly earnings this morning. At the same time, the Commerce Department reported sales for the retail sector overall were basically flat last month. What gives?

We asked Marketplace’s Gregory Warner to take a look.

Gregory Warner: During the depths of the recession a lot of people accustomed to shopping at Macys and Bloomingdales stepped maybe for the first time into discount stores like Ross and T.J.Maxx. But then as the economy began to improve, a lot of those customers stayed.

Ronald Friedman is a partner at accounting firm Marcum LLP.

Ronald Friedman: People who got used to shopping in the T.J.’s and the Rosses, it’s amazing you find the same labels in those stores as you do at Macy’s.

Why those labels are there has to do with what’s happened in the back room. Again, during the recession up-market stores had a lot of merchandise lying around… Not selling.

Jamie Katz: A lot of stores who are looking to get rid of excess inventory Ross and TJX are the best channels to do it through. They’re kind of a good resource for everybody to pass through inventory at better pricing.

Jamie Katz is a retail analyst for MorningStar. Parent company TJX posted larger than expected profits last quarter, in part because of increased sales in Europe. The same recession effect seems to have introduced Europeans to the pleasures of discount shopping.

I’m Gregory Warner for Marketplace.

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