Amid economic anxieties and job market uncertainties, value retailers are experiencing a surge in sales. While overall holiday spending is projected to hit a five-year low, discount giants like TJX Cos., Ross Stores Inc., and Burlington Stores Inc. are poised to announce robust third-quarter sales. This stands in stark contrast to the slowdown reported by high-end brands such as LVMH Moet Hennessy Louis Vuitton and Tapestry Inc.

In times of economic pressure, consumers tend to gravitate towards value, notes Jennifer Bartashus, Senior Analyst at Bloomberg Intelligence.

The cautious spending mindset is propelling discount retailers through their yearlong sales recovery. TJX and Ross Stores, operators of T.J. Maxx and Marshalls, are set for their first double-digit sales growth in seven quarters from October to December. Burlington Stores is anticipated to report consecutive double-digit sales growth for two quarters, starting from Q3.

Despite the kickoff of holiday promotions, US retail traffic saw a dip in October. The resurgence of student-loan repayments compounded the impact of higher interest rates and a cooling labor market, according to Mary Ross Gilbert, Senior Analyst at Bloomberg Intelligence.

However, this reluctance to spend on significant purchases is less likely to impact retail chains such as Dollar Tree Inc., Five Below Inc., and Miniso Group Holding Ltd., known for offering lower-priced goods compared to upscale department stores.

Five Below, focusing on snacks and personal accessories for teenagers, is forecasted to achieve a 19% sales growth in Q4, up from the estimated 13% in the previous period. Miniso, specializing in small electronics and toys, is expected to experience accelerated sales, rising by an estimated 34% in Q3 2023 and 45% in the subsequent quarter. Analysts predict that Dollar Tree, a discount variety store operator, will nearly double revenue growth to 13% in Q4 compared to the average estimate for the previous three months.

Certainly, the value-seeking mindset will also benefit major retailers like Walmart Inc., Target Corp., and Dollar General Corp., renowned for their everyday low-price stance. These stores, offering a broader range of products, are appealing to consumers aiming to manage a limited budget across various categories, according to Bartashus.

«Those retailers have an everyday low-price stance,» she adds.

While these retailers boast a wider array of offerings, earnings comparisons may face challenges due to the base effects of comparing against last year’s elevated food prices. Quarterly revenue growth projections indicate a deceleration for Walmart until the end of this year, a contraction in sales for Target in Q3, followed by a 1.4% expansion in the next quarter. Dollar General, known for its emphasis on fresh produce, is expected to see a 2% revenue growth in Q3, followed by a 4.2% contraction in the subsequent quarter.

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