Goldman Says Off-Price Retailers “Structurally Well-Positioned” To Benefit As Trade-Down Behavior Persists

Amidst the swirling currents of the consumer economy, one sector continues to catch the discerning eye of Wall Street: off-price retail. Goldman Sachs is reiterating its bullish stance, suggesting that retailers like TJ Maxx, Ross Stores, and Burlington are not just surviving, but are “structurally well-positioned” to thrive as consumer trade-down behavior becomes increasingly prevalent.

Why Off-Price Is Poised for Growth

Goldman’s Managing Director in Equity Research, Brooke Roach, building on earlier insights from analyst Scott Feiler, recently published a comprehensive note dissecting store-traffic trends. Her conclusion? The off-price sector is a beacon of opportunity for several reasons:

• Persistent Trade-Down Activity: As consumers tighten their belts or seek better value, they are increasingly migrating to off-price stores.
• Healthier Middle-Income Consumer: Despite broader economic anxieties, the middle-income segment appears to be showing resilience, which directly benefits value-oriented retailers.
• Modest AUR Growth: Tariff-related pricing increases at full-price retailers indirectly boost the appeal and relative value proposition of off-price options.

“Our checks indicate trends remain solid across the group,” Roach told clients, specifically highlighting strong momentum for ROST (Ross Stores) and TJX (TJX Companies) heading into their F4Q results. While acknowledging “relatively more muted momentum at BURL (Burlington Stores),” the overall sentiment remains positive.

Shifting Demographics: The Trade-Down Effect in Action

A fascinating insight from Roach’s analysis concerns store traffic demographics. Historically, off-price stores were primarily patronized by low-income consumers. However, a significant shift is underway: trade-down activity has accelerated among higher-income shoppers, a trend expected to persist through late 2025. This expanding customer base underscores the sector’s robust positioning.

The Broader Economic Picture: Resilience Amidst Fragility

This optimistic outlook comes even as the broader consumer landscape presents a mixed bag. Scott Feiler’s earlier notes pointed to “solid” consumer trends, with January growth often matching or exceeding December’s for many companies. Indeed, recent data from the Federal Reserve showed a surprising surge in consumer credit as 2025 closed.

However, not all news has been rosy. December’s retail sales data disappointed, reigniting concerns about a potentially fragile consumer economy. It’s precisely this environment – where consumers are discerning but still spending – that off-price retailers are best equipped to navigate.

The Bottom Line: A Strong Bet for the Year Ahead

Brooke Roach’s key takeaway is clear: off-price retailers are set to deliver solid performance throughout the year. As consumer trade-down behavior becomes a dominant force and “K-shaped” economic concerns continue to mount, value-oriented retail emerges as a strategically sound investment. It seems consumers are smart shopping, and Goldman is betting on the stores that cater to that savvy behavior.

For more in-depth analyses on consumer trends, consider exploring relevant market insights.

Source: Original Article