Off-Price Retail Investor Discussion: BURL, OLLI, ROST, TJX

Consumer


On May 12, 2022, DeMatteo Research hosted a discussion on the off-price retail industry and its players with five investors. Some of the participants were negative on the space, including one who is short OLLI, while others shared near-term concerns on earnings but are more likely to take long positions in specific names as earnings improve over the medium term. Topics discussed include merchandise availability, the impacts of macroeconomic factors, short- and medium-term earnings outlooks, risks to valuations, and the positioning of major players (BURL, OLLI, ROST, TJX). At the end, the group quickly compared notes on some other retailers including ASO, CTRN, DKS, and DXLG.

Publicly traded companies mentioned herein: Academy Sports & Outdoors Inc (ASO), Burlington Stores Inc (BURL), Citi Trends Inc (CTRN), Destination XL Group Inc (DXLG), Dick’s Sporting Goods Inc (DKS), Ollie’s Bargain Outlet Holdings Inc (OLLI), Ross Stores Inc (ROST), TJX Cos Inc/The (TJX), Torrid Holdings Inc (CURV)

Near-Term vs. Longer-Term Setup

The consensus amongst the group was negative over the short term but more positive over the medium to long-term. Regarding the bearish short-term outlook, the investors pointed to supply chain issues, discretionary spend trends, difficult comps, and increased competition. Looking past the next couple of quarters, the group’s optimism reflects a strong closeout environment, driven by consumers trading down from full-price retailers, low-end consumer resilience, and margin expansion.

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