‘Treasure Hunt’ Shopping Drives Baird's Bull Call on Discounters

(Bloomberg) -- Even as shoppers turn increasingly to the internet, Baird analysts are betting that off-price stores are a retail bright spot, especially if the economy takes a turn for the worse.

Analyst Mark Altschwager initiated coverage on Burlington Stores Inc., Ross Stores Inc. and TJX Cos. with buy-equivalent ratings, citing their potential to gain market share as customers prioritize value. Shoppers are specifically looking for cheaper ways to get popular brands, and discount retailers offer the same products as department and specialty stores, but anywhere from 20% to 70% cheaper, he said.

“In the event of a downturn in the U.S. economy, we believe value will become an even more important driver to consumers purchasing decisions,” he said. The stores are also supported by their layout and fast-changing assortment of products, which “creates a ‘treasure hunt’ shopping experience that is very difficult to replicate online, contributing to consistent growth in store traffic.”

Altschwager said he is mindful of pressure on physical store traffic as consumers go online even as off-price stores add millions of square feet yearly. Still, it helps that those retailers tend to be in shopping strips and stand-alone locations rather than malls, he said.

Shares of Burlington climbed as much as 1.9%, the most in three weeks and Ross up as much as 1.2%. TJX, meanwhile, dropped 0.5%.

To contact the reporter on this story: Sydney Maki in New York at smaki8@bloomberg.net

To contact the editors responsible for this story: Brad Olesen at bolesen3@bloomberg.net, Will Daley

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