As consumers shift into a value-centric frame of mind, how and where they shop is changing. Shoppers are seeking deals and waiting for sales. They are also more mindful about every dollar spent.
Underpinning this behavior is a fundamental restructuring of the economy. And, according to a research report from retail advisor Antony Karabus, the impact on the industry runs deep. As a result, retailers are closing stores and reconfiguring formats into smaller footprints. They are carving niches to stay competitive and reevaluating their overall market positions.
However, there’s one sector that is succeeding in this tumultuous landscape: off-price. But will it last?
A bifurcation in household wealth
Karabus said in his report that the “K-shaped” economy is at the heart of these changes. Karabus said one branch of the “K” is bending upward, “as wealthy households ride sharply increased wealth, driven by record stock portfolios and rising home values into ever-greater spending (incredibly, the top 1 percent of the richest families in the U.S. own 32 percent of U.S. total wealth (as per the Federal Reserve), while the other branch of the ‘K’ bends downward, as lower- and middle-income families contend with stubborn inflation, slower wage growth and thinner savings cushions.”
He said the top of the wealth ladder is pulling away from everyone else, “and by some measures the wealthiest 10 percent of American households now account for close to half of all consumer spending nationwide.”
Antony Karabus
Karabus said this divergence is no longer just “an academic talking point on earnings calls” but a rewriting of the retail map. “And nowhere is the shift more visible than in the off-price sector, where TJX Cos., Ross Stores and Burlington Stores have turned economic anxiety into one of the most durable growth stories in American retail,” he said in the report, adding that there are also specialist retailers such as Five Below, RH and Dicks Sporting Goods that are finding success by carving out a specific niche.
TJX Cos. is the largest off-price chain with brands that include T.J. Maxx, Marshalls, HomeGoods, Sierra and Homesense in the U.S., along with Winners in Canada and T.K. Maxx internationally.
When asked about the scale of TJX Cos., Ross Stores and Burlington Stores, Karabus said, taken together, the three chains add about $3 billion in combined topline revenue in a single quarter, “a striking figure given that broader retail sales have been largely flat over the same period,” Karabus said, adding that Wall Street has been rewarding the sector as a result.
As of mid-July 2026, Karabus said the market gap between off-price and traditional department store retailers remains stark. TJX Cos. carries a market capitalization of about $170 billion, making it the largest player in the space. Ross Stores follows at around $71 billion. And Burlington Stores carries about $20 billion.
“By comparison, Macy’s—the largest traditional department store chain still publicly traded—has a market cap of roughly $6 billion, and Kohl’s trails further behind at under $2 billion,” he said. “Combined, the three off-price retailers are worth more than 25 times what Macy’s and Kohl’s are worth together, underscoring how thoroughly value-focused, treasure-hunt retail has eclipsed the traditional department store model in investor eyes.”
A turning point?
“The rapid expansion of the off-price retail channel has largely been driven by inaccuracies in inventory forecasting by traditional buyers and retailers,” Karabus told Sourcing Journal. “In recent years, retailers—particularly in the department store sector—frequently over-ordered while simultaneously shuttering locations. Macy’s, for instance, has announced well over 100 store closures in just a few years.”
Karabus said the mismatch between order volume and actual customer demand stems from a massive market shift away from traditional mid-priced apparel and department stores toward discounters and Amazon. As a result, both suppliers and retailers generated a massive surplus of excess inventory, supplying the fuel for off-price growth.
“The major off-price players have announced ambitious targets for both store count and store productivity,” Karabus said. “However, they will soon be competing for a shrinking pool of excess supply.”
As major retailers increasingly integrate artificial intelligence into their inventory forecasting, Karabus said they will be able to order much closer to actual consumer demand and timeline needs. This reduction in overstock, combined with an eventual end to massive waves of store closures, will choke off the supply of traditional excess inventory.
In the meantime, the off-price sector (along with Walmart and Amazon) has left store closures and excess inventory in its wake.
“Consider Saks Global, which has scaled down rapidly from around 170 stores to roughly 40 locations,” Karabus said. “And there’s Macy’s and JCPenney, retailers that have served as massive sources of excess inventory through widespread closures.”
Karabus said once Macy’s finishes its planned 150 store closures, future adjustments will likely just be routine fine-tuning. “This level of rapid store-closure liquidation simply isn’t repeatable.”
As top-tier excess inventory dries up, Karabus said the pressure will shift directly onto sourcing strategies. “Traditionally, off-price retail has balanced genuine excess inventory with ‘special makeup’ items—goods produced specifically for discount channels,” he said.
Moving forward, major off-price retailers will likely go directly to suppliers to manufacture deliberate, lower-cost product variations. Karabus said that rather than acquiring top-quality overstock at a discount, they will order items made with lower-cost materials, such as simplified embroidery, economical zippers, or alternative cuts of leather.
“While the products will remain acceptable to consumers, they will be purpose-built to cost less to make and buy, fundamentally reshaping off-price sourcing,” Karabus said.
