Shares of Ross Stores Inc. and TJX Cos. Inc. hit their highest level in months after JPMorgan took a bullish stance on their growth prospects, saying the off-price sector has little to worry about from traditional retailers or even Amazon.

JPMorgan retail analyst Matthew Boss pointed to several areas where the off-price channel has the upper hand over other retailers, including a “robust” pipeline of merchandise and a retail real estate market looking at 10 or more years of store consolidation, along with an established customer base and prices at 20 percent to 60 percent below retail.

Store closures alone have left about $4.25 billion in sales “up for grabs,” according to JPMorgan’s estimates, and off-price is expected to be “the primary beneficiary.”

“We expect the trend of store closures to continue as the new normal in retail with a 25 percent capacity reduction,” Boss added.

With all that in their favor, Boss upgraded both off-pricers to higher price targets. He projected Ross’ stock to hit $74 by December 2018 and TJX to rise to $82 in the same time frame.  

Ross’ stock subsequently jumped 3.25 percent to $62.87 and TJX’s stock rose by 2 percent to $73.86, the highest level for both retailers since May.

Boss also noted larger economic trends working in favor of Ross and TJX, like low gas and energy prices and some increases to low- and middle-income wages. He also noted the prices in off-price are insulated from future “economic downturns.”

As for competition from the likes of Amazon, Boss said management from Ross sees the online giant becoming more akin to department stores in terms of price. Amazon recently hired Christine Beauchamp to head up its continued fashion push, launched Prime Wardrobe and closed its flash sale site MyHabit.

Ross also sees the potential for its market share to double over the next several years. The company already has plans to hit 2,500 stores in the U.S. from its current count of 1,598. However, given that Ross has upped its store target twice in recent years and research on population density in certain areas, Boss said the retailer could hit more than 2,800 stores and has about 14 years before it reaches market saturation.

Even Hurricane Harvey in the Houston area, where Ross maintains 7 percent of its store base, is expected to benefit the retailer. Boss said Ross stores “historically experience a post-hurricane bump” and the disruption to other stores and their tendency to cancel orders creates “compelling buying opportunities.”

As for TJX, which is largely benefiting from the same trends as Ross, Boss specifically pointed out its continued increases in foot traffic. TJX management attributes the rise to its value pricing, neighborhood locations and a “treasure hunt atmosphere,” which is apparently appealing to Millennial shoppers, as TJX has been luring more 18- to 34-year-olds into its stores.

The retailer is also continuing to invest in online capabilities, recently adding beauty and bridal categories, while “closely monitoring brick-and-mortar cannibalization,” Boss said.

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