Competing retailers waiting for the strong momentum in off-price retailing to abate might be in for a long wait.

In a report on the sector this week, Moody’s Investors Service said off-price retailers of apparel and footwear will grow at a rate between 6 and 8 percent per year over the next five years while outperforming apparel and footwear sales gains by a four percent margin.

This outlook mirrors the trend last year when off-pricers — led by “incumbents” The TJX Cos. Inc., Ross Stores Inc. and Burlington Stores — in the U.S. grew at a rate of 6.8 percent versus a 2.5 percent increase for apparel retail sales overall.

That gap is expected to close just slightly over the next four years, according to Moody’s. It projects 7.5 percent growth for apparel and footwear at off-price in 2018, versus a 3.5 percent rate for apparel and footwear sales overall.

The off-price share of apparel and footwear volume rose to 8.8 percent last year and, at 9.8 percent, is expected to close in on 10 percent by 2018.

Scott Tuhy, vice president and senior credit officer at Moody’s and author of the report, said much of the growth could be attributed to consumers who haven’t yet felt the full benefits of what has been a slow, deliberate recovery from the recession of the last decade.

“The bounceback from the economic slowdown has been long and not particularly strong,” he told WWD. “A lot of consumers are still under stress and looking for value wherever they can find it. Whether it’s good times or bad, consumers seem to find what they need. They’re smart. They look for good value and they equate it with what they’re paying for the quality they’re getting. This isn’t about to change.”

Although the off-price market is large enough to accommodate new entrants, such as Macy’s new Backstage concept, “we believe consumer interest in discount luxury is such that newcomers like Macy’s will hardly make a dent in the incumbents’ already significant market share. Although high-end department stores will continue to open off-price stores at an above-average page, we expect incumbents to remain the sector leaders.”

The report states that Nordstrom opened 27 off-price Nordstrom Rack units last year, and that Hudson’s Bay Co. expects to open 12 to 14 Saks Off 5th units during the current year. Noteworthy is that Nordstrom operates more off-price unites that full-line stores: there are 178 Nordstrom Rack stores and 116 full-line stores.

Where is the market share coming from to feed off-pricers? Tuhy said underperforming retailers, such as J.C. Penney Co. Inc. and Sears, have contributed some, as have specialty stores who failed to survive the challenges of 2014. A large number of specialty retailers, including Gap Inc.’s Gap division, are also in the midst of paring their square footage to boost sales productivity and margins.

Craig Johnson, president of Customer Growth Partners in New Canaan, Conn., estimated that, adding in some off-price hybrids, such as Century 21, off-price already has about a 16 percent share of the apparel market and adds about 0.5 percent to that figure every year.

Johnson, whose firm monitors retail traffic and customer reaction, noted that the Macy’s unit in Palisades Center in Nyack, N.Y., saw a steep drop-off in traffic when a Burlington store opened at the other end of the mall. “Department stores have been the biggest losers in the battle with off-pricers,” he said. “If anyone needed further validation of the concept, Macy’s decision to go ahead with Backstage was exactly that.”

Asked if he saw any particular points of vulnerability among the off-price giants, he mentioned the lack of performance apparel and ath-leisure in many of the stores, at least from top resources like Under Armour and Lululemon.

“Supply gets sucked up pretty quickly in hot categories, but if you’re an apparel retailer of any type, you need to have some presence and show the flag in the strong parts of retail,” he said, acknowledging the bigger off-pricers have all made significant investments in merchandising talent to close the hot-category gap.

Shelley Kohan, vice president of retail consulting at RetailNext, which monitors traffic and transactions in brick-and-mortar stores, pointed out that Millennials are being drawn to off-price stores based on some of the same selling points that bring them into fast-fashion retailers.

“There’s strong fashion at good prices, and there’s always the scarcity issue,” she said. “Just like at H&M, you don’t know if the item you turned up on your ‘treasure hunt’ is going to be there when you come back. In off-price retailing’s past, it was irregulars and the dogs that didn’t sell, “ she commented. “Today, it’s the diamonds in the rough you’re afraid you’ll miss.”

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