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Stock Strategist Industry Reports

Off-Price Retailers Fall Victim to COVID-19, but Long-Term Prognosis Good

Chains' recovery will eventually come; in the meantime, check out the full-price sale.

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Editor’s note: Read the latest on how the coronavirus is rattling the markets and what investors can do to navigate it.

America’s virtually instant transformation into a lazaretto will undo longstanding comparable sales growth streaks for off-price retailers in 2020, but the long-term factors underlying their narrow economic moats and ability to transcend their full-price counterparts’ more chronic woes remain in place. Also, we think strengthened balance sheets should provide ample ammunition for combating short-term turmoil. The near term is not without challenges; while a difficult-to-digitize business model protects TJX (TJX), Ross (ROST), and Burlington (BURL) long term, their limited e-commerce options are a liability at present. We think shoppers are likely to stay wary about lingering in stores for extended periods on a bargain hunt, particularly if social distancing efforts continue to limit work and social opportunities outside the home.

Zain Akbari does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.