The TJX Companies, Inc. (TJX), Ross Stores, Inc. (ROST): Can off-Price Retail Continue to Flourish?

The treasure hunt

Most investors refer to the shopping experience at off-price retailers as a “treasure hunt.” Figuring out which one to invest in is not quite the same.

Ross Stores, Inc. (NASDAQ:ROST)’ future growth lies with its store expansion. The company has room to grow before even coming close to The TJX Companies, Inc. (NYSE:TJX). Ross has 28 million square feet of retail space, compared to TJX’s 70 million at the end of 2012. Ross has nearly 1,100 stores across 33 states, but hopes to boost that number to 2,000 over the long term . For fiscal 2013, Ross opened just over 60 Ross Dress for Less stores, and entered three new states.

But one of the beauties of The TJX Companies, Inc. (NYSE:TJX), compared to Ross Stores, Inc. (NASDAQ:ROST), is that it already has a broad geographical profile. The company has stores spread across North America and Europe. It also has a stronger product diversification portfolio, thanks to its home goods stores.

Bottom line

It sounds counter intuitive, but the slow recovery will be a positive for the off-price retailers, giving them a chance to further build up a loyal following. The Economist Intelligence Unit believes that the U.S. GDP growth will be the slowest since 2010, coming in at 1.6% for the full year compared to 2.8% in 2012, 1.8% in 2011, and 2.5% in 2010.

As far as the best way to play off-price retail? I tend to like The TJX Companies, Inc. (NYSE:TJX) from a growth standpoint and customers agree. TJX’s premium valuation is justified and sales per square foot were up to $370 for TJX in fiscal 2012 compared to Ross Stores, Inc. (NASDAQ:ROST)’  $350 . Until Kohl’s Corporation (NYSE:KSS) shows strength in new sales practices, I’ll be holding off on this retailer.

The article Can off-Price Retail Continue to Flourish? originally appeared on Fool.com.

Marshall Hargrave has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned.

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