More shoppers head to discount stores

With fears of recession hanging over the nation, Kimberly Washington has begun to steer clear of her usual retail haunts — Macy's m, The Limited ltd, Ann Taylor Loft ann.

Unless there's a clearance sale, "The prices are just too high for me." Her favorites now? T.J. Maxx, Marshalls and Ross Dress for Less rost.

"I can find good-quality merchandise at lower prices than in some regular stores," Washington, a legal editor from Stone Mountain, Ga., says of the off-price retailers.

Her shopping habits seem to fit a broader pattern. The weaker the economy gets, it seems, the more some discounters benefit and the bleaker the outlook for their higher-priced competitors. That trend burst into view during the holiday season, when Wal-Mart and some off-price retailers outperformed full-price stores.

Now, with the economy sputtering, some analysts say, more shoppers have begun to ratchet down the price level of the stores where they shop.

Off-price retailers are in a "customer-gathering mode," says retail analyst Jeff Stein. "Department store customers are able to shop in a different venue and get the same brands. (T.J. Maxx and Marshalls) are gaining exposure to non-traditional customers."

Analysts point to sales figures, including fresh data out Thursday and figures from previous downturns, to show that more shoppers turn to discounters at times such as these. January retail sales were dismal across the board, and the International Council of Shopping Centers said it was the worst January showing since at least 1970. Still, discounters such as Wal-Mart wmt, Ross and TJX tjx— parent of T.J. Maxx and Marshalls — outperformed their higher-priced competitors, such as Nordstrom jwn and Macy's.

The next year's outlook for some discounters — when compared with higher-end stores and full-price retailers — suggests Wal-Mart, TJX, Ross and others will continue to enjoy an edge. (See charts on left.)

Off-price stores typically sell some of the same name-brand clothing found at department stores but at prices that are often far lower, along with jewelry, luggage and other items. These stores buy merchandise that didn't sell at department stores in previous seasons, then sell it at deep discounts. They also buy from apparel makers when stores cancel orders or go out of business. Wal-Mart, on the other hand, sells discounted name-brand food, health and beauty aids, as well as private-label and other low-price clothes.

Changing attitudes

In recent weeks, some people who seldom shopped at Wal-Mart, for reasons ranging from a perception of low quality to poor customer service, say they've put aside those concerns in favor of saving money. Others who normally favor attractively displayed merchandise and a wide selection now say they find off-price retailers a way to shop down without sacrificing style or brands.

Amy Erickson of Bensalem, Pa., lives within a mile of a Macy's, a Target and an outlet mall, but these days spends most of her shopping time at Wal-Mart. She'll still rifle through sale racks at the outlet stores. And her husband jokes that they should have named their 1-year-old son Clearance. But since her family's adjustable-rate mortgage reset in October, jacking up their monthly payment by more than 35%, they value the savings on food, formula and diapers at Wal-Mart more than ever.

"It's just so much less expensive," she says.

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