High stock in style for off-price retail
Perspectives from BofA Global Research’s Leading Analysts
July 14, 2026
Lorraine Hutchinson, Senior Research Analyst, Retailing Department Stores & Specialty Softlines
Strong share gains have led to consistent earnings growth
Off-price stocks have outperformed the rest of apparel retail for several years, driven by earnings growth and multiple expansion. Consistent same-store sales growth has translated into a repeatable earnings algorithm. Trends accelerated in 2H25 and into 1Q26 as the companies executed on the off-price playbook: continue to procure stronger brands at better value and the customer will spend an increasing share of their wallet. The inflationary macro backdrop also creates a good environment for trade-down, allowing consumers to stretch a tight budget, and off-price has responded with sharper values.
Inventory is up but well-balanced
After a solid start to the year, we are hearing increasing concerns from investors on risks associated with higher inventory levels at off-price. Off-price retailers posted strong comps and captured market share in 1Q, partly driven by strategic inventory planning. Our view is that the teams are striking the right balance between offensive and defensive initiatives, and we see limited risk to the recent build of inventory.
Playing offense with the assortment to drive share gains
Having higher store inventories is just one of the strategies off-price has been using to take share. Shifting more product into stores is allowing the capture of outsized customer demand for value.
We estimate inventory per square foot for the off-price industry was up double digits at the end of 4Q, and it helped to fuel double-digit comps.
In-store inventories at the end of 1Q26 had risen to mid-teens, and we expect them to ramp up for several more quarters. Still, we see little risk to the higher inventory levels given the strong comp momentum.
Improving productivity with better allocation
Off-price retailers are also using improved allocation and localization capabilities to drive productivity and faster inventory turns. This contributed to better transitions to spring merchandise during 1Q. Seasonal transitions present another opportunity for the industry in late July and into 3Q as retailers prepare for back-to-school and can use learnings from 1Q to drive stronger sell-through.
Powering a shift to data center demand
As U.S. sales slump, automakers are diversifying to higher-growth markets. We think datacenter power generation and defense are the most tangible opportunities.
