Younger Consumers Can Lift These 3 Retail Stocks, Bank of America Says

Demand from younger shoppers should benefit off-price apparel retailers like Burlington Stores (BURL), Ross Stores (ROST), and TJX (TJX), according to Bank of America analysts.

Spending on value apparel is higher among those in the millennial and Gen Z demographic than in older groups, the analysts wrote in a Wednesday note, which they view “as a positive leading indicator of future sales.” The analysts said the share of spending directed to value apparel by millennials and Gen Zers has risen by 4 percentage points in the past year.

Capturing younger consumers early in their earnings years is important, the analysts wrote, and “showing them exciting brands at a great value goes a long way towards maintaining loyalty even as their earnings rise.” These share shifts “indicate a long runway” for the stocks of Burlington Stores, Ross Stores, and TJX, they said.

The recent popularity of off-priced brands was driven by persistently high multi-year inflation, and the challenge for companies in the sector now is holding on to those customers as their incomes grow and inflation pressure wane, according to Bank of America. The analysts maintained a “buy” rating on all three stocks.

Shares of Burlington Stores, Ross Stores, and TJX are all higher year-to-date, with Burlington rising some 40%.