Ross, TJX and Gap Pivot as Consumer Spending Shift Poses Challenges

As consumers remain cautious with their spending amid ongoing economic pressures, leading retail companies encountered a mixed landscape in the third quarter. Ross Stores, TJX Companies and Gap reported varying results, with some challenges tied to shifting consumer behaviors and signs of resilience in the off-price and value segments.

Ross Stores Faces Slower Sales Growth, Merchandising Challenges

In its third-quarter earnings report, Ross Stores reported sales reaching $5.1 billion, a slight increase from $4.9 billion for the same period last year. Comparable store sales grew by 1%. CEO Barbara Rentler was disappointed in the results, noting a slowdown compared to the strong first half of 2024. She highlighted that while low-to-moderate-income customers are facing persistent cost pressures, Ross had execution issues in merchandising initiatives.

“We should have better executed some of our merchandising initiatives,” Rentler acknowledged, adding that the company missed opportunities to capitalize on shifts in consumer preferences. “The first opportunity to change is in the assortment. We had some execution issues in a couple of businesses that we’ve identified and that we think we can correct. We probably didn’t move as quickly as we should have in some things where there were some, I would say, shifts in the world from a product perspective. I feel like that’s an opportunity and we missed some volume there. We continue to iterate on our brand strategy and keep improving the brand strategy, listening to the customer, and making those changes.”

This ongoing adjustment process is critical as consumers remain cautious. According to the “New Reality Check: The Paycheck-to-Paycheck Report: Pessimism About Pay Rises Offsets the Effect of Falling Inflation,” 83% of consumers are at least somewhat concerned about current and near-future economic conditions.

Looking ahead, Ross Stores projects total sales for the fourth quarter to decline by 1% to 3%, while comparable store sales are expected to increase by 2% to 3%.

TJX Reports Strong Sales Growth, Plans Major Expansion

TJX reported third-quarter net sales of $14.1 billion, a 6% increase from last year. Comparable store sales grew by 3%. CEO Eddie Herrman praised the strong execution of the company’s off-price business model, noting that customer transactions drove the sales increase. “Our values and treasure hunt shopping experience are appealing to a wide range of customers,” he said, adding that TJX’s daily value offerings are a competitive advantage, especially during the holiday season, and the company is well-positioned for further growth in the global off-price market.

TJX is also expanding its footprint, with plans to open more than 1,200 additional stores. Herrman announced plans to expand the T.K. Maxx brand into Spain, with the first stores expected to open in early 2026, targeting over 100 stores in the long term.

This growth comes as consumers, after years of cutbacks, are seeking more joyful retail experiences. According to “The Nonessential Spending Deep Dive Edition” of The Paycheck-to-Paycheck Report series, 70% of retail shoppers purchase “nice-to-have” items at least occasionally. By offering value-driven pricing alongside an engaging treasure hunt shopping experience, TJX has attracted bargain hunters looking for excitement without stretching their budgets.

Gap Delivers Successful Quarter, Focuses on Brand Reinvention

Gap reported third-quarter net sales of $3.8 billion, an increase of 2%, with comparable sales rising 1%. CEO Richard Dickson noted market share gains across all brands. Gap’s reinvigoration strategy continues to show success, especially for Old Navy, which had strong performances in the men’s and women’s categories. “Old Navy is already a top-five player in the active category,” Dickson said, citing a 10% growth in the category and a fifth consecutive quarter of growth in activewear.

Dickson emphasized Gap’s focus on media and creative strategies, noting the importance of digital engagement and partnerships like the one with Omnicom, which has improved media effectiveness and demand creation. “We’re certainly living in a daily digital dialogue with consumer and consumers are moving at an incredibly faster pace than ever,” he said. “We’ve been working hard at improving our creative expression, which needs to be met with our media platforms that we manage those creatives on, and much of that motivation was designed in selecting our new media partner. This all complements the up-leveling of our creative expression of our brands in support of our playbook, driving cultural-relevant messaging, stimulating conversations about our brands.”