TJX, Ross, Burlington benefit from ‘losers in the mall’

CNBC’s Jim Cramer on Friday highlighted one segment in the retail industry he believes will work well in a portfolio whether the economy is slowing or thriving.

The off-price retailers of TJX Companies, Ross Stores and Burlington Stores satisfy both consumers looking for bargain deals and real estate investment trusts, or REITs, looking to lease space to brands with a track record of drawing shoppers into stores, the “Mad Money” host said.

“Something like TJX or Ross Stores has got a treasure hunt atmosphere, where you can search for incredible, unmatched deals,” he said. “That’s why shoppers keep coming back. When TJX or Burlington or Ross generates more traffic, that benefits their neighbors in the same shopping center. They are all the winners from the roadkill losers in the mall.”

Shares of each of the discount retailers are beating the S&P 500‘s roughly 23% gains year to date. TJX, the parent of TJ Maxx, Marshalls and HomeGoods, has risen more than 32% to $59.23 through Friday’s close. Ross, the owner of Ross Dress for Less and DD’s Discounts, has surged more than 34% to $11.82, while Burlington has posted a more than 24% gain to $202.75 in that same period.

The off-price chains, who buy excess inventory from department stores to sell at value prices, have a business model that is counter cyclical and allows their stores to sell products consistently in a slowing economy, Cramer said.

REITs such as Brixmor Property Group, Regency Centers and Kimco Realty count most of these brands among their top tenants, the host pointed out. In a time when more and more brick-and-mortar businesses are closing stores and shrinking their footprints, TJX, Ross and Burlington have plans to expand.

TJX has told investors it has its eyes set on growing from 4,400 to 6,100 locations in the long run. Ross, with less than 1,800 stores, has ambitions of reaching 3,000, and Burlington wants to add 300 more to its roughly 700 locations.

In August, Cramer noted that TJX, Ross and Burlington are names that can compete alongside the online-shopping experience.

“Of course, the off-price chains work when times are good, too. This is a fabulous economy for the consumer, and all three of these stocks are on fire,” Cramer said. “But the fact that they’d benefit from a slowdown means their landlords can sleep soundly at night. They don’t need to worry about TJX … Ross or Burlington going under the next time we have a recession.”

With TJX shares trading for 21 times earnings, Ross going for 22 times earnings and Burlington at 24 times, Cramer suggested that investors add these stocks to their shopping lists.

“That’s a bargain when you consider the earnings growth they have,” he said.

Each of the companies is scheduled to report quarterly earnings in coming weeks.

Disclosure: Cramer’s charitable trust owns shares of Burlington.

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