Major off-price retailers are positioned to withstand the current rise in logistics costs more effectively than they did in recent supply chain shocks, according to a fresh industry analysis by Bank of America Corp (NYSE:BAC). Chains referenced in the report include TJX Companies Inc (NYSE:TJX), Ross Stores Inc (NASDAQ:ROST) and Burlington Stores Inc (NYSE:BURL).
At the center of the analysis is the role played by Average Unit Retail - or AUR - gains. By selling goods at higher average prices, these retailers reduce the number of units that must be shipped and distributed for each dollar of sales. That change lowers what analysts call "freight intensity" and provides a structural cushion against rising transportation costs.
The logistics backdrop is mixed. Ocean freight rates have increased about 8 percent, a much smaller spike than the roughly 250 percent jump seen four years ago. Still, diesel has moved sharply higher, rising 50 percent year-over-year to reach $5.38 per gallon. That fuel cost increase is expected to be passed quickly to margins through domestic fuel surcharges.
Bank of America estimates the diesel-driven increase in fuel expenses could translate to roughly 20 basis points of gross margin pressure for TJX. While real, that impact is markedly smaller than the peak 280 basis points of margin pressure the sector experienced in late 2022.
The group will likely feel the full effect of elevated ocean contract rates later in the year. New inventory secured under current, higher ocean rates will reach store shelves in the second half, and those costs will be reflected in margins once those shipments are booked and sold.
Analysts remain constructive on the sector's prospects. The expectation of continued "trade-down" behavior by cost-conscious consumers is cited as a driver of potential market share gains for off-price retailers. In addition, forecasts for stronger sales growth and expense favorability are expected to support the groups results through the remainder of the 2026 fiscal year.
Inventory discipline is another stabilizing factor. By prioritizing higher-margin items, off-price retailers effectively lower the freight cost per dollar of revenue. That selective buying reduces exposure to shipping cost volatility compared with models that move large volumes of lower-priced units.
Looking ahead, investors and managers alike will watch annual ocean contract negotiations closely. Those negotiations are framed as the principal indicator for margin stability as the sector rolls toward the critical fourth-quarter holiday season.
Implications for related sectors
- Retailers using a price-and-mix strategy may be less exposed to shipping inflation than high-volume, low-margin chains.
- Logistics and fuel-sensitive parts of the economy will transmit higher costs into retail margins through domestic fuel surcharges and contract freight rates.
- Consumer-facing segments that serve budget-conscious shoppers may see share shifts toward off-price formats if trade-down trends persist.