Why shoppers are flocking to off-price retailers like T.J. Maxx

PHILADELPHIA – Tabitha Dardes dresses stylishly, holds a good-paying job and lives in a tony suburb.

So how come she's a regular at T.J. Maxx?

"It's more like treasure hunting," she said.

As Dardes spoke, she looked in a mirror while holding up a suede camel Calvin Klein knee-length dress with a $69.99 price tag; it originally retailed for $120. The dress eventually made it into her nearly full cart.

"I love the selection," Dardes, 54, a public relations director, said, noting she ­visits a T.J. Maxx once a week. "It's cheaper than department stores."

Therein lies the not-so-subtle reason so many department-store chains — from Macy's, J.C. Penney and Sears to Aeropostale, Victoria's Secret and the Gap — are ­shuttering stores.

Internet shopping is one contributor. The Pew Research Center said 68 percent of Americans now own a smartphone — an increasingly popular tool for shopping.

"Luxury and high-end retail bounced back within about 18 months of the recession. Discount and off-price thrived" as well, said Garrick Brown, vice president of Retail Research of the Americas at Cushman & Wakefield, Brown said.

Moody's Investors Service predicts that the same four value-oriented chains will "continue to outperform the apparel retail segment over the next five years."

In contrast, the department-store industry is losing share "as online competition increases and mall traffic continues to decelerate," noted Christina Boni, a Moody's senior analyst.

Even more telling is how off-price retailers are adding stores while the footprint of traditional department stores keeps shrinking. Moody's expects the off-price segment's market share in sales to grow to about 10 percent of apparel sales by 2018, from 8.8 percent in 2015.

Ironically, according to the U.S. Census Bureau, annual median income growth last year of 5.4 percent was the biggest jump Americans had seen in 49 years, and the job market set a record for its longest consecutive streak of employment growth (71 months in a row and nearly 16 million jobs created).

Even Nordstrom, a more upscale player, hasn't been immune. The company's growth is from Nordstrom Rack. Outside of a planned New York flagship, the only new full-line Nordstrom department stores that have opened are in Canada. The firm closed two U.S. department stores in recent years, including one in downtown San Diego.

Meanwhile, Burlington Coat Factory wants to add 80 to 100 stores this year; Ross, T.J. Maxx and Marshalls want to open 40 to 60 new stores each; and Nordstrom Rack is planning 35 stores.

Madeline Hurley, retail analyst at IBISWorld Inc., said: "Consumers feel that they are receiving a better value when shopping at off-price stores than at traditional department stores. Especially as off-price retailers expand their online offering, department stores will have an even more difficult time competing."

At the entrance of a Nordstrom Rack in downtown Philadelphia, a sign reads: "The ultimate treasure hunt destination."