When the economy abounds with liquidity and low interest rates, such as the 2020-2022 period, markets tend to focus on the more exciting growth stories available for investment. These stories were mostly focused on the technology sector, particularly semiconductor stocks that enabled the rise and adoption of artificial intelligence trends. Today, markets are changing, and so are these preferences.

It isn’t the exciting tech names anymore, nor the overnight successes in cryptocurrency; the market is now rewarding the other ‘boring’ businesses that fall in the retail sector. However, not all these stocks are equal; some are highly focused on the consumer discretionary sector, like Lululemon Athletica Inc. (NASDAQ: LULU) and On Holdings (NYSE: ONON). Others, like TJX Co. (NYSE: TJX), Burlington Stores Inc. (NYSE: BURL), and more, are focused on the consumer staples niche of the industry.

Today, investors will notice that Wall Street sentiment and a bit of price momentum stand to push these types of stocks into a new path toward potentially higher prices. All that matters is that these businesses are helping the broader economic landscape, which has been suffering from inflation and rising costs of living, where these off-price names come into play.

Earnings Momentum Signals This Market Niche Will Continue to Outperform

Shares of TJX brands surprised investors as they rose by over 8% in a single day. The optimistic reaction came essentially from the company’s second-quarter 2024 earnings results, which prove that the financial stance in this industry is as strong as ever.

The first positive sign is posting comparable store sales growth of 4%, which beats inflation and most other GDP growth projections.

It signals that consumers are adopting the off-price brand model as personal finance budgets become tighter in today’s economy.

For TJX, earnings per share (EPS) reached $0.96 for a 13% jump over the past 12 months. Since Wall Street analysts only forecast 8.7% EPS growth for the next 12 months, investors might expect upward revisions in the coming quarters, especially as momentum is proving itself.

With upward EPS revisions could also come more bullish price targets for TJX. While the consensus valuation is $126.4 a share, some analysts are willing to stand out. Those at UBS Group think that a fair value for TJX stock is closer to $148 a share, calling for up to 22.9% upside from where the stock trades today.

It's More Than Just Apparel: Home Renovation Boosts Burlington Stock

Moving into Burlington's latest quarterly earnings report, the picture looks similar to TJX's. The main difference is that TJX focuses more on apparel and like products. At the same time, Burlington focuses on the home furnishing niche, which is just as attractive today.

Given that mortgage rates are at cyclical highs and the average home value is still over 30% above pre-COVID levels, would-be home buyers are still on the sidelines. Therefore, current homeowners (who are not willing to sell) would likely lean toward renovating rather than flipping for a new home.

This trend can be quantified by Burlington's 11% jump in sales over the year, followed by a 68% jump in EPS. The stock has trended upward by as much as 48% since the last quarterly results, and management gave investors a new reason to expect a similar upside after the next quarter is reported.

Outlooks for the rest of the year increased to show an 18% to 24% rise in EPS over 2023. Wall Street analysts expect further EPS growth of 22.6% for the next 12 months, which is more realistic than TJX's projection.

Leaning on this bullish evidence, those at Evercore decided to place a price target of $300 a share for Burlington stock, daring it to rally by as much as 10.6% from where it trades today. This view calls for a new 52-week high in this stock, reiterating the bullish momentum expectations in the off-price niche.

Institutional Backing Signals Optimism for Burlington and TJX

Another factor in common between Burlington and TJX is bearish capitulation. TJX stock's short interest declined by as much as 9.9% in the past month; the short-covering trend can also be seen in Burlington stock's short interest decline of 11.3% in the same period.

Institutional buyers also shared the same optimism for these two off-price names. As of August 2024, Ameriprise Financial (TJX stock's largest shareholder) boosted its position by 33.4% to net its investment at $1.35 billion today. Likewise, for Burlington, Anomaly Capital Management boosted its investment by 34.6% to bring its stake as high as $175.2 million.