How Ross, Warby Parker, and Cava Are Defying a Choppy Economy

While companies like Starbucks, Home Depot, Amazon, and Macy’s cope with shrinking customer bases, some standout consumer-facing enterprises are thriving despite inflationary pressures, recession fears, and generational shifts.

Three that are flourishing and warrant a closer look are Ross (“Dress for Less”) Stores, eyewear brand Warby Parker, and Cava Grill, a fast-growing chain of Greek-themed casual dining restaurants. All three have managed to tap into the Gen Z-Millennial zeitgeist, expanding despite the pullback by tapped-out, over-leveraged consumers by focusing on physical stores.

The oldest is Ross Stores, a chain of about 1,800 discount department stores selling apparel and home fashion products at 20-60% discounts. Although started 75 years ago in California, Ross’s brick-and-mortar strategy is paying off, with its stock price behaving lately like a high-tech phenom, hitting a new all-time high in August with a market cap of $50 billion.

Like its discount brethren (e.g., T.J. Maxx), the company is on an expansion tear, opening two dozen new stores this summer alone, with plans to grow its fleet to 3,600. While discount stores as a group have struggled over the last five years, declining at an annualized rate of 3.8%, Ross reported in May that its first-quarter sales rose a healthy 8% year over year, with comparable-store sales up 3%. Its target market is mostly female price-conscious shoppers aged 18 to 54.

Warby Parker is the company that, beginning in 2010, set out to disrupt the expensive market for eyeglasses with a direct-to-consumer online model, allowing shoppers to order multiple frames to try at home at discount prices with free shipping.

The company benefited from a declining preference for contact lenses and a surge in people needing vision correction (two out of three Americans now wear prescription eyeglasses), due in part to excessive screen time and, more recently, a renewed interest in glasses as a fashion accessory. Vintage-look round lenses are back.

What’s put the company on the map, despite the fact it has yet to earn a profit, is accelerating growth in revenue (sales grew nearly 12% in 2023) driven in part, according to the founders, by adding physical stores to its online presence.

In a recent interview on CNBC, Co-founder Neil Blumenthal explained, “We found that the vast majority of folks in America want to go to a store, try on glasses, and buy them in person.” Two-thirds of Warby’s sales now come from its 250 physical stores, he said, and the company is “on a path to open over 900 stores.”

Cava Grill is a fast, up-and-coming restaurant chain that is filling the gap created by the decline of older, worn-out brands like Applebee’s, which has closed hundreds of its stores in the past two years, and TGI Fridays, which posted an 18% decline in sales in 2023. The restaurants feature a menu of traditional Mediterranean dishes and ingredients.

Cava’s first restaurant was opened in the suburban Washington, DC market in 2006 by three first-generation Greek-American friends, and they opened their first fast-casual location in 2011. The company went public in a hot offering last year that gave it a market cap of $10 billion. Today, it operates 323 restaurants that have been dubbed by hopeful investors as the Mediterranean Chipotle.

The company recently reported its fiscal second-quarter sales climbed 35% to $233 million, while same-store sales rose 14.4%. Cava said it expects same-store sales growth of 8.5% to 9.5% this year. Some Wall Street analysts recently hit the brakes on the stock for having gotten ahead of itself, but the company’s growth rate looks set to continue as it plans to open more than 50 new locations this year.

These three share a couple of things in common: innovation, value orientation, and an understanding of the Gen Z consumer.