There’s a reason people like shopping at Costco, beyond the ridiculously low prices.

Shopping at Costco is often likened to going on a treasure hunt. When you roam those massive warehouse club store aisles, you never quite know what you’re going to find.

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Shopping at off-price retailers is similar.

When you shop at an off-price retailer like Marshalls, TJ Maxx, Ross, or Burlington, you have a prime opportunity to score brand-name products at heavily discounted prices. And part of the fun is browsing the store to see what you’re going to find.

Of course, off-price retailers don’t have the same consistent inventory as traditional department stores.

But hunting for deals is something many consumers enjoy — especially when you manage to find an awesome product at a price that’s way lower than what you’d pay elsewhere.

While off-price retail shines, Gabe’s struggles

In today’s economy, off-price retail is thriving. And there’s a reason for that.

Consumer habits have shifted in recent years as a result of lingering inflation. In July, the Consumer Price Index was up 2.7% across all spending categories. And while that’s not a drastic increase by itself, it’s coming after years of rising costs.

For this reason, consumers are increasingly turning to off-price retailers to enjoy the savings.

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And it’s not just lower-income shoppers that are flocking to off-price stores. Even higher-income customers are looking for ways to stretch their budgets, and are increasingly embracing off-price retail for the value it offers.

But while discount retail chains are clearly having their moment in the sun, Gabe’s, an off-price chain that operates more than 160 locations across 20 different states, has been struggling.

Although Gabe’s is known for offering brand-name merchandise at ultra-low prices, often up to 70% off compared to department stores, the company has shouldered a heavy debt load that’s made it difficult to operate and expand.

The company has also struggled to obtain capital in recent years to not only fund daily operations, but also secure the merchandise it needs to keep customers happy.

Like many off-price retailers, Gabe’s business model involves purchasing excess inventory at a discount and passing those savings along to its customers. But it takes money to keep inventory fresh and exciting.

Gabe’s avoids bankruptcy with new owner

In recent years, a host of retail bankruptcies have plagued the fashion and apparel space. Some of the companies forced into Chapter 11 include:

• Forever 21
• Claire’s
• Rue21
• Express

Of course, whenever a company files for bankruptcy, there’s the risk of it having to close stores – something that can deal consumers a major blow.

Related: Bankrupt retailer Joann store has a surprising new owner

Gabe’s, despite its financial troubles, seems to have skirted bankruptcy this time around. The company was able to undergo a big out-of-court restructuring that left it with new owners at the helm.

A group of term lenders converted more than 75% of Gabe’s loan obligations into equity and provided the company with a meaningful amount of capital to continue operations. The company’s new owners have also said they’ll continue to provide Gabe’s with capital as the company hits key financial milestones.

Gabe’s CEO Jason Mazzola said the company is excited about its prospects. And while its new owners may be taking a risk by infusing so much capital, it’s a calculated one.

Late last year, Jane Hali & Associates analysts noted that off-price retail is in a unique position to thrive, given the current economic circumstances.

“As consumers remain pressured by inflation and accrued debt, discretionary items are taking a back seat when it comes to spending….However, when they do shop discretionary items, consumers are seeking value.”

Analysts also noted that “the off-price sector is poised to benefit from retail store closures and the current weakness in the department store sector.”

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Gabe’s management team is confident that as long as the company can stay operational, customers will continue to embrace its treasure hunt-style experience, the same way Costco customers consistently come back for more. The company, however, will need to be strategic in managing debt and cash flow to improve its balance sheet and avoid bankruptcy long-term.

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