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Ross Stores (ROST) Outpaces Peers, Surges 52.5% in a Year


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Shares of Ross Stores Inc.ROST have showcased an overwhelming performance in the past year, emerging as an attractive investment option. Notably, the stock has gained 52.5% in a year, marking an outperformance compared with the industry 's growth of 41.2%.

We believe, there is still momentum left in the stock of this CA-based discount stores operator, based on its commitment toward better price management, merchandise initiatives, cost containment and store expansion.

Further, the off-price business model is its key strength as competitive bargains that the company offers make its stores attractive destinations for customers in all economic scenarios. It is evident from this Zacks Rank #3 (Hold) company's long-term impressive earnings growth rate of 10% and a VGM Score of B.

You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here .

Looking more closely at stocks in the broader industry, we note that the Ross Stores stock has outpaced peers. Notably, stocks like Dollar Tree DLTR , Dollar General DG and Target TGT have witnessed gains of 0.8%, 35.2% and 48.9%, respectively, in a year. Let's delve deeper and find out reasons that are placing Ross Stores ahead of its peers.

ROST Price Performance Vs. Peers



Merchandising Initiatives Bode Well

Merchandising measures - including investments in workforce, processes and technology - are the core of Ross Stores' strategies, which keeps it on growth trajectory. It has been committed to improving merchandise assortments in the ladies' apparel business. Moreover, the company constantly organizes its merchant group, enabling it to expand market coverage steadily in the vendor community while enhancing relationships with broad network of existing and new resources. These initiatives strengthen Ross Stores' buying operation, facilitating purchase of in-trend merchandise at attractive prices.

Off-Price Model Boosts Top and Bottom Lines

The company's off-price model provides strong value proposition and micro-merchandising that drive product allocation and margins. This helped the company to deliver solid top- and bottom-line trends.

We observe that the company's total sales increased 8.9% in second-quarter fiscal 2018, with comparable store sales (comps) growth of 5%. Historically, sales have increased 8.5% in first-quarter fiscal 2018 and 7%, 7.9%, 7.8% and 16% in the first, second, third and fourth quarters of fiscal 2017, respectively. Moreover, comps increased 3% in first-quarter fiscal 2018, and 3%, 4%, 4% and 5% in the first, second, third and fourth quarters of fiscal 2017, respectively.

Ross Stores, Inc. Price, Consensus and EPS Surprise

Ross Stores, Inc. Price, Consensus and EPS Surprise | Ross Stores, Inc. Quote



Additionally, both earnings and sales surpassed estimates in the last nine quarters. Earnings continued to gain from the company's ability to deliver broad assortments at compelling bargains to value-focused customers. Based on results of the first half and view for the second half, the company has raised earnings outlook for fiscal 2018. It now projects earnings per share of $4.01-$4.10 for fiscal 2018 compared with $3.92-$4.05 guided earlier. Comps for fiscal 2018 are estimated to increase 1-2%.

Store Expansion on Track

Ross Stores has consistently been on track with its store expansion plans. This is clear from the opening of 22 Ross and eight dd's DISCOUNTS stores in second-quarter fiscal 2018. Moreover, it plans to open nearly 40 stores, including 30 Ross and 10 dd's DISCOUNTS in third-quarter fiscal 2018. With this, the company is poised to reach the target of opening 100 stores in fiscal 2018, including 75 Ross and 25 dd's DISCOUNTS stores. However, this guidance does not include plans to close or relocate nearly 10 older stores.

Further, Ross Stores' focus on store expansion is highlighted by its recent research, which suggests that it has the potential to increase penetration in existing as well as new markets. Consequently, it raised long-term projected store growth target to 3,000 from 2,500 projected earlier. This will include the opening of nearly 2,400 Ross Dress for Less stores (up from the prior forecast of 2,000) and 600 dd's DISCOUNTS stores (up from the prior assessment of 500).

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Dollar Tree, Inc. (DLTR): Free Stock Analysis Report

Target Corporation (TGT): Free Stock Analysis Report

Dollar General Corporation (DG): Free Stock Analysis Report

Ross Stores, Inc. (ROST): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.



This article appears in: Investing , Business , Stocks
Referenced Symbols: DLTR , TGT , DG , ROST



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