Ross Stores Picks Up the Pace of Expansion with 37 Outlets - Analyst Blog

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Off-price retailer, Ross Stores Inc.ROST is on track with its store expansion plans as it recently opened 37 new stores, which includes 32 Ross Dress For Less and 5 dd's DISCOUNTS stores in 15 different states.

These stores are located in states like California, Texas and Florida, where the company already has significant presence. Moreover, these new locations provide ample growth avenues, which can further fortify its presence in the future.

These new store openings signify the first set of stores opened under the company's 2015 pan to add about 90 stores (70 Ross Dress For Less and 20 dd's DISCOUNTS). Additionally, the company plans to open a new set of stores during spring which will expand its presence in newer markets of Illinois, Kentucky and Indiana.

Including the latest store openings, Ross Dress For Less now operates 1,242 stores in 33 states, the District of Columbia and Guam, while dd's DISCOUNTS now operates 157 locations in 15 states.

Looking ahead, we remain confident about the company's growth potential and believe that it can successfully attain its target of expanding store base to 2,500 over the longer term. This will comprise 2,000 Ross Dress For Less and 500 dd's DISCOUNTS stores.

Additionally, we believe the company is underpenetrated in the 33 states it serves and holds promise to substantially grow its store base in these markets. Further, management remains on track to increase square footage by about 6%-7% annually, aiming to maintain its pace of opening about 70 stores per year.

Further, this Zacks Rank #2 (Buy) company ended fiscal 2014 on a spectacular note, with better-than-expected top and bottom-line results for the fourth quarter and fiscal 2014. Backed by robust sales and merchandise margins, quarterly earnings surged 17.6% year over year to $1.20 per share. The bottom line came in much ahead of the guided range of $1.05-$1.09 and the Zacks Consensus Estimate of $1.11 per share.

Total sales advanced 10.6% to $3,032.7 million, backed by positive response from value-focused customers toward the company's extensive collection of brand bargains. Sales also cruised ahead of the Zacks Consensus Estimate of $2,933 million.

Other stocks worth considering in the retail-discount space include Burlington Stores Inc. BURL with a Zacks Rank #1 (Strong Buy) and Target Corp. TGT carrying a Zacks Rank #2. A better-ranked stock in the broader retail space is Citi Trends Inc. CTRN with a Zacks Rank #1.

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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.

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

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