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Ross Stores' (ROST) Strategic Efforts Seem Good: Apt to Hold

Ross Stores, Inc. ROST seems well-poised for growth, thanks to its robust strategic efforts. The company has been gaining from positive customer response for its merchandise across both banners, which has been boosting the comparable-store sales (comps) performance for a while now. Its store expansion plans also bode well. Buoyed by such strengths, shares of this apparel and accessories dealer have increased 33% compared with the industry’s 25.3% growth in a year.

What’s More?

Ross Stores is consistent with the execution of its store expansion plans. It remains focused on continually increasing penetration in the existing as well as new markets. At the end of fiscal 2023, the company operated a total of 2,109 stores, comprising 1,764 Ross Dress for Less stores and 345 dd's DISCOUNTS locations. This reflects the company's continued expansion strategy, with 94 net new stores added in fiscal 2023, including 71 Ross and 23 dd's DISCOUNTS stores. This expansion is part of the company’s plans for fiscal 2024. It aims to open 90 locations, which will include about 75 Ross and 15 dd's DISCOUNTS stores.

Given the large retail closures over the past years, Ross Stores earlier raised its long-term store expansion targets. The company expects to expand “Ross Dress for Less” to 2,900 stores and dd’s DISCOUNTS to 700 stores. This represents a 20% increase in potential store growth targets, bringing the total to 3,600 stores. This reflects significant growth from the company’s store count of 1,923 stores at the end of fiscal 2021.

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Zacks Investment Research


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Ross Stores has been benefiting from higher merchandise margin, as well as lower distribution expenses, domestic freight and occupancy costs due to the easing of supply-chain headwinds. This led to a 265-basis points (bps) decline in the cost of goods sold as a percentage of revenues, which boosted the operating margin in fourth-quarter fiscal 2023. Merchandise margins increased 110 bps year over year, resulting from lower ocean freight costs. Backed by improved same-store sales and lower freight costs, the operating margin of 12.4% improved 170 bps year over year in the reported quarter.

In fourth-quarter fiscal 2023, comps improved 7%, mostly attributed to higher customer traffic and a favorable reaction from shoppers toward the enhanced assortments across its stores. This led to a sales improvement of 15.5% year over year in the quarter. Additionally, earnings rose 38.9% year over year, while the top and bottom lines surpassed the Zacks Consensus Estimate. This marked the third straight quarter of top and bottom-line beat.

Given all the positives, Ross Stores stock seems to deserve a place in your investment portfolio. Analysts seem quite optimistic about the company. The Zacks Consensus Estimate for fiscal 2024 sales and earnings per share (EPS) is currently pegged at $21.2 billion and $5.89, respectively. These estimates show corresponding growth of 3.9% and 5.9% year over year. The consensus mark for fiscal 2025 sales and EPS is $22.4 billion and $6.45, respectively, suggesting year-over-year growth of 5.8% and 9.6%.  A VGM Score of A further adds strength to this current Zacks Rank #3 (Hold) company.

Key Picks

We have highlighted three better-ranked stocks, namely American Eagle AEO, Gap GPS and Deckers DECK.

American Eagle, a leading apparel retailer, currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for American Eagle’s current financial-year sales suggests growth of 3.3% from the year-ago reported figure. AEO delivered an earnings surprise of 22% in the last reported quarter.

Gap, a leading apparel retailer, currently sports a Zacks Rank of 1. GPS delivered an earnings surprise of 180.9% in the trailing four quarters.

The Zacks Consensus Estimate for Gap’s financial-year sales suggests growth of 1.7% from the year-ago reported figure.

Deckers, a footwear and accessories dealer, currently sports a Zacks Rank of 1. DECK delivered an earnings surprise of 32.1% in the trailing four quarters.

The Zacks Consensus Estimate for Deckers’ current financial-year sales suggests growth of 15.8% from the year-ago reported figure.

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American Eagle Outfitters, Inc. (AEO) : Free Stock Analysis Report

Deckers Outdoor Corporation (DECK) : Free Stock Analysis Report

The Gap, Inc. (GPS) : Free Stock Analysis Report

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

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