Sparkling June Comps for Ross

Ross Stores Inc. (ROST - Snapshot Report), one of the largest off-price apparel and home fashion chain retailers in the U.S., reported robust sales and same-store sales numbers for the five weeks ended June 30, 2012.

Ross Stores’ comparable sales in June jumped 7% against a 5% growth registered in the prior-year period. Comps for the month benefited from improved merchandise and geographic sales gains, which resulted from the company’s ability to offer renowned brands to value customers. Consequently, the company’s total sales for the five-week period surged 12% to $886 million compared with $793 million in the year-ago period.

Ross Stores’ year-to-date (22 weeks ended June 30, 2012) sales also increased 13% to $3,989 million from $3,529 million in the year-ago period, primarily driven by strong comparable store sales growth. Comparable sales for the period reflected an 8% rise compared with a 4% growth in the prior-year period.

The company’s robust sales mainly mirror the company’s relentless focus on offering exciting collection in its name brand fashion for the family and home, which has appealed to its value-oriented customers.

Driven by better-than-expected sales and gross margins in May and June and expected comps gain of 2% to 3% in July, Ross Stores raised its second-quarter earnings per share guidance to 77-78 cents, compared with the prior guidance range of 72-75 cents and well above the year-ago earnings of 64 cents. Currently, the Zacks Consensus Estimate for the second quarter is 78 cents per share, which is at the higher end of the company’s forecast.

Peer Performance

One of Ross Store’s competitors, Gap Inc. (GPS - Analyst Report), registered flat comps for the month of June. Meanwhile, another competitor, Nordstrom Inc. (JWN - Analyst Report), reported comparable sales of 8.1% for the month of June.

Our Recommendation

Ross Stores and its subsidiaries operate two chains of off-price retail apparel and home accessories stores in the U.S. These stores offer branded apparel, shoes, and accessories for the entire family, as well as gift items, linens, and other home-related merchandise.

The company also offers small furniture and furniture accents, educational toys and games, luggage, gourmet food and cookware, watches, sporting goods and fine jewelry, which provide it with a competitive edge over its rivals.

Ross Stores has implemented a micro-merchandising tool, through which the company expects to enhance its total sales and profitability by targeting expansion in its existing markets. Moreover, Ross remains focused on new store growth, share buybacks, and attractive dividend payouts even as many other retailers are implementing dramatic cutbacks, and has the financial strength to continue its course while building shareholders' value.

Ross' shares maintain a Zacks #2 Rank, which translates into a short-term Buy rating. We have a long-term Neutral recommendation on the stock.