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Here's Why Ross Stores (ROST) is Poised for Growth in 2024
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Ross Stores, Inc. (ROST - Free Report) appears encouraging on the back of the successful execution of its strategic initiatives and strong fundamentals. The company is undertaking store expansion efforts to drive efficiency and boost growth. It continues to gain from the positive customer response for its merchandise across both banners, which has been boosting the comparable store-sales (comps) performance.
Buoyed by such endeavors, the off-price apparel retailer’s shares have increased 24.7% in the past six months, surpassing the industry’s 12.9% growth. Impressively, analysts seem optimistic about the stock. The Zacks Consensus Estimate for fiscal 2023 sales and earnings per share (EPS) is currently pegged at $20.1 billion and $5.36, showing an increase of 7.5% and 22.4%, respectively, year over year. The consensus estimate for fiscal 2024 sales and EPS is presently $21 billion and $5.83, respectively, indicating growth of 4.3% and 8.8% year over year.
Deeper Analysis
Ross Stores has been benefiting from higher merchandise margin, as well as lower distribution expenses, domestic freight and occupancy expenses due to the easing of supply-chain headwinds. This led to a 260-basis points (bps) decline in the cost of goods sold, as a percentage of revenues, which boosted operating margin in third-quarter fiscal 2023. Merchandise margins increased 235 bps year over year, resulting from lower ocean freight costs. Additionally, the company witnessed a 45 bps decline in distribution expenses, a 40 bps decline in domestic freight and 25 bps leverage from occupancy costs. Further, comps improved 5%, backed by improved traffic in the said quarter.
Image Source: Zacks Investment Research
The company predicted improved operating margin for fourth-quarter fiscal 2023 driven by lower domestic freight and distribution costs, partly due to favorable packaway timing. The operating margin for the fiscal fourth quarter is expected to be 11.3-11.5% compared with the year-ago quarter’s reported figure of 10.7%, driven by gains from higher merchandise margins, owing to lower ocean freight costs and a 65-bps gain from the 53rd week.
Ross Stores has been consistent with the execution of its store expansion plans over the years. The company’s store expansion efforts are focused on continually increasing penetration in the existing as well as new markets. In third-quarter 2023, the company completed its targeted store expansion plans for fiscal 2023. Through the nine months of fiscal 2023, the company opened 97 stores, including 72 Ross and 25 dd’s DISCOUNTS. It expects to close fiscal 2023 with 1,764 Ross stores and 345 dd’s DISCOUNTS stores. This reflects an addition of net 94 stores for the fiscal year.
Management had 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, thus bringing it to 3,600 stores. This indicates significant growth from the company’s store count of 1,923 stores at the end of fiscal 2021.
Ross Stores operates a chain of off-price retail apparel and home accessories stores, which target value-conscious men and women, aged 25 to 54 in middle-to-upper middle-class households. The company has a proven business model as the competitive bargains it offers continue to make its stores attractive destinations for customers in all economic scenarios. Moreover, the off-price model offers a strong value proposition and micro-merchandising that drive better product allocation and margins. Overall, gains at the core business demonstrated consumers' continued focus on value and the company’s ability to deliver value bargains to customers.
Given all the positives, Ross Stores is well-placed for growth in 2024. A Value Score of B for this current Zacks Rank #3 (Hold) company further speaks volumes.
The Zacks Consensus Estimate for Abercrombie & Fitch’s current financial-year sales suggests growth of 13.3% from the year-ago reported figure. ANF delivered an earnings surprise of 713% in the last reported quarter.
Gap, a fashion retailer of apparel and accessories, currently sports a Zacks Rank of 1. The company has a trailing four-quarter earnings surprise of 137.9%, on average.
The Zacks Consensus Estimate for Gap’s current financial-year EPS suggests growth of 387.5%, from the year-ago reported figure.
Hibbett, the key sporting goods retailer, currently sports a Zacks Rank of 1. HIBB delivered an earnings surprise of 24.2% in the trailing four quarters.
The Zacks Consensus Estimate for Hibbett’s current financial-year sales suggests growth of 1.7% from the year-ago reported figure.
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Here's Why Ross Stores (ROST) is Poised for Growth in 2024
Ross Stores, Inc. (ROST - Free Report) appears encouraging on the back of the successful execution of its strategic initiatives and strong fundamentals. The company is undertaking store expansion efforts to drive efficiency and boost growth. It continues to gain from the positive customer response for its merchandise across both banners, which has been boosting the comparable store-sales (comps) performance.
Buoyed by such endeavors, the off-price apparel retailer’s shares have increased 24.7% in the past six months, surpassing the industry’s 12.9% growth. Impressively, analysts seem optimistic about the stock. The Zacks Consensus Estimate for fiscal 2023 sales and earnings per share (EPS) is currently pegged at $20.1 billion and $5.36, showing an increase of 7.5% and 22.4%, respectively, year over year. The consensus estimate for fiscal 2024 sales and EPS is presently $21 billion and $5.83, respectively, indicating growth of 4.3% and 8.8% year over year.
Deeper Analysis
Ross Stores has been benefiting from higher merchandise margin, as well as lower distribution expenses, domestic freight and occupancy expenses due to the easing of supply-chain headwinds. This led to a 260-basis points (bps) decline in the cost of goods sold, as a percentage of revenues, which boosted operating margin in third-quarter fiscal 2023. Merchandise margins increased 235 bps year over year, resulting from lower ocean freight costs. Additionally, the company witnessed a 45 bps decline in distribution expenses, a 40 bps decline in domestic freight and 25 bps leverage from occupancy costs. Further, comps improved 5%, backed by improved traffic in the said quarter.
Image Source: Zacks Investment Research
The company predicted improved operating margin for fourth-quarter fiscal 2023 driven by lower domestic freight and distribution costs, partly due to favorable packaway timing. The operating margin for the fiscal fourth quarter is expected to be 11.3-11.5% compared with the year-ago quarter’s reported figure of 10.7%, driven by gains from higher merchandise margins, owing to lower ocean freight costs and a 65-bps gain from the 53rd week.
Ross Stores has been consistent with the execution of its store expansion plans over the years. The company’s store expansion efforts are focused on continually increasing penetration in the existing as well as new markets. In third-quarter 2023, the company completed its targeted store expansion plans for fiscal 2023. Through the nine months of fiscal 2023, the company opened 97 stores, including 72 Ross and 25 dd’s DISCOUNTS. It expects to close fiscal 2023 with 1,764 Ross stores and 345 dd’s DISCOUNTS stores. This reflects an addition of net 94 stores for the fiscal year.
Management had 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, thus bringing it to 3,600 stores. This indicates significant growth from the company’s store count of 1,923 stores at the end of fiscal 2021.
Ross Stores operates a chain of off-price retail apparel and home accessories stores, which target value-conscious men and women, aged 25 to 54 in middle-to-upper middle-class households. The company has a proven business model as the competitive bargains it offers continue to make its stores attractive destinations for customers in all economic scenarios. Moreover, the off-price model offers a strong value proposition and micro-merchandising that drive better product allocation and margins. Overall, gains at the core business demonstrated consumers' continued focus on value and the company’s ability to deliver value bargains to customers.
Given all the positives, Ross Stores is well-placed for growth in 2024. A Value Score of B for this current Zacks Rank #3 (Hold) company further speaks volumes.
Eye These Solid Picks
We have highlighted three better-ranked stocks, namely Abercrombie & Fitch (ANF - Free Report) , Gap (GPS - Free Report) and Hibbett (HIBB - Free Report) .
Abercrombie & Fitch, a leading casual 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 Abercrombie & Fitch’s current financial-year sales suggests growth of 13.3% from the year-ago reported figure. ANF delivered an earnings surprise of 713% in the last reported quarter.
Gap, a fashion retailer of apparel and accessories, currently sports a Zacks Rank of 1. The company has a trailing four-quarter earnings surprise of 137.9%, on average.
The Zacks Consensus Estimate for Gap’s current financial-year EPS suggests growth of 387.5%, from the year-ago reported figure.
Hibbett, the key sporting goods retailer, currently sports a Zacks Rank of 1. HIBB delivered an earnings surprise of 24.2% in the trailing four quarters.
The Zacks Consensus Estimate for Hibbett’s current financial-year sales suggests growth of 1.7% from the year-ago reported figure.