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Why Ross Stores (ROST) Stands Out Amid Retail-Wholesale Peers

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Ross Stores Inc. (ROST - Free Report) has been a strong performer, evident from its robust earnings surprise history and the stock momentum. In fact, the company has been consistently doing well, courtesy of its commitment toward merchandising initiatives, off-price model and store expansion. As a result, Ross Stores has emerged as an attractive investment option.

Driven by these positives, shares of this Zacks Rank #3 (Hold) company have surged 14.3% in a year, against the Retail-Wholesale sector’s 3.8% decline. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Ross Stores is also reaping the benefits of the boom in the Retail – Discount Stores industry. The unique off-price model of discount stores makes it an attractive destination for customers in all economic scenarios. The industry gains strength mainly from the efforts of constituent players to grab a bigger share on attributes such as price, products and speed to market. Further, these companies are steadily strengthening their digital ecosystem and omni-channel capabilities as well as boosting shipping and delivery capabilities in the face of fierce competition from Amazon (AMZN - Free Report) .

Looking more closely at stocks in the broader industry, we note that the Ross Stores has outpaced its peers. Notably, stocks like Burlington Stores (BURL - Free Report) , TJX Companies (TJX - Free Report) and Target (TGT - Free Report) have witnessed growth of 5.1%, 8.2% and 10.7%, respectively, in a year.

ROST Vs. Peer Group

Let’s delve deeper and find out reasons that are placing Ross Stores ahead of its peers.

Off-Price Model Boosts Top and Bottom Lines

Ross Stores’ 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.

The company boasts a positive surprise trend, which continued in first-quarter fiscal 2019. In the quarter, its bottom line surpassed the Zacks Consensus Estimate and improved on a year-over-year basis, marking the 12th consecutive earnings beat. Earnings gained from ongoing success in delivering broad assortments of compelling bargains to value-focused customers.

Ross Stores, Inc. Price, Consensus and EPS Surprise

Ross Stores, Inc. Price, Consensus and EPS Surprise

Ross Stores, Inc. price-consensus-eps-surprise-chart | Ross Stores, Inc. Quote

Although sales missed the consensus mark in the first quarter, it improved year over year on robust comparable store sales (comps) backed by increased average basket size. Comps also gained from strength in the men’s category, offset by softness in ladies apparel. Midwest was the best performing region. Markedly, sales topped estimates in 10 of the last 12 quarters.

Store Expansion on Track

Ross Stores has consistently been on track with its store expansion plans. Evidently, the company opened 28 stores in February and March, comprising 22 Ross and six dd’s DISCOUNTS stores. This marked the completion of the company’s planned store expansion for first-quarter fiscal 2019. In the fiscal second quarter, it expects to open 28 stores including 22 Ross and 6 dd’s DISCOUNTS stores. Additionally, Ross Stores is on track to meet the target of inaugurating 100 stores in fiscal 2019  including 75 Ross and 25 dd’s DISCOUNTS outlets.

It should be noted that the company’s store expansion efforts are focused on increasing penetration in the existing as well as new markets. Currently, it operates 1,745 Ross stores and dd’s DISCOUNTS stores across 38 states, the District of Columbia and Guam. Over the long term, Ross Stores expects to operate about 3,000 stores, expanding the Ross chain of stores to 2,400 locations, and nearly 600 dd’s DISCOUNTS stores.

Bullish Outlook

Following the robust first quarter, Ross Stores issued an encouraging view for second-quarter fiscal 2019. The company anticipates comps to be up 1-2%. Total sales are estimated to increase 5-6%. Moreover, the company envisions earnings per share of $1.06-$1.11 compared with $1.04 recorded in the prior-year quarter.

Driven by first-quarter results and expectations for the second quarter, Ross Stores raised its earnings view for fiscal 2019. It now estimates earnings per share of $4.38-$4.52 compared with $4.30-$4.50 anticipated earlier.

These apart, we believe there is still momentum left in the stock of this CA-based discount stores operator as it has a long-term impressive earnings growth rate of 10.4% and a VGM Score of B.

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