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Ross Stores Gains 38% YTD: Will Momentum Continue in 2020?

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Ross Stores, Inc.’s (ROST - Free Report) performance on bourses remains sturdy, thanks to its constant store-expansion plans, strength in its business model and impressive comparable-store sales (comps) trend.

Year to date, this Zacks Rank #3 (Hold) stock has soared 38.1%, comfortably outperforming the S&P 500’s 28.7% rally. The company has also outpaced the Retail-Wholesale sector’s 24.7% growth. Ross Stores’ expected long-term earnings growth rate of 10.5% coupled with a VGM Score of B further highlight its inherent strength.



Strategic Efforts & Strengths

Speaking of Ross Stores’ store-growth efforts, it has consistently been on track with increasing penetration in existing and new markets. We note that the company has successfully reached its target of opening 42 stores in third-quarter fiscal 2019, which included 30 Ross and 12 dd’s DISCOUNTS stores. Notably, this marked the completion of its store opening target for the current fiscal year, with the addition of 98 outlets. Over the long term, Ross Stores expects to expand the Ross chain of stores to 2,400 locations alongside operating about 600 dd’s DISCOUNTS stores.

Further, Ross Stores’ off-price business model that target value-conscious men and women, in middle to upper-middle class households, is a positive. The proven business model enables it to offer competitive bargains that attract customers to stores in all economic scenarios. The company offers strong value proposition and micro-merchandising that drive better product allocation and margins. In fact, the solid execution of the off-price strategy should continue to boost the company’s top and bottom lines.

Ross Stores’ robust comps trend, mainly driven by improved performance across different categories and geographic regions, highlights its top line momentum. In third-quarter fiscal 2019, comps improved 5%, driven by higher traffic and increased average basket size.

Bottom Line

Clearly, the aforesaid factors make us optimistic about the stock’s potential in 2020. Further, the Zacks Consensus Estimate for fiscal 2020 top and bottom line indicates year-over-year improvement of 6.1% and 8.3%, respectively.

3 Key Picks in Retail

Hibbett Sports, Inc. HIBB has an impressive long-term earnings growth rate of 12.2%. The company currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Target Corporation TGT, which is also a Zacks Rank #1 stock, has an expected long-term earnings growth rate of 7.5%.

DICK'S Sporting Goods, Inc. DKS has long-term earnings growth rate of 6.5%. The company currently has a Zacks Rank of 1.

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