Ross Stores, Inc. (ROST – Free Report) stock has been doing well, recording a gain of 9.9% in the past three months. This gain comfortably outpaces the broader Retail-Wholesale sector and the Zacks Retail – Discount Stores industry’s growth of 6.5% and 3.6%, respectively, in the same period. ROST shares also surpassed the S&P 500 index’s rise of 3.6%.
The company has been benefiting from strategies, including store-expansion plans and its off-price retailing model, offering branded and designer goods at discounted prices. This has helped maintain customer loyalty and adapt to changing consumer preferences.
ROST Price Performance
Image Source: Zacks Investment Research
ROST’s Solid Strategies Aid Rally
Ross Stores’ consistent execution of store expansions over the years is quite appealing. The company has concluded its store-expansion plans for fiscal 2024 by opening 47 stores. These new stores are likely to capture extra sales and boost ROST’s overall profits. ROST has been expanding its foothold by introducing stores and extending its capabilities.
Ross Stores has been reinforcing its presence across both the existing and new markets. The aforesaid openings highlight Ross Stores’ efforts to expand stores are quite on track. This also indicates the company’s continued expansion strategy. Management expects to expand “Ross Dress for Less” to 2,900 stores and dd’s DISCOUNTS to 700 stores in the long term.
In addition, the company operates a chain of off-price retail apparel and home accessories stores, which target value-conscious men and women. ROST has a proven business model as the competitive bargains the company offers continue to make its stores attractive destinations for customers.
The off-price model offers a strong value proposition and micro-merchandising that drive better product allocation and margins. Ross Stores continues to gain from positive customer response for its merchandise across both banners.
ROST Shows Higher Estimate Revisions
Analysts seem quite optimistic about the company. The Zacks Consensus Estimate for Ross Stores’ fiscal 2024 earnings per share (EPS) has risen 0.8% to $6.17 in the past 60 days. The consensus estimate for fiscal 2025 EPS has risen 0.3% to $6.67 in the past seven days.
For fiscal 2024, the Zacks Consensus Estimate for ROST sales and EPS implies growth of 3.7% and 11%, respectively, year over year. For fiscal 2025, the consensus mark for sales and EPS indicates a 5.6% and 8.1% year-over-year increase, respectively.
ROST Stock Valuation
Ross Stores stock is trading at an appealing valuation relative to the industry. Going by the price/earnings ratio, the stock is currently trading at 23.27 on a forward 12-month basis, lower than 30.33 for the industry. Also, the stock is trading lower than its high of 79.52.
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Hindrance to Ross Stores’ Growth Path
Despite the aforementioned strengths, Ross Stores has been witnessing higher costs as well as the ongoing headwinds related to the macroeconomic volatility, rising inflation and geopolitical uncertainty.
Our model predicts cost of goods sold to increase 2.8% year over year for fiscal 2024. We expect selling, general and administrative expenses to increase 5.7% year over year for the fiscal fourth quarter and 4% for fiscal 2024.
Such costs are likely to weigh on its profitability in the near term. Management envisions earnings per share to be in the bracket of $1.57-$1.64 for fourth-quarter fiscal 2024, down from $1.82 in fourth-quarter fiscal 2023.
Final Words on ROST
Ross Stores has been making smart moves to tackle cost challenges and enrich customers’ overall experience. ROST currently carries a Zacks Rank #3 (Hold).
We note that the aforementioned-discussed tailwinds have been bolstering the company’s comparable store-sales (comps), which rose 1% in the third quarter of fiscal 2024 on increased customer traffic and basket size. This indicates that a higher number of shoppers visited Ross Stores and purchased more items per visit. This led to a sales increase of 3% year over year in the same quarter.
Solid Picks From the Industry
We have highlighted three better-ranked stocks, namely Deckers (DECK – Free Report) , Boot Barn (BOOT – Free Report) and Abercombie (ANF – Free Report) .
Deckers, a footwear and accessories dealer, 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 Deckers’ current financial-year sales indicates growth of 13.6% from the year-ago figure. DECK delivered an average earnings surprise of 41.1% in the trailing four quarters.
Boot Barn, a lifestyle retail chain devoted to western and work-related footwear, apparel and accessories, currently carries a Zacks Rank #2 (Buy). The company delivered a trailing four-quarter earnings surprise of 6.8%, on average.
The Zacks Consensus Estimate for Boot Barn’s current financial-year sales indicates growth of 13.4% from the year-ago figure.
Abercrombie, a leading casual apparel retailer, currently carries a Zacks Rank of 2. ANF delivered an earnings surprise of 16.8% in the last reported quarter.
The consensus estimate for Abercrombie’s current financial-year sales indicates growth of 13% from the year-ago figure.
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