Company Reports

Ross Stores’ strategy is rooted in disciplined execution of a domestic off-price apparel and home fashion model that prioritizes value leadership, cost efficiency, and inventory management over assortment breadth or omnichannel reach. We believe the firm is well positioned to defend and modestly expand its standing within the US apparel retail realm despite heightened competition. Ross captures roughly 30% of the US off-price apparel market, supported by a store footprint of more than 2,100 locations concentrated in dense urban and suburban markets. This scale affords purchasing leverage with vendors and enables consistent access to branded closeouts and excess inventory that many smaller competitors cannot replicate.

Ross' fiscal second-quarter results included 13% net sales growth and a 10% comparable-store sales increase. Adjusted operating margin expanded by 205 basis points —excluding 405 basis points of tariff refund benefits—on an increase in merchandise margin and lower distribution costs.

Ross' first-quarter results included 21% sales growth and adjusted EPS of $2.02, up 38%. Operating margin expanded by 120 basis points to 13.4%, driven by merchandise margin gains, occupancy leverage, and lower distribution costs, but partly offset by higher compensation expense.

Ross Stores’ strategy is rooted in disciplined execution of a domestic off-price apparel and home fashion model that prioritizes value leadership, cost efficiency, and inventory management over assortment breadth or omnichannel reach. We believe the firm is well positioned to defend and modestly expand its standing within the US apparel retail realm despite heightened competition. Ross captures roughly 30% of the domestic off-price apparel market, supported by a store footprint of more than 2,100 locations concentrated in dense urban and suburban markets. This scale affords purchasing leverage with vendors and enables consistent access to branded closeouts and excess inventory that many smaller competitors cannot replicate.

Ross Stores’ strategy is rooted in disciplined execution of a domestic off-price apparel and home fashion model that prioritizes value leadership, cost efficiency, and inventory management over assortment breadth or omnichannel reach. We believe the firm is well positioned to defend and modestly expand its standing within the US apparel retail realm despite heightened competition. Ross captures roughly 30% of the domestic off-price apparel market, supported by a store footprint of more than 2,100 locations concentrated in dense urban and suburban markets. This scale affords purchasing leverage with vendors and enables consistent access to branded closeouts and excess inventory that many smaller competitors cannot replicate.

Ross' fourth-quarter results included 9% comp sales growth and adjusted EPS of $2.00, up 12%. Gross margin expanded 70 basis points to 27.2%, reflecting improved merchandise margins driven by better buying and disciplined inventory management, partly offset by elevated distribution costs.

Ross remains a dominant force in off-price retail, pairing industry-leading inventory turns with a lean, store-only model that caters to lower- and middle-income shoppers. The firm continues to target a footprint of 3,600 locations long term, as it works to build out physical store density.

Ross Stores’ strategy is rooted in disciplined execution of a domestic off-price apparel and home fashion model that prioritizes value leadership, cost efficiency, and inventory management over assortment breadth or omnichannel reach. We believe the firm is well positioned to defend and modestly expand its standing within the US apparel retail realm despite heightened competition. Ross captures roughly 30% of the domestic off-price apparel market, supported by a store footprint of more than 2,100 locations concentrated in dense urban and suburban markets. This scale affords purchasing leverage with vendors and enables consistent access to branded closeouts and excess inventory that many smaller competitors cannot replicate.

As the second-largest off-price retailer in the US with about 30% market share, we think Ross Stores’ unique inventory procurement method and scale positions the firm to comfortably expand its top line at a mid-single-digit pace while fending off competition from online channels in the future. We suggest that Ross’ standing as a reliable sales outlet for product manufacturers and traditional (or full-price) retailers looking to discreetly liquidate excess inventory should provide the firm with a plethora of buying opportunities. Ross consistently stocks its more than 2,200 stores with a wide assortment of branded merchandise at bargain prices due to its plentiful vendor relationships and disciplined inventory management.

Ross' third-quarter revenue grew 10%, with 7% comparable sales growth. The operating margin decreased by 30 basis points to 11.6%, hurt by a $0.05-per-share tariff impact. The full-year outlook was updated to include 3%-4% same-store sales growth and EPS of $6.38-$6.46 (from $6.08-$6.21).

As the second-largest off-price retailer in the US with about 30% market share, we think Ross Stores’ unique inventory procurement method and scale positions the firm to comfortably expand its top line at a mid-single-digit pace while fending off competition from online channels in the future. We suggest that Ross’ standing as a reliable sales outlet for product manufacturers and traditional (or full-price) retailers looking to discreetly liquidate excess inventory should provide the firm with an abundant assortment of buying opportunities. Ross consistently stocks its more than 2,200 stores with a wide assortment of branded merchandise at bargain prices due to its plentiful vendor relationships and disciplined inventory management.

Ross posted 2% comp growth in its second quarter, backing a 5% sales rise. Operating margin and earnings per share of 11.5% and $1.56, respectively, beat the guidance midpoint. Ross reinstated guidance, including 2%-3% comp growth in the back half, resulting in full-year EPS of $6.08-$6.21.

As the second-largest off-price retailer in the US with about 30% market share, we think Ross Stores’ unique inventory procurement method and scale positions the firm to comfortably expand its top line at a mid-single-digit pace while fending off competition from online channels in the future. We suggest that Ross’ standing as a reliable sales outlet for product manufacturers and traditional (or full-price) retailers looking to discreetly liquidate excess inventory should provide the firm with an abundant assortment of buying opportunities. Ross consistently stocks its more than 2,100 stores with a wide assortment of branded merchandise at bargain prices due to its plentiful vendor relationships and meticulous inventory management.

As the second-largest off-price retailer in the US with about 30% market share, we believe Ross Stores’ unique inventory procurement method and scale positions the firm to comfortably expand its top line at a mid-single-digit pace while fending off competition from online channels in future. We suggest that Ross’ standing as a reliable sales outlet for product manufacturers and traditional (or full-price) retailers looking to discreetly liquidate excess inventory should provide the firm with an abundant assortment of buying opportunities. Ross consistently stocks its more than 2,100 stores with a wide assortment of branded merchandise at bargain prices due to its plentiful vendor relationships and meticulous inventory management.

Ross posted 2.6% revenue growth in the first quarter, driven by an increased store count. The operating margin of 12.2% was consistent with the prior year, and adjusted earnings per share of $1.47 increased by $0.01. Management withdrew its full-year guidance due to economic and tariff uncertainty.

As the second-largest off-price retailer in the US with about 30% market share, we believe Ross Stores’ unique inventory procurement method and scale positions the firm to comfortably expand its top line at a mid-single-digit pace while fending off competition from online channels in future. We suggest that Ross’ standing as a reliable sales outlet for product manufacturers and traditional (or full-price) retailers looking to discreetly liquidate excess inventory should provide the firm with an abundant assortment of buying opportunities. Ross consistently stocks its more than 2,100 stores with a wide assortment of branded merchandise at bargain prices due to its plentiful vendor relationships and meticulous inventory management.

We don’t plan to alter our $127 per share fair value estimate on wide-moat Ross materially after the firm delivered strong fourth-quarter results but issued cautious guidance for fiscal 2025. While we expect to temper our near-term sales and profit forecasts (offsetting the fair value benefit associated with the time value of money), our long-term outlook is intact.

As the second-largest off-price retailer in the US with about 30% market share, we believe Ross Stores’ unique inventory procurement method and scale positions the firm to comfortably expand its top line at a mid-single-digit pace while fending off competition from online channels in future. We suggest that Ross’ standing as a reliable sales outlet for product manufacturers and traditional (or full-price) retailers looking to discreetly liquidate excess inventory should provide the firm with an abundant assortment of buying opportunities. Ross consistently stocks its more than 2,100 stores with a wide assortment of branded merchandise at bargain prices due to its plentiful vendor relationships and meticulous inventory management.

We plan to slightly raise our $123 fair value estimate for wide-moat Ross Stores due to the time value of money after reviewing the company's third-quarter results, which featured underperforming sales growth but better-than-expected profitability. Although we maintain a positive view of the retailer’s competitive edge in the off-price segment, we see the shares as overvalued, especially given their high-single-digit price increase after the report.

Wide-moat Ross Stores appointed James Conroy (chief executive of Boot Barn since 2012) to succeed Barbara Rentler as CEO, effective February 2025. The transition in leadership does not come as a surprise, given the firm initiated a long-term succession plan for Rentler (now 67 years old) back in June 2023. However, the board’s decision to select an external candidate to fill the CEO role strikes us as peculiar, given that the off-price model tends to differ significantly from that of traditional retailers. Additionally, Rentler (CEO since 2014) and Michael Balmuth (CEO from 1996-2014) each boasted extensive experience in the merchandising division of Ross prior to their respective ascensions to the helm. Conroy’s track record at Boot Barn has proven to be stellar, but we will be interested to see how experience leading a lifestyle retail banner with $1.7 billion in annual sales translates into running the nation’s second-largest off-price retailer. However, Rentler’s commitment to serve in an advisory role through early 2027 and Balmuth’s continued presence as executive chairman give us confidence in the firm’s leadership transition plans. As such, we don’t plan on altering our $123 per share fair value estimate or our Standard Capital Allocation Rating.