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Ross Stores Inc ROST

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Morningstar’s Analysis

Valuation
Currency in USD
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1-Star Price

PREMIUM

5-Star Price

PREMIUM

Economic Moat

PREMIUM

Capital Allocation

PREMIUM

Recovery Underway for Ross as Shoppers Return to Physical Retail, but the Shares Seem Rich

Zain Akbari, CFA Equity Analyst

Analyst Note

| Zain Akbari, CFA |

Our $100 per share valuation of narrow-moat Ross should rise by a mid-single-digit percentage, due to the combined effects of stronger-than-expected first-quarter earnings and the time value of money. While first-quarter sales were considerably higher than we had anticipated ($4.5 billion versus our $3.8 billion), we attribute the outperformance to transitory pandemic-related effects, particularly consumers’ rising comfort with physical retail as vaccination rates rise and the impact of economic stimulus. Therefore, our long-term forecast still calls for mid-single-digit sales growth rates against low- to mid-teens adjusted operating margins long-term. We believe prospective investors should seek a more attractive entry point.

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Company Profile

Business Description

Ross Stores is a leading American off-price apparel and home fashion retailer, operating over 1,850 stores (at the end of fiscal 2020) across the Ross Dress for Less and dd's Discounts banners. Ross offers a variety of name-brand products and targets undercutting conventional retailers' regular prices by 20%-70%. The company uses an opportunistic, flexible merchandising approach; together with a relatively low-frills shopping environment centered on a treasure-hunt experience, Ross maximizes inventory turnover and traffic, enabling its low-price approach. In fiscal 2020, 28% of sales came from home accents (including bed and bath), 23% from the ladies' department, 14% from each of men’s and accessories, 12% from shoes, and 9% from children's. All sales were made in the United States.

Contact
5130 Hacienda Drive
Dublin, CA, 94568-7579
T +1 925 965-4400
Sector Consumer Cyclical
Industry Apparel Retail
Most Recent Earnings Apr 30, 2021
Fiscal Year End Jan 29, 2022
Stock Type Cyclical
Employees 93,700

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