Ross Stores, Inc. (ROST) | Investment Case

1. Company Snapshot

1.a. Company Description

Ross Stores, Inc., together with its subsidiaries, operates off-price retail apparel and home fashion stores under the Ross Dress for Less and dd's DISCOUNTS brand names.Its stores primarily offer apparel, accessories, footwear, and home fashions.The company's Ross Dress for Less stores sell its products at department and specialty stores primarily to middle income households; and dd's DISCOUNTS stores sell its products at department and discount stores for households with moderate income.

As of July 5, 2022, it operated approximately 1,950 stores under the Ross Dress for Less and dd's DISCOUNTS name in 40 states, the District of Columbia, and Guam.Ross Stores, Inc.was incorporated in 1957 and is headquartered in Dublin, California.

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1.b. Last Insights on ROST

Ross Stores' recent performance was driven by strong Q4 results, with EPS of $2.00 and revenue of $6.64B exceeding expectations. Same-store sales surged 9% year-over-year, fueled by strong holiday assortments, fresh marketing, and in-store execution. A 10% dividend hike and a new $2.55B buyback program also contributed to the positive momentum. The company's optimistic FY26 view, with expected higher comps and margins, further supports its growth prospects. Analysts rate the stock as "Moderate Buy" (MarketBeat Ratings).

1.c. Company Highlights

Last Price	234.81
Change Percentage	8.11%
Open	228.96
Previous Close	217.19
Market Cap ( Millions)	75948
Volume	4589063
Year High	235.8
Year Low	124.49
M A 50	219.56
M A 200	183.49

FCF Yield	3.47%
Dividend Yield	0.71%
ROE	38.42%
Debt / Equity	74.92%
Net Debt / EBIDTA	16.07%
Price To Book	11.88
Price Earnings Ratio	32.34
Price To FCF	28.85
Price To sales	3.19
EV / EBITDA	20.77

2. Ross Stores Rides Strong Q1 Surge to 21% Sales Growth

Ross Stores posted a robust first‑quarter performance, with total sales climbing 21% to $6.0 billion and earnings per share surging 37% to $2.02—well above the $1.73 estimate. Comparable store sales grew 17%, supported by a higher transaction volume and a broader customer base spanning all income levels, ethnicities, and age groups. Operating margin expanded 120 basis points to 13.4%, while merchandise margin improved 85 basis points and occupancy leveraged another 60 basis points. The company’s P/E of 32.34 reflects the market’s premium on its disciplined growth strategy.

Publication Date: 07:30

                                    📋 Highlights
                                    Strong Q1 Performance::
                                                Total sales rose 21% to $6.0B; EPS grew 37% to $2.02.
Margin Expansion::
                                                Operating margin widened 120 bps to 13.4% (merchandise +85 bps; occupancy +60 bps).
Store Growth Strategy::
                                                Opened 13 Ross and 4 dd's DISCOUNTS stores; plans 110 new units (5% unit growth) in 2024.
Customer Acquisition Momentum::
                                                Double-digit comp growth (17%) driven by broad demographic and regional expansion, including younger demographics.
Guidance Raised::
                                                2026 EPS guidance of $7.50–$7.74; cosmetics category surged due to Korean beauty and brand availability.

                                

Q1 Highlights

The quarter’s 17% comp growth was driven by a strong top‑line performance and a 70‑75% store‑productivity rate that exceeded guidance. New store openings—13 Ross and 4 dd’s DISCOUNTS locations—contributed to the sales lift, and the firm’s focus on cosmetics, especially Korean beauty products, added a premium category that boosted margins.

Margin Expansion

Operating margin growth stemmed from improved merchandise margins and a tighter SG&A structure, even as the company invested in marketing and store experience. The firm’s ROIC of 19.06% underscores efficient capital deployment, while the 120‑basis‑point margin expansion signals strong cost discipline.

Store Expansion & Growth

Ross plans 110 new stores this year, targeting 5% unit growth, with 20% of that in newer Northeast markets. New‑store productivity has already surpassed 70% guidance, and the company’s store refresh initiatives are expected to enhance the shopping experience and attract younger shoppers, particularly 18‑to‑24 year‑olds.

Guidance & Outlook

For Q2, the company forecasts 6%‑7% comparable sales growth and EPS of $1.85‑$1.93, while it has raised fiscal 2026 sales and earnings guidance to 6%‑7% comp sales and $7.50‑$7.74 EPS. Fuel surcharges are a potential headwind, but the firm believes its comp growth and merchandising strategy will offset the impact. The company remains on track to buy back $1.275 billion in stock during 2024.

Shareholder Return & Valuation

With a dividend yield of 0.71% and a free‑cash‑flow yield of 3.47%, Ross offers modest income alongside growth. The 1.5 million share repurchase in Q1 cost $319 million, underscoring management’s confidence in the stock’s valuation. Analysts project 11.6% revenue growth next year, positioning Ross as a disciplined, growth‑oriented retailer in a competitive discount landscape.

3. NewsRoom

3 Top-Rated Stocks to Buy After Crushing EPS Expectations: LION, KEYS, ROST

May -22

Source: zacks.com

Is Ross Stores Inc (ROST) Overvalued After 8.1% Rally? GF Value Says Overvalued

May -22

Source: gurufocus.com

These Analysts Boost Their Forecasts On Ross Stores After Better-Than-Expected Q1 Results

May -22

Source: benzinga.com

Ross Stores Stock Hits 52-Week High - Here's Why

May -22

Source: benzinga.com

Ross Stores (ROST) Hits New Highs with Strong Q1 Performance and Upbeat Guidance

May -22

Source: gurufocus.com

Rost Stores Q1 Earnings & Sales Beat Estimates, Comp Up 17% Y/Y

May -22

Source: zacks.com

Friday's Morning Movers: ROST, DECK & TTWO Report Earnings

May -22

Source: youtube.com

Ross Stores: Q1 Was A Great Quarter, But There Are Tougher Comps Ahead

May -22

Source: seekingalpha.com

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (4.50%)

6. Segments

Off-Price Retailing

Expected Growth: 4.5%

Ross Stores' off-price model benefits from consumers seeking value in a uncertain economic environment, driving growth. Furthermore, the retailer's ability to offer a wide range of branded apparel and home goods at discounted rates attracts price-conscious customers, leading to market share gains.

7. Detailed Products

Apparel

Ross Stores, Inc. offers a wide range of apparel products for men, women, and kids, including casual and dressy clothing, outerwear, and activewear.

Home Accents

Ross Stores, Inc. sells a variety of home accents, including decorative items, kitchenware, and textiles.

Furniture

Ross Stores, Inc. offers a selection of furniture pieces, such as sofas, loveseats, chairs, and tables.

Bed and Bath

Ross Stores, Inc. sells a range of bed and bath products, including bedding, towels, and kitchen linens.

Luggage and Accessories

Ross Stores, Inc. offers a variety of luggage, handbags, and accessories, such as wallets, hats, and scarves.

Beauty and Fragrances

Ross Stores, Inc. sells a range of beauty and fragrance products, including skincare, haircare, and perfumes.

Shoes

Ross Stores, Inc. offers a wide selection of shoes for men, women, and kids, including athletic shoes, boots, and sandals.

8. Ross Stores, Inc.'s Porter Forces

Forces Ranking

Threat Of Substitutes

Ross Stores, Inc. faces moderate threat from substitutes as customers have limited alternatives for off-price department store shopping experience. However, online shopping platforms and discount stores can be considered as substitutes.

Bargaining Power Of Customers

Ross Stores, Inc. has a large customer base, but individual customers have limited bargaining power due to the company's off-price business model, which offers a wide range of products at discounted prices.

Bargaining Power Of Suppliers

Ross Stores, Inc. has a diverse supplier base, which reduces dependence on individual suppliers. However, suppliers of popular brands may have some bargaining power due to their brand reputation.

Threat Of New Entrants

The threat of new entrants is low for Ross Stores, Inc. due to the high barriers to entry, including the need for significant capital investment, establishing relationships with suppliers, and building a large store network.

Intensity Of Rivalry

The off-price department store industry is highly competitive, with Ross Stores, Inc. competing with TJX Companies, Burlington Stores, and other regional players. The company needs to maintain its competitive edge through effective pricing, inventory management, and customer service.

9. SWOT Analysis

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

	Value
Debt Weight	39.23%
Debt Cost	3.95%
Equity Weight	60.77%
Equity Cost	9.26%
WACC	7.17%
Leverage	64.55%

11. Quality Control: Ross Stores, Inc. passed 5 out of 9 key points

Strong Liquidity

Low Deb

Strong Interest Coverage

Healthy Cash Flow

Operating Efficiency

Strong Return On Equity

Consistent Revenue Growth

Consistent Operating Cash Flow Growth

Margin Improvement

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

Buckle

A-Score: 6.8/10

Value: 5.0

Growth: 4.0

Quality: 7.6

Yield: 10.0

Momentum: 7.0

Volatility: 7.3

1-Year Total Return ->

PulteGroup

A-Score: 5.8/10

Value: 6.0

Growth: 8.8

Quality: 7.7

Yield: 2.0

Momentum: 4.0

Volatility: 6.3

1-Year Total Return ->

Booking

A-Score: 5.8/10

Value: 3.6

Growth: 8.7

Quality: 8.0

Yield: 1.0

Momentum: 5.0

Volatility: 8.3

1-Year Total Return ->

TJX

A-Score: 5.6/10

Value: 1.6

Growth: 6.4

Quality: 5.8

Yield: 2.0

Momentum: 8.0

Volatility: 10.0

1-Year Total Return ->

Ross Stores

A-Score: 5.5/10

Value: 2.2

Growth: 5.9

Quality: 6.5

Yield: 2.0

Momentum: 7.0

Volatility: 9.3

1-Year Total Return ->

Lennar

A-Score: 4.8/10

Value: 6.8

Growth: 4.3

Quality: 5.9

Yield: 3.0

Momentum: 2.5

Volatility: 6.3

1-Year Total Return ->

Peers Metrics

12.e Scoring ^Insights

12.f DCF ^BETA

Parameters

Short Term Growth

7.91%

Short term Time

10.0

Long-Term Growth

2.00%

WACC

7.17%

Ross Stores, Inc. - US7782961038

1. Company Snapshot

1.a. Company Description

1.b. Last Insights on ROST

1.c. Company Highlights

Expensive

Less Volatile

Strong Momentum

Earnings Beats

Better Quality

Revenues Miss

Average Quality

Revenues Beats

2. Ross Stores Rides Strong Q1 Surge to 21% Sales Growth

Q1 Highlights

Margin Expansion

Store Expansion & Growth

Guidance & Outlook

Shareholder Return & Valuation

3. NewsRoom

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (4.50%)

6. Segments

Off-Price Retailing

Expected Growth: 4.5%

7. Detailed Products

Apparel

Home Accents

Furniture

Bed and Bath

Luggage and Accessories

Beauty and Fragrances

Shoes

8. Ross Stores, Inc.'s Porter Forces

Forces Ranking

Threat Of Substitutes

Bargaining Power Of Customers

Bargaining Power Of Suppliers

Threat Of New Entrants

Intensity Of Rivalry

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

11. Quality Control: Ross Stores, Inc. passed 5 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

234.81$

Current Price

234.81$

Potential

-0.00%

Expected Cash-Flows

12.e Scoring ^Insights

12.f DCF ^BETA