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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 Q3 results, with EPS and revenue beats, and robust same-store sales growth of 7%. The company's value-oriented model continues to outperform peers amid cautious consumer spending. Effective management of tariff and cost pressures, a pristine balance sheet, and healthy free cash flow also contributed to the positive trend. Additionally, the company maintains ongoing shareholder returns through buybacks and dividends. Analysts have a "Moderate Buy" rating, with 14 buy ratings and 5 hold ratings (MarketBeat.com).

1.c. Company Highlights

2. Ross Stores' Q3 Earnings Shine with 7% Comp Sales Growth

Ross Stores, Inc. reported a robust third-quarter performance, with sales reaching $5.6 billion, a 10% increase year-over-year, driven by a 7% comparable store sales growth. The operating margin stood at 11.6%, fueled by strong sales and effective expense control, resulting in earnings per share (EPS) of $1.58, surpassing estimates of $1.42, and net income of $512 million, up from $489 million in the prior year period. Year-to-date EPS were $4.61, with net earnings of $1.5 billion, marginally higher than the $4.53 per share and $1.5 billion in the same period last year.

Publication Date: Nov -21

📋 Highlights
  • Q3 Sales Growth:: $5.6 billion in sales, 10% YoY increase, with 7% comp sales growth driven by branded strategy and ladies' business improvements.
  • Operating Margin Expansion:: 11.6% operating margin, up from prior year, leading to $1.58 EPS and $512 million net income.
  • Store Expansion:: Opened 36 Ross and 4 DD's stores, completing 90 locations in 2025 expansion program.
  • Share Repurchases:: $262 million spent to repurchase 1.7 million shares, on track for $1.05 billion annual buybacks.
  • Guidance Increase:: Raised 2025 EPS guidance to $6.38–$6.46, reflecting confidence in brand strategy and inventory strength.

Operational Highlights

The company opened 36 new Ross Stores and four DD's discount stores during the quarter, completing its expansion program for 2025 with the addition of 90 locations. The ladies' business was a significant contributor to the comp sales growth, with the branded strategy paying dividends. The company believes there's substantial opportunity for growth in this segment and plans to maintain its current marketing spend as a percentage of sales.

Guidance and Outlook

For the fourth quarter, Ross Stores expects comparable store sales to increase by 3% to 4% and EPS to be in the range of $1.77 to $1.85. The company has also increased its EPS guidance for fiscal 2025 to $6.38 to $6.46. The guidance reflects the company's internal plan and the momentum seen in Q3, with a strong holiday season anticipated.

Valuation and Growth Prospects

With a P/E Ratio of 24.86 and an ROE of 36.28%, the market appears to have priced in a significant level of growth. Analysts estimate next year's revenue growth at 4.9%. The company's strong brand strategy, inventory position, and ongoing store upgrades position it well for future growth. The current valuation metrics suggest that while the company has a strong track record, the stock may be fairly valued, with an EV/EBITDA of 18.43 and a Free Cash Flow Yield of 3.76%.

Segment Performance

DD's performance was consistent with Ross Stores, with no pressure from the delay of SNAP benefits. The Northeast area stores are performing well, and the company has a healthy pipeline for store growth. The self-checkout rollout to 80 stores is expected to drive lower shrink and higher customer adoption.

3. NewsRoom

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Ross Stores (ROST) Upgraded to Buy: What Does It Mean for the Stock?

Dec -01

Source: zacks.com

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Big retailers project calm and confidence this holiday season, while smaller businesses scramble

Nov -28

Source: marketwatch.com

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Boston Partners Lowers Holdings in Ross Stores, Inc. $ROST

Nov -27

Source: defenseworld.net

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Ross Stores (ROST) Is Up 8.36% in One Week: What You Should Know

Nov -26

Source: zacks.com

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Charles Schwab Investment Management Inc. Buys 30,232 Shares of Ross Stores, Inc. $ROST

Nov -26

Source: defenseworld.net

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Ross Stores Announces Board Chair Succession

Nov -24

Source: businesswire.com

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Stock Of The Day: Time To Sell Ross Stores?

Nov -24

Source: benzinga.com

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Retailers try to downplay worries about lower-income shoppers, as bargains reign supreme

Nov -23

Source: marketwatch.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

Strength

Weaknesses

Opportunities

Threats

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

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

Stock-Card
Buckle

A-Score: 6.8/10

Value: 4.5

Growth: 3.9

Quality: 7.5

Yield: 10.0

Momentum: 8.0

Volatility: 7.0

1-Year Total Return ->

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Stock-Card
Booking

A-Score: 6.3/10

Value: 3.8

Growth: 8.7

Quality: 8.0

Yield: 1.0

Momentum: 7.5

Volatility: 8.7

1-Year Total Return ->

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Stock-Card
PulteGroup

A-Score: 5.8/10

Value: 5.9

Growth: 8.8

Quality: 7.6

Yield: 2.0

Momentum: 4.0

Volatility: 6.3

1-Year Total Return ->

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Stock-Card
TJX

A-Score: 5.7/10

Value: 1.6

Growth: 6.6

Quality: 5.8

Yield: 2.0

Momentum: 8.0

Volatility: 10.0

1-Year Total Return ->

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Stock-Card
Lennar

A-Score: 5.4/10

Value: 7.5

Growth: 7.2

Quality: 7.1

Yield: 3.0

Momentum: 1.5

Volatility: 6.3

1-Year Total Return ->

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Stock-Card
Ross Stores

A-Score: 5.3/10

Value: 2.6

Growth: 5.9

Quality: 6.3

Yield: 2.0

Momentum: 6.0

Volatility: 9.0

1-Year Total Return ->

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Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

177.87$

Current Price

177.87$

Potential

-0.00%

Expected Cash-Flows