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Ross Stores Inc ROST

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Though Ross Stores Is Weathering the Current Landscape Well, Headwinds Loom; Shares Not Attractive

Erin Lash, CFA Sector Director

Analyst Note

| Erin Lash, CFA |

Despite posting solid marks in the second quarter relative to the prepandemic period in 2019 (15% comps and 40 basis points of operating margin expansion to 14.1%), the market soured on narrow-moat Ross Stores, sending shares down at a mid-single-digit rate after hours. We attribute this response to management’s expectations that costs stand to soar ahead (freight was an 85-basis-point drag in the quarter and higher wages ate into profits by 40 basis points) and that a potential deceleration in sales may ensue (as the effect of government stimulus wanes and as rising case counts could prompt further restrictions).

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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.

5130 Hacienda Drive
Dublin, CA, 94568-7579
T +1 925 965-4400
Sector Consumer Cyclical
Industry Apparel Retail
Most Recent Earnings Jul 31, 2021
Fiscal Year End Jan 29, 2022
Stock Type Cyclical
Employees 93,700