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Can Ross Stores (ROST) Keep Its Solid Growth Story Intact?
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Ross Stores Inc. (ROST - Free Report) has been doing well, thanks to its impressive growth initiatives, including mainly its efficient merchandise strategy and focus on store expansion. These efforts have been fueling the performance of this off-price retailer of apparel and home accessories, as evident from its splendid earnings surprise history. The company’s shareholder-friendly moves are also noteworthy.
However, being part of a consumer-driven industry, the company remains prone to threats arising from consumers’ transition toward the dot.com bandwagon. So let’s take a closer look at the pros and cons of this California-based bigwig and see where it’s headed.
What’s Driving Ross Stores?
Ross Stores’ continued focus on enhancing merchandise through investments in workforce, processes and technology, remains a key strategy to keep itself on growth trajectory. The company continually fine-tunes and upgrades its systems and processes to enhance productivity, and is particularly committed to improving its assortments in the ladies’ apparel business.
We also applaud Ross Stores’ focus on its store expansion program. Evidently, the company opened 28 stores, including 21 Ross Dress for Less and seven dd’s DISCOUNTS stores, in second-quarter fiscal 2017. For fiscal 2017, the company anticipates opening 90 stores, including 70 Ross and 20 dd’s DISCOUNTS outlets. For the fiscal third quarter, the company plans to open 40 stores, including 30 Ross outlets and 10 dd's DISCOUNTS.
These actions make us confident of its growth potential and ability to attain the target of expanding store count to 2,500, comprising 2,000 Ross and 500 dd’s DISCOUNTS stores, over the longer term. Further, we commend Ross Stores’ off-price business model that makes it an attractive destination for customers in all economic scenarios. Moreover, the model offers strong value proposition and micro-merchandising that drive better product allocation and margins.
Bits of Yesterday & Signs for Tomorrow
Driven by these factors, Ross Stores’ bottom line delivered positive earnings surprise in 12 of the last 13 quarters. Moreover, the company’s average positive surprise in the trailing four quarters is pegged at 6.3%. In second-quarter fiscal 2017, both the top and bottom lines beat the Zacks Consensus Estimate and improved year over year. Results gained from solid top-line growth that was backed by broad-based growth across all merchandise categories and regions. Further, better-than-expected sales and operating profits at dd's DISCOUNTS aided results.
Concluding first-half fiscal 2017 on a strong note, the company provided guidance for the second half and accordingly raised earnings view for fiscal 2017. The company anticipates same-store revenues to increase 1-2% in both fiscal third and fourth quarters. Earnings per share are projected in the band of 64-67 cents for the fiscal third quarter, an increase from 62 cents reported last year. For the fiscal fourth quarter, the company anticipates earnings per share in the range of 88-92 cents compared with 77 cents in the prior-year quarter.
Consequently, the company raised its earnings per share view for fiscal 2017 to a range of $3.16-$3.23, compared with $3.07-$3.17 guided earlier. The updated guidance reflects year-over-year growth of 12-14%. These factors collectively underscore the company’s solid future potential.
Major Deterrents
Ross Stores operates in a highly competitive industry, which is currently facing extremely challenging trends. Amazon.com Inc.’s (AMZN - Free Report) rising dominance has taken a toll on some of the major retailers like Macy’s Inc. (M - Free Report) and J. C. Penney Company, Inc. , as consumers are making a rapid shift toward online business. Thus, Ross Stores also remains vulnerable to these headwinds. In fact, management stated that it expects witnessing the most challenging year-ago comparisons in second-half fiscal 2017. It also expects facing a volatile retail backdrop, which remains a concern.
Nevertheless, Ross Stores’ solid growth drivers and encouraging guidance for the fiscal indicates that there is still immense growth potential for the company.
More Stock News: This Is Bigger than the iPhone!
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2020.
Image: Bigstock
Can Ross Stores (ROST) Keep Its Solid Growth Story Intact?
Ross Stores Inc. (ROST - Free Report) has been doing well, thanks to its impressive growth initiatives, including mainly its efficient merchandise strategy and focus on store expansion. These efforts have been fueling the performance of this off-price retailer of apparel and home accessories, as evident from its splendid earnings surprise history. The company’s shareholder-friendly moves are also noteworthy.
However, being part of a consumer-driven industry, the company remains prone to threats arising from consumers’ transition toward the dot.com bandwagon. So let’s take a closer look at the pros and cons of this California-based bigwig and see where it’s headed.
What’s Driving Ross Stores?
Ross Stores’ continued focus on enhancing merchandise through investments in workforce, processes and technology, remains a key strategy to keep itself on growth trajectory. The company continually fine-tunes and upgrades its systems and processes to enhance productivity, and is particularly committed to improving its assortments in the ladies’ apparel business.
We also applaud Ross Stores’ focus on its store expansion program. Evidently, the company opened 28 stores, including 21 Ross Dress for Less and seven dd’s DISCOUNTS stores, in second-quarter fiscal 2017. For fiscal 2017, the company anticipates opening 90 stores, including 70 Ross and 20 dd’s DISCOUNTS outlets. For the fiscal third quarter, the company plans to open 40 stores, including 30 Ross outlets and 10 dd's DISCOUNTS.
These actions make us confident of its growth potential and ability to attain the target of expanding store count to 2,500, comprising 2,000 Ross and 500 dd’s DISCOUNTS stores, over the longer term. Further, we commend Ross Stores’ off-price business model that makes it an attractive destination for customers in all economic scenarios. Moreover, the model offers strong value proposition and micro-merchandising that drive better product allocation and margins.
Bits of Yesterday & Signs for Tomorrow
Driven by these factors, Ross Stores’ bottom line delivered positive earnings surprise in 12 of the last 13 quarters. Moreover, the company’s average positive surprise in the trailing four quarters is pegged at 6.3%. In second-quarter fiscal 2017, both the top and bottom lines beat the Zacks Consensus Estimate and improved year over year. Results gained from solid top-line growth that was backed by broad-based growth across all merchandise categories and regions. Further, better-than-expected sales and operating profits at dd's DISCOUNTS aided results.
Concluding first-half fiscal 2017 on a strong note, the company provided guidance for the second half and accordingly raised earnings view for fiscal 2017. The company anticipates same-store revenues to increase 1-2% in both fiscal third and fourth quarters. Earnings per share are projected in the band of 64-67 cents for the fiscal third quarter, an increase from 62 cents reported last year. For the fiscal fourth quarter, the company anticipates earnings per share in the range of 88-92 cents compared with 77 cents in the prior-year quarter.
Consequently, the company raised its earnings per share view for fiscal 2017 to a range of $3.16-$3.23, compared with $3.07-$3.17 guided earlier. The updated guidance reflects year-over-year growth of 12-14%. These factors collectively underscore the company’s solid future potential.
Major Deterrents
Ross Stores operates in a highly competitive industry, which is currently facing extremely challenging trends. Amazon.com Inc.’s (AMZN - Free Report) rising dominance has taken a toll on some of the major retailers like Macy’s Inc. (M - Free Report) and J. C. Penney Company, Inc. , as consumers are making a rapid shift toward online business. Thus, Ross Stores also remains vulnerable to these headwinds. In fact, management stated that it expects witnessing the most challenging year-ago comparisons in second-half fiscal 2017. It also expects facing a volatile retail backdrop, which remains a concern.
Nevertheless, Ross Stores’ solid growth drivers and encouraging guidance for the fiscal indicates that there is still immense growth potential for the company.
More Stock News: This Is Bigger than the iPhone!
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2020.
Click here for the 6 trades >>