Are you worried that you missed Ross Stores Inc.’s ROST bull run in the past three months with the stock gaining more than 14%? If you haven’t yet taken advantage of the share price appreciation, then the time is right to add the stock to your portfolio. After all, Ross Stores looks promising and is poised to carry the momentum into 2016. The company’s recent performance speaks of its popularity among investors. Let’s delve a little deeper into the reasons.
3 Factors Driving Up the Stock
Strong Earnings Trend & Raised FY15 Outlook Indicate Future Potential: Ross Stores continued its earnings beat trend with better-than-expected results for the third quarter of fiscal 2015. With this, the company has surpassed earnings expectations for six straight quarters. The average positive surprise over the trailing four quarters comes to 5.6%. The company’s results were supported by a positive response from value-focused customers for its extensive collection of brand bargains. This was aided by efficient cost controls. Though the company retained its outlook for the fourth quarter, it raised its earnings projection for fiscal 2015 taking into account the year-to-date performance and the fourth-quarter guidance. Following the impressive third-quarter fiscal 2015 performance, the Zacks Consensus Estimate for fiscal 2015 and fiscal 2016 earnings has moved up by 2% and 1.1% over the past 60 days to $2.50 and $2.75 per share, respectively.
Off-Price Model to Drive Growth: Ross operates a chain of off-price retail apparel and home accessories stores, which target value-conscious men and women, aged 25 to 54 in middle-to-upper middle class households. The decisions of the company, from merchandising, purchasing and pricing, to the location of its stores, are made keeping in mind this customer base. The company has a compelling business model as the competitive bargains it offers continue to make its stores attractive destinations for customers in all economic scenarios. Moreover, the off-price model offers strong value proposition and micro-merchandising that drive better product allocation and margins. We believe this will help sustain the company’s top- and- bottom-line growth trends.
Immense Store Growth Potential: This Zacks Rank #2 (Buy) retailer, which shares the space with Kohl's Corp. KSS, Wal-Mart Stores Inc. WMT and The TJX Companies, Inc. TJX, remains on track with respect to its store expansion program. During the third quarter, Ross Stores completed its planned store openings for fiscal 2015. The company opened 19 Ross and 7 dd’s DISCOUNT stores in the quarter, bringing the total store openings for the fiscal, net of closures, to 84. The company expects to end fiscal 2015 with a total of 1,274 namesake and 172 dd’s Discount stores. These actions make us confident of the company’s growth potential and its ability to successfully attain the target of expanding its store base to 2,500, comprising 2,000 Ross and 500 dd’s DISCOUNTS stores, over the longer term.
All these factors make Ross Stores appear promising, making it a solid choice for investors.
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