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Here's Why Ross Stores (ROST) is a Solid Investment Option

Zacks Equity Research

Ross Stores, Inc. ROST is worth investing at the moment as its sound fundamentals and growth efforts look impressive. The company is poised to gain from a favorable comparable store sales (comps) trend and higher operating margin. Notably, strength across categories has been aiding its comps for the past few quarters. Moreover, the company’s commitment toward pricing, merchandise initiatives, cost containment and store expansion bodes well.

Further, a Zacks Rank #2 (Buy) and Growth Score of B increases its odds of success.

Notably, shares of the Dublin, CA-based company have gained 6.8% in the past three months compared with the industry’s growth of 3.2%.



Factors Aiding the Stock

Ross Stores has been witnessing solid comps performance over the past few quarters due to sturdy growth across categories and geographic regions. Notably, comps improved 5% in third-quarter fiscal 2019, driven by higher traffic and increased average basket size. The higher basket size can be attributable to increased units per transaction, offset by slightly lower average unit retail. 

Comps also outpaced the company’s guidance of 1-2% growth, benefiting from strength in the children's category, and in the Midwest region. It anticipates 1-2% comps growth for fourth-quarter fiscal 2019.

Moreover, the company’s store expansion plans bode well. It remains focused on increasing penetration in the existing as well as new markets. In the fiscal third quarter, the company successfully reached the target of opening 42 stores, which included 30 Ross and 12 dd’s DISCOUNTS stores. Notably, this also marked the completion of its store opening target for fiscal 2019, with the addition of 98 outlets. Furthermore, the company expects to expand the Ross chain of stores to 2,400 locations alongside operating about 600 dd’s DISCOUNTS stores in the long run.

Upbeat FY19 View Bodes Well

Further, management’s guidance for the fourth quarter and fiscal 2019 remain robust. The company expects earnings per share of $4.52-$4.57 for fiscal 2019, up from $4.41-$4.50 mentioned earlier. Notably, it earned $4.26 per share in fiscal 2018.

For the fiscal fourth quarter, the company expects earnings per share of $1.20-$1.25, whereas it reported $1.20 in the year-ago period. Total sales are expected to increase 5-6% in the fiscal fourth quarter.

Wrapping Up

We believe that the company’s solid fundaments and robust view confirm a robust growth trajectory moving ahead. This is likely to keep the stock in investors’ good books.

3 Other Stocks to Consider

Nordstorm JWN has a long-term earnings growth rate of 6%. It presently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Costco Wholesale Corporation COST currently has a long-term earnings growth rate of 8.1% and a Zacks Rank #2.

Zumiez ZUMZ has a long-term earnings growth rate of 12%. It flaunts a Zacks Rank #1 at present.

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