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Ross Stores hits 52-week high on strong results

NEW YORK (AP) -- Shares of the Ross Stores Inc. hit a 52-week high Friday, a day after the discount retailer posted second-quarter earnings that beat Wall Street expectations thanks to rising sales at its stores.

THE SPARK: The company reported net income of $213 million, or 98 cents per share, in the three months that ended Aug. 3. That's up from the $182 million, or 81 cents per share, it reported a year ago. Revenue rose 9 percent to $2.5 billion.

Analyst expects earnings of 93 cents per share and revenue of $2.5 billion, according to FactSet.

It forecast full-year earnings between $3.80 per share to $3.87 per share, below the $3.89 per share analysts expect, according to FactSet.

THE BIG PICTURE: Ross Stores posted strong earnings during a tough quarter for other retailers. Companies including Wal-Mart Stores Inc., Macy's Inc. and Saks Inc. have posted disappointing results, fueling worries that consumers are cutting back on spending.

Shoppers may be looking for deals. TJX Cos., the parent company of discount stores T.J. Maxx and Marshalls, also posted second-quarter results this week that beat expectations.

THE ANALYSIS: Sterne Agee analyst Ike Boruchow called Ross Stores "a safe haven among a sea of struggling apparel retailers" in a note to clients. He said that demand for discounted goods is "very healthy" and kept his "Buy" rating on the stock.

Cowen and Co. analyst John Kernan said that weakness at department stores should help increase inventory for discount retailers in the second half of the year.

Kernan has an "Outperform" rating on shares of Ross Stores.

SHARE ACTION: Up $1.07, or 1.5 percent, to $69.59 in morning trading Friday, after hitting a 52-week high of $70.86 earlier. Its shares are up about 29 percent since the beginning of the year.