Ross Stores stock trades steadily as off-price retailer grows sales and raises outlook

Ross Stores, Inc. (ISIN US7782961038) stock remains underpinned by improving fundamentals after the off-price retailer reported higher sales and profitability alongside a raised outlook for the current fiscal year, according to recent company filings and market data as of 23 May 2024. The Nasdaq-listed discount apparel and home retailer has benefited from value-oriented consumer demand, and its latest earnings release showed that both revenue and earnings moved higher compared with the prior year period.

Revenue rises to $4.86 billion

According to the Ross Stores investor relations materials for the quarter ended 4 May 2024, the company generated net sales of approximately $4.86 billion, up from about $4.57 billion in the comparable quarter a year earlier. This represents year-over-year sales growth of around 6% as customers continue to favor off-price offerings in apparel and home categories. The company also reported that comparable store sales increased in the low single digits versus the prior year quarter, reflecting both higher traffic and average ticket in its Ross Dress for Less and dd's DISCOUNTS chains.

The same quarterly update indicated that Ross Stores achieved earnings per share in the range of $1.46 for the first quarter of fiscal 2024, compared with roughly $1.09 in the prior year’s first quarter, implying EPS growth of more than 34% year over year. Management attributed the improvement in profitability to a combination of better merchandise margins, disciplined expense control and leverage on higher sales volumes. For investors, the combination of mid-single-digit revenue growth and double-digit earnings expansion reinforces the picture of an off-price model that is currently converting demand into stronger bottom-line results.

Operating margin and guidance improved

Ross Stores reported operating margin in the region of 15% for the quarter ended 4 May 2024, up from about 12% in the same period of the previous fiscal year, based on figures discussed in its quarterly results communication. The margin expansion reflects lower buying and occupancy costs as a percentage of sales together with a favorable merchandise margin, despite ongoing cost pressures in distribution and labor. In the same context, the company emphasized that it continues to pursue opportunities to improve inventory productivity and optimize its store base.

In its outlook statement accompanying the first quarter figures, Ross Stores raised its full-year fiscal 2024 earnings guidance, indicating an expected EPS range that sits noticeably above the prior forecast given earlier in the year. While the exact guidance band was framed broadly, the updated range implies year-over-year EPS growth in the low to mid teens for fiscal 2024, assuming continued stable consumer demand in the off-price segment and disciplined expense management. This adjustment to guidance followed the stronger than anticipated first quarter performance and suggests Ross Stores management sees scope for continued margin resilience.

Alongside earnings guidance, Ross Stores also commented on expectations for comparable store sales in fiscal 2024, indicating a low single-digit positive comp assumption versus the prior year, after delivering similar comp performance in the first quarter. The company highlighted that its off-price value proposition, focused on branded apparel and home merchandise at discounts to traditional retailers and department stores, remains a key driver of customer traffic. For Ross Stores stock, sustained positive comp trends are important because they can support further operating margin leverage and underpin investor confidence in the retailer’s growth trajectory.

Balance sheet and cash returns to shareholders

The Ross Stores quarterly update for the period ended 4 May 2024 indicated that the company closed the quarter with a cash and cash equivalents position measured in the low single-digit billions of dollars, together with modest long-term debt compared with its equity base. This balance sheet configuration gives the retailer flexibility to fund inventory, store growth, and shareholder returns while navigating a volatile consumer backdrop. The company also noted continued investment in distribution infrastructure and technology to support its off-price buying and allocation model.

Ross Stores has been returning capital to shareholders through both dividends and share repurchases. For fiscal 2024, the company communicated a quarterly cash dividend of roughly $0.3675 per share, which annualizes to nearly $1.47 per share and reflects an increase compared with the prior fiscal year’s dividend level. Over the latest trailing twelve months as of 4 May 2024, Ross Stores also executed share repurchases measured in the hundreds of millions of dollars, reducing the share count and supporting earnings per share growth. These capital allocation decisions are consistent with management’s stated objective of balancing growth investments with shareholder returns.

Market data around late May 2024 showed Ross Stores stock trading at a price level in the low one hundred dollar range on the Nasdaq, corresponding to a market capitalization of roughly $30 billion in US dollars. At that valuation, the shares were priced at a forward price-to-earnings multiple in the mid-to-high teens based on the updated fiscal 2024 EPS guidance, in line with or slightly above some other US off-price retail peers. For investors analyzing Ross Stores stock, the combination of steady sales growth, margin expansion, and active capital returns has been an important part of the valuation narrative.

Off-price format supports apparel and home sales

Ross Stores operates Ross Dress for Less and dd's DISCOUNTS, focusing on offering branded apparel, footwear, accessories, and home goods at discounts to regular prices in department and specialty stores. The company sources merchandise opportunistically from manufacturers and other retailers, allowing it to present a constantly changing assortment to value-conscious customers. In the first quarter of fiscal 2024, management indicated that apparel categories, including women’s and men’s clothing, delivered particularly strong performance, contributing meaningfully to the 6% net sales increase to approximately $4.86 billion versus the prior year period.

Home-related categories, including décor, bed and bath, and small furniture, also showed positive trends in the quarter ended 4 May 2024, according to commentary in the earnings materials. These categories benefited from consumer interest in refreshing living spaces at affordable price points, reinforcing the role of Ross Stores as a destination for value in both fashion and home. The company continues to expand and refine its category mix within its off-price model, seeking to balance fashion-driven assortment with everyday staples that encourage repeat visits.

Ross Stores stock and recent trading levels

As of 23 May 2024, Ross Stores stock on the Nasdaq was quoted in the low one hundred dollar range in US dollars, with the shares trading within a 52-week band that extended from the mid eighty dollar area at the low to around the mid one hundred ten dollar area at the high. This places the current price closer to the upper portion of the 52-week range, reflecting the market’s positive reaction to the company’s recent earnings beat and raised guidance. Over the prior twelve months, Ross Stores stock delivered a positive total return, supported by both price appreciation and the cash dividend of approximately $1.47 per share on an annualized basis.

For investors assessing Ross Stores stock, the recent pattern of steady share price performance aligned with improving fundamentals suggests the market has incorporated the stronger operating performance into the valuation. The company’s off-price positioning appears well suited to an environment in which many consumers remain cost-conscious yet continue to spend on apparel and home goods. If Ross Stores can sustain mid-single-digit revenue growth and maintain operating margins around the mid-teens percentage level, the current market capitalization near $30 billion as of late May 2024 implies ongoing confidence in its ability to generate attractive returns on capital.

Apparel drives Ross Dress for Less performance

Ross Dress for Less, the core banner of Ross Stores, focuses on women’s, men’s, and children’s apparel complemented by footwear and accessories, all offered at discounts to traditional retail prices. Management commentary for the quarter ended 4 May 2024 highlighted that women’s apparel and juniors categories performed particularly well, contributing disproportionately to the net sales increase of about 6% to roughly $4.86 billion compared with the first quarter of the previous fiscal year. The off-price format’s treasure-hunt experience encourages frequent store visits, supporting traffic growth and enabling the company to test and adjust its assortment rapidly.

The company continues to open new Ross Dress for Less locations in select markets while relocating and remodeling existing stores to improve layouts and customer experience. In the first quarter of fiscal 2024, Ross Stores added a number of net new stores across both banners, pushing its total store count into the vicinity of 2,000 locations in the United States and related territories. These store openings are part of a longer-term expansion plan that envisions the potential for several hundred additional stores over time, subject to market conditions. Increased store density boosts brand visibility and offers more convenience to shoppers, which can further reinforce comparable store sales trends.

Stock metrics and investor perspective

From an investor perspective, analysis of Ross Stores stock typically focuses on a combination of comparable store sales growth, margin trajectory, capital allocation, and valuation metrics such as price-to-earnings and enterprise value to EBITDA. As of late May 2024, with the shares trading in the low one hundred dollar range and a market capitalization near $30 billion in US dollars, Ross Stores was valued at a forward P/E multiple in the mid-to-high teens based on its updated fiscal 2024 EPS guidance, which implies low-to-mid teen percentage EPS growth over the prior year. This valuation level balances the company’s growth prospects with the cyclicality inherent in discretionary retail.

The company’s ongoing share repurchases and increased annualized dividend of around $1.47 per share as of fiscal 2024, combined with its relatively conservative balance sheet, play a role in supporting Ross Stores stock. Investors tracking the retailer often compare it with other US off-price and discount peers when assessing relative valuation and growth potential. While the broader retail environment remains sensitive to shifts in consumer confidence and labor markets, Ross Stores’ positioning at the value end of the apparel and home spectrum may provide some resilience, as shown by the 6% net sales growth in the quarter ended 4 May 2024 versus the prior year.

Fact box: Ross Stores key data