Ross Stores (ROST) Stock Moving Up the Charts: Time to Buy?

Ross Stores Inc. ROST is in investors’ good books, gaining traction from its commitment toward better price management, merchandise, cost containment and store expansion plan. These endeavors have been aiding the company’s quarterly performance. The company’s robust surprise trend along with its initiatives led the shares of Ross Stores to surge 28% in the last three months compared with the industry’s growth of 20.6%.

Let’s analyze the factors driving this Zacks Rank #2 (Buy) stock.

Off-Price Model Boosts Growth

Ross Stores makes decisions regarding merchandising, purchasing and pricing as well as location of the stores, mostly to suit its customer base. Further, the company’s proven off-price business model along with competitive bargains continues to make its stores an attractive destination for customers in all economic scenarios. Also, its 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-line growth trends.

Effective Merchandising Strategies & Store Growth

Ross Stores’ is on the growth trajectory owing to its continued focus on merchandising organization through investments in workforce, processes and technology. Additionally, the company has been committed toward improving its merchandise assortments in the ladies’ apparel business in order to boost the top line. Ross Stores constantly organizes its merchant group as well. This enables it to steadily expand market coverage in the vendor community while enhancing relationships with a broad network of existing and new resources. These initiatives strengthen the company’s buying operation by facilitating the purchase of in-trend merchandise at attractive prices.

Furthermore, Ross Stores’ store expansion program reflects a lot about its strength. Evidently, the company opened 40 new stores surpassing its fiscal 2017 target of opening 90 stores, comprising 70 Ross and 20 dd’s DISCOUNTS outlets. These actions make us confident about its growth potential and ability to successfully attain the target of expanding store count to 2,500, comprising 2,000 Ross and 500 dd’s DISCOUNTS stores, over the longer term.

Strong Surprise Trend & Upbeat Outlook

Ross Stores has a splendid earnings history with a positive surprise in 13 of the last 14 quarters. In addition, the company’s average positive surprise in the trailing four quarters is 5.5%. For fourth-quarter and fiscal 2017, its robust earnings and sales guidance raise investors’ optimism on the stock. These factors collectively underscore the company’s solid future potential.

Do Retail-Discount Stocks Grab Your Attention? Check These

Investors interested in the industry may also consider stocks such as Dollar Tree Inc. DLTR, Target Corporation TGT and Burlington Stores Inc. BURL. While Dollar Tree and Target Corporation sport a Zacks Rank #1 (Strong Buy), Burlington Stores carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Dollar Tree delivered an average positive earnings surprise of 7.4% in the trailing four quarters. It has a long-term earnings growth rate of 13.3%.

Target Corporation came up with an average positive earnings surprise of 10.2% in the trailing four quarters. It has a long-term earnings growth rate of 4%.

Burlington Stores pulled off an average positive earnings surprise of 15.2% in the trailing four quarters. Also, it has a long-term earnings growth rate of 18.6%.

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