Tags: Ross Stores | ROST | retail | stocks

Economy Makes Ross Stores a Buy

By    |   Tuesday, 12 Jul 2011 01:59 PM

Even in a recession, window shopping isn't enough. Consumers need to buy new clothes eventually, and when it comes to quality brand names, many shop more on price and less on having the latest style first. That's where retailer Ross Stores (ROST) comes in, and shoppers seem to flocking to the designer discounter.

Revenue in the first quarter of 2011 rose 7 percent to $2.1 billion. Net earnings were up 22 percent on year to $173 million. Ross Stores reported first-quarter earnings per share of $1.48, up from $1.16 for same period in 2010.

Interestingly, that growth doesn't reflect a rebound from a weak 2010; last year was good, but this year was even better. "We are pleased to report that both sales and earnings in the first quarter were better than expected, with solid gains on top of very tough comparisons in the prior year," says Michael Balmuth, vice chairman and chief executive officer.

"These results were mainly driven by our ongoing ability to deliver a wide array of compelling name-brand bargains to today's value-focused customers, while operating our business on leaner in-store inventories."

May same-store sales rose by 4 percent, exceeding expectations for 2 percent to 3 percent growth.

The company expects growth to continue going forward. "Looking ahead, we continue to forecast same store sales increases of 2 percent to 3 percent for both June and July," Balmuth says.

In fact, Ross raised its profit forecast for the fiscal 2011, expecting to earn $5.16 to $5.31 per share.

Although any upward revision is a good one, the result fell well below the $5.36 per share forecast of Wall Street analysts.

Still a buy

Still, in the retail world, ups and downs are part of the business, as swings in the economy and seasonal factors can make or break a quarter. Overall, some analysts say, Ross is a buy.

"We believe that Ross’ continuous effort to increase its store base coupled with the ability to deliver positive comparable same-store sales will augur well for top-line growth," Zacks Investment Research reports, adding it has assigned a short-term strong buy rating and a long-term outperform recommendation on the stock.

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Even in a recession, window shopping isn't enough. Consumers need to buy new clothes eventually, and when it comes to quality brand names, many shop more on price and less on having the latest style first. That's where retailer Ross Stores (ROST) comes in, and shoppers seem...
Ross Stores,ROST,retail,stocks
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Tuesday, 12 Jul 2011 01:59 PM
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