Ross Stores

Ross Stores is riding the off-price wave

The retailer reported quarterly results after the market closed Thursday, improving on both top and bottom lines. 

Total sales for the three-month period ending Nov. 2 were $3.8 billion, up from $3.5 billion the same time last year, an increase of 8 percent. Profits grew to $371 million, up from $338 million. 

“We are pleased that our third-quarter results were ahead of expectations,” Barbara Rentler, chief executive officer of Ross Stores, said in a statement. “As we enter this year’s holiday season, we are up against multiple years of strong comparable store sales gains. In addition, we expect another fiercely competitive retail landscape, along with ongoing uncertainty surrounding the macroeconomic and political environment. As such, while we hope to do better, we continue to project fourth-quarter comparable store sales gains of 1 percent to 2 percent versus a 4 percent increase last year.”

Even so, retail’s off-price segment is on fire. 

As both department stores and specialty retailers continue to shutter stores in the midst of e-commerce’s expansion and the looming threat of tariffs, off-price retail has been able to buck the trend. (Competitor TJX Cos., Inc., parent to T.J. Maxx and Marshalls, also reported impressive quarterly results this week.

Ross Stores is no exception. The group, which includes dd’s Discounts stores in the company portfolio, opened 89 stores this year, for a total of 1,546 Ross Stores and 229 dd’s Discounts locations. The company has no plans to expand online. 

“We think that the moderate off-price business, which is the business we’re in, would not work in e-commerce,” Michael Hartshorn, Ross Stores group president and chief operating officer, said on the company’s conference call Thursday evening. Profit margins would be too low when things like returns are factored in, he said. 

Meanwhile, the company’s comparable same-store sales were up 5 percent. That’s on top of last year’s gain of 3 percent. 

Rentler said on the call that the company’s impressive quarter was broad across brands and categories. 

“Overall the company took a lift,” she said, even in women’s apparel, which performed “slightly above our expectations.” 

That’s good news for the retailer, which counted women’s apparel as one of its weak spots as recently as the first quarter. 

“Ladies apparel is tough,” Rentler explained. “Apparel is a big part of the business. So that makes the business tough. But when we think of ladies, we don’t just think of apparel. We take a more holistic approach. We think of beauty and accessories. Those businesses are growing exponentially and they’re lots of things for her to buy. If we do all the other things that will satisfy her, then all ships will rise.”

In fact, beauty was one of the company’s growth drivers. So was children’s apparel, shoes, men’s wear and home goods. 

For now, executives said they will continue to monitor the tariff situation. 

“What’s different going into next year is tariffs, which are very uncertain right now,” Hartshorn said. “The key for us is to plan the business cautiously.” 

Shares of Ross Stores, which closed up 1.22 percent to $111.79 a share, are up more than 39 percent year-over-year.

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