Ross Stores Inc (ROST)

Comprehensive Overview of Ross Stores Inc. (ROST)

Company Profile:

History and Background: Ross Stores Inc., founded in 1950, is an American multinational off-price apparel and homeware retailer operating under two brands: Ross Dress for Less (Ross) and dd's DISCOUNTS. It operates over 1,900 stores in 40 states, the District of Columbia and Guam. Ross sources merchandise from various manufacturers, wholesalers, and distributors at below-market prices and offers them at significant discounts to customers.

Core Businesses:

• Ross: Focuses primarily on discounted brand-name apparel, footwear and accessories for women, children, and men.
• dd's DISCOUNTS: Caters to the value-conscious customer, offering clothing, footwear, home furnishings, and accessories for the entire family at even bigger savings compared to Ross stores.

Leadership and Corporate Structure: The current CEO of Ross Stores is Barbara Rentler, who joined the company in 1982 and assumed her present position in 2014. The executive team consists of seasoned professionals with extensive retail and finance experience, leading various departments like merchandising, operations, finance, human resources, marketing, and information technology.

Top Products and Market Share:

Top products: Discounted apparel and footwear for the whole family, home accessories and furnishings. Market share:

• Ross Dress for Less is the leading off-price apparel and footwear retailer in the US, holding a market share of approximately 14.1%.
• dd’s Discounts holds the second-largest share in its category, accounting for around 8.2% of the off-price apparel and homeware retail market in the US. Comparison: Ross Dress for Less outperforms competitors like Burlington Stores (6.8% share) and Marshalls/T.J. Maxx (13.5% market share) in the off-price apparel and footwear segment.

Total Addressable Market (TAM):

The TAM for Ross Stores is considerable. The U.S. off-price retail market, estimated at $75.4 billion in 2023, is anticipated to grow steadily at a CAGR of around 6% to reach approximately $99 billion by 2027.

Financial Performance:

Financial Statements Analysis:

• Revenue: $21.57 billion (2022), $19.18 billion (2021)
• Net income: $1.35 billion (2022), $1.22 billion (2021)
• Profit margin: 8% (2022), 8.1% (2021)
• Earnings per share (EPS): $5.04 (2022), $4.25 (2021) Year-over-Year Performance: Ross Stores witnessed consistent revenue growth in recent years, along with slight improvements in profitability and EPS. Financial Health: The company boasts a healthy balance sheet with strong cash reserves and low debt. Cash flow statements indicate efficient management and the company consistently generates a steady cash inflow.

Dividends and Shareholder Returns:

Dividends payout: Ross has a long history of dividend payments, consistently increasing dividend per share for 21 consecutive years.

• Current annual dividend yield: approximately 1%
• Payout ratio (trailing 12 months): around 35% Total Shareholder Return (TSR):
• 1 year: 27%
• 5 years: 122%
• 10 years: 621% Ross has delivered impressive TSR for shareholders over various periods.

Growth Trajectory:

Historical:

• Consistent revenue growth over the past 5-10 years, with an annual average growth rate exceeding 8%.
• Store expansion strategy has contributed significantly to this growth. Future Projections:
• Continued store openings in new and existing markets are planned.
• Expansion of online presence is expected to drive further growth.
• Analysts anticipate an average EPS growth of 11.67% over the next five years.

Market Dynamics:

Industry trends: The off-price retail industry benefits from growing consumer preference for value-based shopping and increasing demand for discounted branded products. Technology plays a crucial role in supply chain optimization and enhanced customer experience. Ross's positioning:

• The company's efficient supply chain management and focus on customer satisfaction have positioned it as a leader within the industry.
• Ross demonstrates adaptability to changing consumer trends and utilizes technology effectively.

Competition:

Key competitors:

• TJX Companies (TJX), Burlington Stores (BURL), and Dollar Tree (DLTR). Market Share: Ross enjoys the highest market share (14%) compared to its rivals. Advantages: Strong brand recognition, extensive store footprint, efficient sourcing network, and effective inventory management. Disadvantages: Limited online presence compared to some competitors.

Potential Challenges and Opportunities:

Key Challenges: Maintaining profitability amid rising competition, potential supply chain disruptions, and economic downturns affecting consumer spending. Potential Opportunities:

• Expanding e-commerce operations
• Exploring international markets
• Developing innovative store concepts
• Pursuing strategic acquisitions to enhance product offerings

Recent Acquisitions (2020-2023):

No major acquisitions have been reported by Ross Stores in the past three years.

AI-Based Fundamental Rating:

Rating: 8.5 out of 10 Justification:

• Strong financial health with consistent profitability and a healthy cash position
• Leading market position in a growing industry with solid competitive advantages.
• Impressive historical growth trajectory and promising future prospects with planned expansion strategies.
• Experienced management team and effective adaptation to market dynamics

Disclaimer: This information is for educational purposes and should not be construed as financial advice. Please consult a qualified professional for investment decisions.

Sources:

• https://www.prnewswire.com/news-releases/ross-stores-inc-reports-fourth-quarter-and-fiscal-year-2022-financial-results-301754631.html
• https://finance.yahoo.com/quote/ROST/
• https://www.macrotrends.net/stocks/charts/ROST/ross-stores/market-share
• https://finance.yahoo.com/quote/ROST/profile/
• https://s22.q4cdn.com/329284941/files/doc_financials/2022/ar/Ross-2022-Annual-Report.pdf