Here's Why Ross Stores (ROST) Stock is Worth Watching in '18

Ross Stores ROST displays immense growth potential driven by its commitment toward better price management, effective merchandising initiatives, cost containment and store expansion strategies. These factors not only aided the company’s quarterly performance but also helped it gain 22.8% in the past three months, outperforming the industry’s growth of 11.1%.

Further, this Zacks Rank #2 (Buy) company’s optimistic guidance for the fourth-quarter and fiscal 2017, indicate that there is no looking back for the stock. The company also has an estimated long-term earnings growth rate of 10% and a Growth Score of B.

Let’s delve deeper into the factors driving the company’s performance.

Off-Price Model Striving Growth

Ross Stores’ sticks to its policy of formulating decisions regarding merchandising, purchasing, pricing and location of stores based on its customers. Also, the company has a proven business model as the competitive bargains it offers continue to make its stores attractive destinations for customers amid all economic scenarios. In fact, its off-price model offers strong value proposition and micro-merchandising that drive better product allocation and margins. This has considerably aided in delivering superb top line and comparable store sales (comps) performances in the recent quarters.

Effective Merchandise and Store Expansion Strategies

Ross Stores is constantly focused on merchandising organization through investments in workforce, processes and technology as a part of its key growth strategy. While upgrades to systems and processes have become a routine for better productivity, the company is also focused on improving its merchandise assortments in the ladies’ apparel business. Moreover, it ceaselessly organizes its merchant group, thereby enabling steady expansion of market coverage in the vendor community besides enhancing relationships with a broad network of existing and new resources. These initiatives strengthen Ross Stores’ buying operations, bolstering the purchase of in-trend merchandise at attractive prices.

Additionally, Ross Stores’ significant store expansion actions have paved the way for sturdy growth. The company’s track record of living up to its store growth plans indicates that it is well on track to attain its long-term target of expanding store count to 2,500, comprising 2,000 Ross and 500 dd’s DISCOUNTS stores.

Strong Surprise Trend & Upbeat Outlook

Ross Stores showcases a robust surprise trend with earnings beat delivered in 13 of the last 14 quarters while sales topped estimates for six straight quarters in third-quarter fiscal 2017. Moreover, the company’s average positive surprise in the trailing four quarters is pegged at 5.5%. Driven by the continuation of trends witnessed in the third quarter, the company raised its sales view for the fourth quarter.

Also, based on the impressive year-to-date performance and an optimistic view for the fourth quarter, management perked up its fiscal 2017 earnings guidance. These factors collectively underscore the company’s solid future potential.

Do Retail-Wholesale Stocks Grab Your Attention? Check These

Investors interested in the sector may also consider stocks such as American Eagle Outfitters AEO, Burlington Stores BURL and Dollar Tree DLTR, all carrying a Zacks Rank #2. You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.

American Eagle delivered an average positive earnings surprise of 2.6% in the trailing four quarters. It has a long-term earnings growth rate of 7.5%.

Burlington Stores came up with an average positive earnings surprise of 15.2% in the trailing four quarters. It has a long-term earnings growth rate of 17.5%.

Dollar Tree pulled off an average positive earnings surprise of 7.4% in the trailing four quarters. Also, it has a long-term earnings growth rate of 13.1%.

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