Ross' September Comps Rise - Analyst Blog

Ross Stores Inc. (ROST), the second largest off-price retailer of apparels and home accessories sustained its growth momentum delivering the 8th consecutive quarter of positive comparable-store sales. The company registered a comp sales growth of 2.0% for the five-week period ended October 2, 2010.

Regionally, Florida acted as the catalyst for the increase in comparable-store sales. Categories such as dress and home accessories were the top performers. For the month under review, sales climbed 6.0% to $666.0 million from $629.0 million in the year-ago quarter.

Ross also increased its outlook for the third quarter of fiscal 2010. The company now guides third quarter sales growth in the range of 1% to 2%. It now foresees that top-line growth, coupled with the increase in gross margin, should boost third quarter fiscal 2010 earnings per share to a range of 94–96 cents a share compared to the previous guidance range of 79-83 cents. The company expects to earn $1.15 to $1.20 per share in the fourth quarter fiscal 2010 based on comparable-store sales expectation of flat to down 1%.

Ross also surpassed the comparable-store sales of its nearest competitor The TJX Companies Inc. (TJX), which reported a growth of 1.0% in the month. Ross operates 1,045 stores comprising 978 Ross Dress for Less (Ross) stores and 67 dd’s DISCOUNTS stores.

We believe that Ross’ continuous efforts to increase its store base, coupled with its ability to deliver positive comparable same store sales, will boost its top-line growth.

Ross’s shares maintain a Zacks #3 Rank, which translates into a short-term ‘Hold’ recommendation. Our long-term recommendation for the stock remains ‘Neutral’.