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Happy New Year! Yes…there is good news to share. Momentum has returned to the market and it is time once again to jump in feet first.
I can’t think of any famous people named Ross, so I’ll jump right into the analysis. Today I bought Ross Stores (ROST) at 51.40. I will sell it in 4 – 6 weeks at 59.62. Here’s why I like ROST.
The main reason why I like this stock is that its price is going up and up and up. Take a look at the chart:
Ross Stores, Inc., together with its subsidiaries, operates off-price retail apparel and home accessories stores under the Ross Dress for Less and dd’s DISCOUNTS brand names in the United States. Its Ross Dress for Less brand stores sell brand and designer apparel, accessories, footwear, and home fashions for the entire family at everyday savings of 20 to 60 percent off department and specialty store regular prices; and dd’s DISCOUNTS brand stores sell apparel, accessories, footwear, and home fashions for the entire family at everyday savings of 20 to 70 percent off moderate department and discount store regular prices. As of January 29, 2011, the company operated 1,055 stores, of which 988 were Ross Dress for Less brand stores in 27 states and Guam, and 67 were dd’s DISCOUNTS brand stores in 6 states. Its Ross Dress for Less brand stores primarily target middle income households and dd’s DISCOUNTS brand stores target moderate income households. Ross Stores, Inc. was founded in 1957 and is headquartered in Pleasanton, California.
Why is its stock price going up? Because its stores are doing ridiculous business, that’s why. Why are the stores doing ridiculous business? Let’s ask the customers:
“I love Ross, but every time I go, I spend at least 3 hours there and come out with at least $100 in total purchase. I'm gonna have to go there today to get my son some pants for his b-day. I need someone to control me and tell me to not look for any clothes for myself. Please tell me I have enough clothes.”
“Yep, I love Ross as well! I can never find jeans anywhere else, and for $13-$19, the prices are awesome. And their clearances aren't bad either ($ 3dollar tops/etc.). Also, they have some pretty cute purses there. About a month ago, I fell in love with this white Guess purse they had. Not having any money then, I've been dreaming of it ever since. I'm planning to go today or tomorrow to see if they have it still, as I've honestly been dreaming of it! Its was $35, and I'm hoping that at least one more is still there! “
So just because people don’t have money these days, it doesn’t mean they don’t want to spend money. It’s a human condition. Let’s see some more testimony:
“Seriously low prices. Last I went there I scored a wifebeater navy tank by David & Goliath... There is a Rock and Ruler on it... The Rock is telling the Ruler "You Rule," while the Ruler is telling the Rock, "You Rock." How clever. How cheap for $2.99. Cute!”
“I also get my workout clothes here... I just picked up a pair of yoga (or biker shorts, whatever you want to call them) by Nike for $6.99, and a white pair of soccer shorts by Nike for $7.99.”
“I get ALL of my sunglasses here... They have name brand Armani's, Ralph Lauren, etc. although I just stick with the Rampage or recently Roxy pairs. My pair of Roxy's were $5.99 and that is pretty much the standard price for most of their glasses.”
“I just scored a pair of Steve Madden's cheetah and cork platforms there. They were so freaking cute I had to get them even though they are a size too big. They were $15.99. Prior to that, I got a pair of black cork platforms for $7.99... $7.99 I tell you!”
Let’s ask the employees of ROST what they think of their stores:
I am currently an employee at a Ross and I work in customer service. Which means I do all the returns. purchases, and cleaning up of the entire store. Prior to being hired at a Ross I had only been in one a handful of times. To afford college without taking loans out I applied and got the postion.
I think Ross has some great finds if one takes the time to look through the variety we have. On a lot of message boards and reviews I see about Ross, many people complain about the up keep of the store and the customer service they have received. I thought I should inform people of why it looks the way it does. Well every night usually three people are working by close and we literally have thirty minutes to clean up and entire store filled with a million different items. Now most of you have been into a Ross and know that clothes are all over the floors thrown on whatever shelf and things are left broken in the aisles. It's not that we don't care about how clean our store is. It's that a some customers don't care enough about our store or even to tell us that something broke. Countless number of times I have seen people walk out of the fitting room and not hand the employee the clothes they didn't want and instead put them on whatever rack they stop at. I have also seen many people pick clothes up with the item still on the hanger and simply throw it on the floor and look at me and walk away.
As far as customer service goes I know that in the store I work in is full of amazing people and I have bonded with many of our regular customers. My fellow employees and I are probably some of the nicest people and even tho we try to be sweet, people still make us out to be the "bad guys." Most of the time we're the bearer of bad news. Our system decides how your money is refunded and often we take the lashing for it. So if we seem to have an atitude it's probably because we got cussed out or reciepts thrown at us. For a minimum wage job we work very hard and we really do try to make your shopping experience great just please meet us half way. I hope that this has shown a better light on the store.Employees love Ross Stores and, more importantly, customers love Ross Stores. What does that translate into?
Earnings Earnings Earnings
Ross Stores (ROST) recently reported a significant 9% jump in its December same-store sales, more than double the 4% gain Retail Metrics analysts expected. The strong sales figures have in turn led Ross to increase its 2011 4Q EPS guidance to $0.82-$0.83, above the $0.80 expected by ANAL-ysts This is not surprising, given the company's history of strong fundamental performance. What is also very attractive about this company is that it is a solid dividend play, having paid increasing dividends since 1994. Ross currently pays a quarterly dividend of $0.11 a share and its consistently growing dividends are an added bonus to an already attractive stock. Ross has seen a 61% gain in its stock price over the last year, and it is poised to continue this streak. Ross is a strong retail play that has profited from its discount pricing strategy; it has been able to endure macroeconomic headwinds with surprising durability, and it continues to experience significant growth. Same-store sales have been terrific, growing 5% last year on top of 6% the year before.
The focus is on providing top-quality, in-season merchandise. Yet the stores are able to offer discounts of up to 60%. This is possible because of a strong merchandising organization that buys a majority of the items directly from manufacturers. The company also focuses on fewer categories and emphasizes closeout products.
Cost Discipline: This is a high priority at Ross Stores. The company continues to invest heavily in new technologies and logistics systems. Another key has been improved inventory management to reduce overstocking, which can be costly. During the latest quarter, Ross Stores saw a 45-basis-point increase in operating margins to 10.9%. The main reason was a 40-basis-point drop in selling, general and administrative costs. The leaner in store inventories increased the percentage of fresh product in front of the customer and teases the customer into coming BACK for a new trip to see what bargains they just might find. This promotes faster inventory turns to maximize merchandise gross margin while reducing working capital needs.
How does this happen in these hard times? Simple. ROST is poised to benefit from this tough macroeconomic climate, which has resulted in declining consumer discretionary spending that has been reflected in the sales of fellow competitors Target (TGT) and Kohl's (KSS); recently, Target and Kohl's both cut their 4Q profit forecasts. This in turn will benefit Ross Stores, which sells its merchandise at 20 to 70 percent off moderate department and discount store regular prices. It does so by taking advantage of overstocking and canceled orders at full-priced retailers. Ross Stores will buy this excess inventory at a steep discount and pass much of the savings on to its customers.
Ross Stores Inc. reported a 2011 3Q that represented a 24% increase year over year and a 23% average EPS growth over the last 3 quarters. The company has had six straight years of annual profit growth and four consecutive years of annual EPS growth. The forward PE of 15X is cheap considering the company delivers 15% YOY earnings growth and a 45% return on equity. Ross looks to be a decent growth at reasonable price (or G.A.R.P). stock, even after a strong performance in 2011. With an EV/EBITDA of 8.8X, ROST is reasonable enough provided its growth continues.
Ross has one of the most impressive dividend records around. The company has increased its dividend for 17 straight years, which is every year that it’s paid one. The company has raised its dividend by at least 14% for 16 of the last 17 years. The stock just finished a blowout year and had a 2-for-1 split. As Ross continues to generate record profits, it has been rewarding shareholders through stock buybacks and dividend hikes. Valuation is attractive too with shares sporting a PEG ratio of 1.0. Ross Stores has a solid balance sheet and generates strong cash flow. In the first nine months of 2011, the company spent approximately $343 million buying back 4.5 million shares. It is on track to complete $450 million in repurchases this year, or half of its two-year $900 million stock repurchase authorization.
Revenue has increased for four quarters in a row. Revenue rose 9.3% to $2.09 billion in the second quarter. Looking back further, revenue increased 7.2% year-over-year in the first quarter, 8.4% in the fourth quarter of the last fiscal year, and 7.5% in the third quarter of the last fiscal year. Ross has the potential to double its store base over the coming years, so there's a long runway for growth.
Of course we need to know where the company is going in order to be confident when buying the stock. ANAL-ysts think that ROST will earn $2.84/share on revenues of $8.6 billion. With hundreds of merchants sourcing product from thousands of manufacturers and vendors, $$$MR. MARKET$$$ has ROST earning $3.01/share on sales of $9.3 billion. If you take the existing PE of 19, and multiply it by the projected EPS of $3.64, you get a share price of 19 x $3.64 = $69.16 which takes me well past my sell target.
Here’s what the boss thinks of his company:
Michael Balmuth, Vice Chairman and Chief Executive Officer, commented, "We are very pleased with our much stronger than expected sales gains in December. These results reflect that value-seeking shoppers continue to respond favorably to the wide array of compelling name brand bargains throughout our stores. Juniors and Shoes were the best-performing merchandise categories, while geographic trends were broad-based."
Looking ahead, Mr. Balmuth continued, "Based on our above-plan sales and favorable gross margin trends for the first two months of the quarter and our continued assumption for a 1% to 2% increase in January same store sales, we now project earnings per share of $.82 to $.83 for the 13 weeks ending January 28, 2012. This updated range compares to our prior earnings guidance of $.77 to $.80 per share, and represents a forecasted increase of 19% to 20% over $.69 in last year's fourth quarter. All current and prior year earnings per share have been adjusted for our recent two-for-one stock split."
I can’t promise that I’ll go shopping at Ross Stores with the money I make in this stock. It’s not because I don’t like a bargain, who doesn’t? It’s just that I love to drink beer. Urrppp.
I am HUGE!!
$$$MR. MARKET$$$
I can’t think of any famous people named Ross, so I’ll jump right into the analysis. Today I bought Ross Stores (ROST) at 51.40. I will sell it in 4 – 6 weeks at 59.62. Here’s why I like ROST.
The main reason why I like this stock is that its price is going up and up and up. Take a look at the chart:
Ross Stores, Inc., together with its subsidiaries, operates off-price retail apparel and home accessories stores under the Ross Dress for Less and dd’s DISCOUNTS brand names in the United States. Its Ross Dress for Less brand stores sell brand and designer apparel, accessories, footwear, and home fashions for the entire family at everyday savings of 20 to 60 percent off department and specialty store regular prices; and dd’s DISCOUNTS brand stores sell apparel, accessories, footwear, and home fashions for the entire family at everyday savings of 20 to 70 percent off moderate department and discount store regular prices. As of January 29, 2011, the company operated 1,055 stores, of which 988 were Ross Dress for Less brand stores in 27 states and Guam, and 67 were dd’s DISCOUNTS brand stores in 6 states. Its Ross Dress for Less brand stores primarily target middle income households and dd’s DISCOUNTS brand stores target moderate income households. Ross Stores, Inc. was founded in 1957 and is headquartered in Pleasanton, California.
Why is its stock price going up? Because its stores are doing ridiculous business, that’s why. Why are the stores doing ridiculous business? Let’s ask the customers:
“I love Ross, but every time I go, I spend at least 3 hours there and come out with at least $100 in total purchase. I'm gonna have to go there today to get my son some pants for his b-day. I need someone to control me and tell me to not look for any clothes for myself. Please tell me I have enough clothes.”
“Yep, I love Ross as well! I can never find jeans anywhere else, and for $13-$19, the prices are awesome. And their clearances aren't bad either ($ 3dollar tops/etc.). Also, they have some pretty cute purses there. About a month ago, I fell in love with this white Guess purse they had. Not having any money then, I've been dreaming of it ever since. I'm planning to go today or tomorrow to see if they have it still, as I've honestly been dreaming of it! Its was $35, and I'm hoping that at least one more is still there! “
So just because people don’t have money these days, it doesn’t mean they don’t want to spend money. It’s a human condition. Let’s see some more testimony:
“Seriously low prices. Last I went there I scored a wifebeater navy tank by David & Goliath... There is a Rock and Ruler on it... The Rock is telling the Ruler "You Rule," while the Ruler is telling the Rock, "You Rock." How clever. How cheap for $2.99. Cute!”
“I also get my workout clothes here... I just picked up a pair of yoga (or biker shorts, whatever you want to call them) by Nike for $6.99, and a white pair of soccer shorts by Nike for $7.99.”
“I get ALL of my sunglasses here... They have name brand Armani's, Ralph Lauren, etc. although I just stick with the Rampage or recently Roxy pairs. My pair of Roxy's were $5.99 and that is pretty much the standard price for most of their glasses.”
“I just scored a pair of Steve Madden's cheetah and cork platforms there. They were so freaking cute I had to get them even though they are a size too big. They were $15.99. Prior to that, I got a pair of black cork platforms for $7.99... $7.99 I tell you!”
Let’s ask the employees of ROST what they think of their stores:
I am currently an employee at a Ross and I work in customer service. Which means I do all the returns. purchases, and cleaning up of the entire store. Prior to being hired at a Ross I had only been in one a handful of times. To afford college without taking loans out I applied and got the postion.
I think Ross has some great finds if one takes the time to look through the variety we have. On a lot of message boards and reviews I see about Ross, many people complain about the up keep of the store and the customer service they have received. I thought I should inform people of why it looks the way it does. Well every night usually three people are working by close and we literally have thirty minutes to clean up and entire store filled with a million different items. Now most of you have been into a Ross and know that clothes are all over the floors thrown on whatever shelf and things are left broken in the aisles. It's not that we don't care about how clean our store is. It's that a some customers don't care enough about our store or even to tell us that something broke. Countless number of times I have seen people walk out of the fitting room and not hand the employee the clothes they didn't want and instead put them on whatever rack they stop at. I have also seen many people pick clothes up with the item still on the hanger and simply throw it on the floor and look at me and walk away.
As far as customer service goes I know that in the store I work in is full of amazing people and I have bonded with many of our regular customers. My fellow employees and I are probably some of the nicest people and even tho we try to be sweet, people still make us out to be the "bad guys." Most of the time we're the bearer of bad news. Our system decides how your money is refunded and often we take the lashing for it. So if we seem to have an atitude it's probably because we got cussed out or reciepts thrown at us. For a minimum wage job we work very hard and we really do try to make your shopping experience great just please meet us half way. I hope that this has shown a better light on the store.Employees love Ross Stores and, more importantly, customers love Ross Stores. What does that translate into?
Earnings Earnings Earnings
Ross Stores (ROST) recently reported a significant 9% jump in its December same-store sales, more than double the 4% gain Retail Metrics analysts expected. The strong sales figures have in turn led Ross to increase its 2011 4Q EPS guidance to $0.82-$0.83, above the $0.80 expected by ANAL-ysts This is not surprising, given the company's history of strong fundamental performance. What is also very attractive about this company is that it is a solid dividend play, having paid increasing dividends since 1994. Ross currently pays a quarterly dividend of $0.11 a share and its consistently growing dividends are an added bonus to an already attractive stock. Ross has seen a 61% gain in its stock price over the last year, and it is poised to continue this streak. Ross is a strong retail play that has profited from its discount pricing strategy; it has been able to endure macroeconomic headwinds with surprising durability, and it continues to experience significant growth. Same-store sales have been terrific, growing 5% last year on top of 6% the year before.
The focus is on providing top-quality, in-season merchandise. Yet the stores are able to offer discounts of up to 60%. This is possible because of a strong merchandising organization that buys a majority of the items directly from manufacturers. The company also focuses on fewer categories and emphasizes closeout products.
Cost Discipline: This is a high priority at Ross Stores. The company continues to invest heavily in new technologies and logistics systems. Another key has been improved inventory management to reduce overstocking, which can be costly. During the latest quarter, Ross Stores saw a 45-basis-point increase in operating margins to 10.9%. The main reason was a 40-basis-point drop in selling, general and administrative costs. The leaner in store inventories increased the percentage of fresh product in front of the customer and teases the customer into coming BACK for a new trip to see what bargains they just might find. This promotes faster inventory turns to maximize merchandise gross margin while reducing working capital needs.
How does this happen in these hard times? Simple. ROST is poised to benefit from this tough macroeconomic climate, which has resulted in declining consumer discretionary spending that has been reflected in the sales of fellow competitors Target (TGT) and Kohl's (KSS); recently, Target and Kohl's both cut their 4Q profit forecasts. This in turn will benefit Ross Stores, which sells its merchandise at 20 to 70 percent off moderate department and discount store regular prices. It does so by taking advantage of overstocking and canceled orders at full-priced retailers. Ross Stores will buy this excess inventory at a steep discount and pass much of the savings on to its customers.
Ross Stores Inc. reported a 2011 3Q that represented a 24% increase year over year and a 23% average EPS growth over the last 3 quarters. The company has had six straight years of annual profit growth and four consecutive years of annual EPS growth. The forward PE of 15X is cheap considering the company delivers 15% YOY earnings growth and a 45% return on equity. Ross looks to be a decent growth at reasonable price (or G.A.R.P). stock, even after a strong performance in 2011. With an EV/EBITDA of 8.8X, ROST is reasonable enough provided its growth continues.
Ross has one of the most impressive dividend records around. The company has increased its dividend for 17 straight years, which is every year that it’s paid one. The company has raised its dividend by at least 14% for 16 of the last 17 years. The stock just finished a blowout year and had a 2-for-1 split. As Ross continues to generate record profits, it has been rewarding shareholders through stock buybacks and dividend hikes. Valuation is attractive too with shares sporting a PEG ratio of 1.0. Ross Stores has a solid balance sheet and generates strong cash flow. In the first nine months of 2011, the company spent approximately $343 million buying back 4.5 million shares. It is on track to complete $450 million in repurchases this year, or half of its two-year $900 million stock repurchase authorization.
Revenue has increased for four quarters in a row. Revenue rose 9.3% to $2.09 billion in the second quarter. Looking back further, revenue increased 7.2% year-over-year in the first quarter, 8.4% in the fourth quarter of the last fiscal year, and 7.5% in the third quarter of the last fiscal year. Ross has the potential to double its store base over the coming years, so there's a long runway for growth.
Of course we need to know where the company is going in order to be confident when buying the stock. ANAL-ysts think that ROST will earn $2.84/share on revenues of $8.6 billion. With hundreds of merchants sourcing product from thousands of manufacturers and vendors, $$$MR. MARKET$$$ has ROST earning $3.01/share on sales of $9.3 billion. If you take the existing PE of 19, and multiply it by the projected EPS of $3.64, you get a share price of 19 x $3.64 = $69.16 which takes me well past my sell target.
Here’s what the boss thinks of his company:
Michael Balmuth, Vice Chairman and Chief Executive Officer, commented, "We are very pleased with our much stronger than expected sales gains in December. These results reflect that value-seeking shoppers continue to respond favorably to the wide array of compelling name brand bargains throughout our stores. Juniors and Shoes were the best-performing merchandise categories, while geographic trends were broad-based."
Looking ahead, Mr. Balmuth continued, "Based on our above-plan sales and favorable gross margin trends for the first two months of the quarter and our continued assumption for a 1% to 2% increase in January same store sales, we now project earnings per share of $.82 to $.83 for the 13 weeks ending January 28, 2012. This updated range compares to our prior earnings guidance of $.77 to $.80 per share, and represents a forecasted increase of 19% to 20% over $.69 in last year's fourth quarter. All current and prior year earnings per share have been adjusted for our recent two-for-one stock split."
I can’t promise that I’ll go shopping at Ross Stores with the money I make in this stock. It’s not because I don’t like a bargain, who doesn’t? It’s just that I love to drink beer. Urrppp.
I am HUGE!!
$$$MR. MARKET$$$
Methinks you jest!
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