Ross Stores has posted a strong uplift in both sales and profit for the third quarter as consumers increasingly seek value in the current market.
The company’s net sales for the quarter ended November 1 grew 10 per cent to $5.6 billion, and comparable store sales increased 7 per cent.
According to GlobalData MD Neil Saunders, Ross succeeded this quarter by allowing customers to do what its name suggests: ‘Dress for less’.
“Against a backdrop in which consumers have become more uncertain and frugal, this helped provide Ross with significant uplift and allowed it to produce a 7 per cent rise in comparable sales – the best rate of growth it has posted in a long while,” he said.
The analyst attributed the results to the company’s big focus on back-to-school, with a good mix of key staples and more fashionable lines. This resonated with the many families who were on strict budgets, which helped the retailer win new customers.
Other helpful factors include a strong assortment with a good mix of brands and bargains, and effective marketing campaigns, Saunders said.
“The forward challenge for Ross is to maintain the sales momentum as it moves into the holiday season,” he continued.
“From our data, Ross tends to under-index a little as a destination for gifting, but if it can keep assortments strong and focused, it has a chance of having more success across the critical golden period. This is especially so if it retains the customers it has won over this quarter and continues to convert them.”
On the bottom line, the company’s net income rose 4.7 per cent to $512 million, exceeding management’s guidance. The growth also reversed the 3.8 per cent decline in the second quarter.
“This represents healthy growth, but the rise came in below the sales line thanks to some tariff-related costs, which do impact off-price retailers. Fortunately, these costs will fade in the fourth quarter, which should be helpful to margins and the bottom line,” Saunders said.
The company has raised its fourth-quarter outlook, expecting comparable sales to be up 3-4 per cent. Earnings guidance for the full year was also lifted to reflect year-to-date results.
