Off-Price Continues Its Winning Streak as Ross Stores Beats Earnings Expectations

On Thursday, Ross Stores offered yet more proof of the resiliency of the off-price sector amid a challenging retail climate.

The discount chain, which operates 1,810 stores across the U.S. under its Ross Dress for Less and dd’s Discounts banners, posted earnings per share of $1.03 for the quarter ended Nov. 2, topping the consensus estimate of $0.97 per share. Comparable store sales likewise got a boost, growing 5% on top of last year’s 3% increase. Revenue for the quarter reached $3.8 billion, beating analysts’ forecast of $3.77 billion.

The solid results came in a week that’s seen retail stocks take a beating: On Monday, Macy’s announced that its website was hit with a security breach last month that may have given hackers access to some customer data. The news was followed by disappointing quarterly results, sending the company’s share price plummeting further.

Ross Stores’ stock, on the other hand, ticked up 1.2% in after-market trading.

The company reiterated its fourth-quarter guidance of a 1% to 2% gain in comparable store sales, following last year’s 4% increase. Ross Stores CEO Barbara Rentler explained that the more modest expectations were mainly the result of larger trends affecting the industry.

“As we enter this year’s holiday season, we are up against multiple years of strong comparable store sales gains,” she said in a statement. “In addition, we expect another fiercely competitive retail landscape, along with ongoing uncertainty surrounding the macro-economic and political environment.”

Earlier this week, TJ Maxx and Marshalls parent TJX Companies Inc. likewise beat earnings and revenue estimates for the quarter and posted further store traffic gains, defying the challenges afflicting most of the sector.

Off-price has been a rare bright spot in the world brick-and-mortar retail in the past several years, which executives and analysts have credited in part to the treasure hunt experience it provides shoppers — something that, unlike traditional retail, can’t be easily replicated online. The model also allows the chains to be more flexible with inventory, and it leaves them far less vulnerable to macroeconomic headwinds like the current trade war with China.

Last quarter, Rentler told analysts the company would be waiting to react to the potential fallout from full-price retailers’ extra stock. “In the near term, I think what we have to do is recognize that we’re not the leader in all of this. We’re the follower. So we’re going to have to wait and see how retailers react to the higher costs, their approach on pricing and then really the customer’s reaction to potential price inflation.”

“Historically, disruptions like this have benefited off-price,” Rentler said on the call, continuing, “As always, our focus will continue to be offering our customers the most compelling values possible throughout our stores.”

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