Ross Stores sees 2,500 stores in 10 years
Undeterred by dynamic and unpredictable market conditions, Ross Stores sees a decade of expansion ahead for its brand of physical retail.
Ross Stores President and COO Michael O’Sullivan maintains the off-price retailer has 10 years of growth ahead of it based on its historical rate of expansion and business fundamentals that support continued investment in new stores. The company currently operates more than 1,600 stores and when asked about the long-term outlook for expansion potential during a fourth quarter earnings call O’Sullivan said the company has the potential for 2,500 stores.
That figure includes roughly 2,000 of the company’s namesake Ross Dress for Less stores and 500 dd’s stores. There are currently 1,409 Ross stores and 213 dd’s Discounts stores, a concept Ross introduced in 2004 that offers even “deeper discounts” than Ross, thus the name dd’s.
Ross Stores expect to open 100 new stores this year, compared to 90 last year, consisting of 75 Ross locations and 25 dd’s.
The expansion outlook was offered as part of Ross Stores’ recap of its fourth quarter and 2017 performance and a cautious outlook toward 2018. Same store sales during the quarter ended Jan. 27 increased 5% on top of a 4% gain the prior year. Full year comps advanced 4% and Ross Stores CEO Barbara Rentler forecast this year’s first quarter comps to range from 1% to 2%.
“While we are encouraged by our recent strong sales and earnings results, we again face our own challenging multi-year comparisons as well as a very competitive retail environment. As a result, although we hope to do better, we continue to take a prudent approach to forecasting our business in 2018,” Rentler said.
Ross took that same conservative approach ahead of its fourth quarter which helps explain why the company substantially exceeded its forecast results and a big increase in margins.
Earnings per share for the 14 week period ended Feb. 3 were $1.19 compared to the 13 week period the prior year while net income was $451 million compared to $301 million. Excluding a 10 cent a share benefit from the extra week and a 21 cent a share benefit from tax reform, earnings per share still grew at 14%.
“Despite our own difficult multi-year comparisons and a very competitive retail climate, sales and earnings were well ahead of our expectations for both the fourth quarter and the full year,” Rentler said. “We are pleased with these results, which reflect our ongoing success in delivering broad assortments of compelling bargains to today’s value-driven shoppers.”
Perhaps most impressive was that Ross Stores expanded its operating margin to 14.6% from 13.6% through a combination of strong merchandise margin, expense leverage from same store sales gains and the benefit of an extra week in the fiscal year.