Thursday, March 08, 2012

Ross Stores (ROST) 2012 Review

Ross Stores (ROST) operates a chain of off price retail stores offering high quality, in season name brand and designer apparel, shoes, cosmetics, accessories and home merchandise at discounts of 20-60% below mainstream retailers.

The company has grown profits and dividends at a 15-20% annual rate over the past 10 years, earning a 25%+ return on equity. While current retail environment experienced difficulties in the recent recession, ROST’s off price business model continued to produce above average results because:

(1) comparable store sales are on the rise,

(2) its ability to deliver name brand merchandise at steep discounts should raise consumer loyalty allowing it to continue to grow even as the economy improves,

(3) it is focused on strict inventory management giving it flexibility to take advantage of close outs, raises its merchandise turn and reduces markdowns,

(4) better than expected performance from its dd’s DISCOUNTS subsidiary.

The primary negative for this company is that retailing is an intensely competitive business.

ROST is rated A by Value Line, has a 10% debt to equity ratio and its stock yields 1.0%

Statistical Summary

Stock Yield Dividend Growth Rate Payout Ratio # Increases Since 2002
ROST 1.0% 17% 16% 10
IND 1.2 10 21 NA

Debt/Equity ROE EPS Down Since 2002 Net Margin Value Line Rating
ROST 10% 43% 1 8% A
IND 12 13 NA 5 NA


Note: ROST stock made great progress off its December 2008 low, quickly surpassing the down trend off its September 2008 high (red line) as well as the November 2008 trading high (green line). Long term the stock is in an up trend (straight blue lines). It is also in an intermediate term up trend (purple lines). The wiggly blue lines are Bollinger Bands. The Aggressive Growth Portfolio does not own a position in ROST. The upper boundary of its Buy Value Range is $20; the lower boundary of its Sell Half Range is $51.

Steve Cook received his education in investments from Harvard, where he earned an MBA, New York University, where he did post graduate work in economics and financial analysis and the CFA Institute, where he earned the Chartered Financial Analysts designation in 1973. His 40 years of investment experience includes institutional portfolio management at Scudder, Stevens and Clark and Bear Stearns. Steve's goal at Strategic Stock Investments is to help other investors build wealth and benefit from the investing lessons he learned the hard way.