Ross Stores (NASDAQ:ROST) stock has been in growth mode ever since the 2008 financial meltdown, and in the past three years it’s up nearly 70%. The crazy thing is, ROST doesn’t even do e-commerce.
Yes, in a world of retail dominated by Amazon (NASDAQ:AMZN) and all the other online shopping sites that virtually every retailer has launched in the past five years, Ross Stores remains an island of analog in a sea of digital competitors. And that hasn’t hurt ROST stock at all.
What Ross Stores Is Getting Right
The key reason for ROST stock’s success is that the company’s model is based on customers wanting to bargain hunt. ROST relies on people wanting to go to a store and look around to see what’s there and perhaps unearth a hidden treasure at a bargain price. Of course, while they’re there they can also pick up a dog bed, some socks, maybe some candy for the kids — the fact is that getting people in the store is what it’s all about.
ROST has been getting more and more shoppers, buying more and more stuff every quarter for quite a while now. ROST has posted same store sales growth of 4% or more for the past 17 consecutive quarters. And that trend should continue through 2019.
Remember, in the years following 2008, the economy was on its way back, unemployment was low and people were feeling pretty good. Consumers should have started to gravitate back to big-name brands and boutique brands as their paychecks got bigger and more consistent. But what’s happening is that after the crash, many consumers started shopping at discount retailers more consistently. They offer name brands at discounts. And they’re usually conveniently located, unlike the outlet malls that are built as destination locations.
ROST currently operates 1,722 stores in 39 states — and opened 28 more Ross and dd’s Discounts stores in 10 more states in June and July alone. Its goal is to open 100 new stores in 2019.
The Bottom Line on ROST Stock
One of the company’s great secrets is that it has kept its same formula over all these years. It hasn’t had to adapt or change with the times. That means ROST can stick to its buyers and has a good handle on its costs. It also helps when it comes time to expand, because the company knows the opportunities and risks.
Because of Ross Stores’ convenience, selection and pricing, those customers that used ROST as a stopgap when money was tight, have stuck around. They like what they get.
And now, ROST has new generations of shoppers that are strapped with student loan debt and are getting paid less than they would have in better times. Their dollars need to stretch more. This produces a new generation of ROST shoppers.
Also, as fears of a recession rise, ROST stock tends to get stronger rather than weaker. My Portfolio Grader rates ROST stock a “B” now, but that grade may be going up now that new sanctions on Chinese goods have been pushed out further.
Louis Navellier is a renowned growth investor. He is the editor of four investing newsletters: Growth Investor, Breakthrough Stocks, Accelerated Profits and Platinum Growth. His most popular service, Growth Investor, has a track record of beating the market 3:1 over the last 14 years. He uses a combination of quantitative and fundamental analysis to identify market-beating stocks. Mr. Navellier has made his proven formula accessible to investors via his free, online stock rating tool, PortfolioGrader.com. Louis Navellier may hold some of the aforementioned securities in one or more of his newsletters.