Ross Stores' Prospects Look Promising, Stock On A Roll

Ross Stores Inc. (NASDAQ:ROST) has been riding on the back of its solid financial status, ongoing merchandise initiatives and consistent focus on store expansion. Also, this Zacks Rank #2 (Buy) stock appears to be a sound investment opportunity, with a long-term earnings growth rate of 11.2% and a VGM Score of “A”. Moreover, the stock has jumped over 33% in the past one year and is currently hovering close to its 52-week high of $66.28. Let’s delve deeper to find out what’s leading to the bullish run for this Pleasanton, CA-based company.

Driving Factors

Ross Stores’ key strategy to keep itself on the growth trajectory is continued focus on merchandising organization through investments in workforce, processes and technology.

Moreover, the company constantly organizes its merchant group, which enables it to steadily expand market coverage in the vendor community while enhancing relationships with a broad network of existing and new resources. We believe these initiatives will strengthen Ross Stores’ buying operations, facilitating the purchase of on-trend merchandise at attractive prices.

Additionally, the company continues to invest in its off-price business model as the competitive bargains it offers help make its stores attractive destinations for customers in all economic scenarios. Also, the off-price model with strong value proposition and micro-merchandising aids better product allocation and margins. This will likely help sustain the company’s top- and- bottom-line growth trends.

Further, Ross Stores remains on track with respect to its store expansion program. Also, it is focused on cutting down inventories at stores to the optimum level, while making the right assortments available at the right store at the right time.

Sturdy Q2 Performance

Recently, Ross Stores reported a robust second-quarter fiscal 2016, wherein both top and bottom lines beat the Zacks Consensus Estimate as well as management’s projections. Moreover, earnings and sales improved year over year. Notably, the company has delivered positive earnings surprises in eight of the past nine quarters. In the trailing four quarters, it outperformed the Zacks Consensus Estimate by an average of 3.8%. (Read: Ross Stores Tops Q2 Earnings & Sales, Stock Gains)

Following the company’s spectacular earnings, management provided a robust outlook for the third and fourth quarters of fiscal 2016. Also, the company raised its earnings projections for fiscal 2016 backed by its strong performance in the first half and promising second-half outlook.

We believe Ross Stores’ positive earnings surprise history, coupled with a raised fiscal 2016 earnings outlook underscore its solid future potential.

Stocks to Consider

Other favorably ranked stocks in the retail space include Burlington Stores, Inc. (NYSE:BURL) , sporting a Zacks Rank #1 (Strong Buy), Dollar Tree, Inc. (NASDAQ:DLTR) and American Eagle Outfitters, Inc. (NYSE:AEO) , both carrying a Zacks Rank #2.