Will Ross Stores' Store-Expansion Strategy Help Boost Profitability?

Ross Stores, Inc. ROST continues to strengthen its presence by introducing new stores and enhancing its operational capabilities. The company is expanding across the existing and new markets while investing in infrastructure to drive long-term growth. In the latest development, ROST has concluded its store-expansion plans for fiscal 2025 by opening 40 stores recently. 

The company has inaugurated 36 Ross Dress for Less (Ross) and four dd's DISCOUNTS outlets in 17 various states this September and October. Including the latest openings, ROST has added 90 new stores in the current fiscal year. Together, Ross Dress for Less and dd's DISCOUNTS currently operate a total of 2,273 locations in 44 states, the District of Columbia, Guam and Puerto Rico, and 364 dd's DISCOUNTS stores across 22 states.

At Ross Dress for Less, the company expanded its footprint in the Midwest and the Northeast, with store openings in Michigan, New Jersey and New York, alongside enhancing its presence in the sunbelt states. At dd's, ROST bolstered its footprint across the core markets of California and Texas. The company continues to benefit from positive customer response for its merchandise across both banners, recording broad-based strength across nearly all merchandise categories and most regions. 

Such openings underscore ROST’s commitment to driving growth via store expansion while enhancing overall sales and profitability. These have also been boosting comparable store sales (comps). In second-quarter fiscal 2025, the company’s top line improved 5% year over year, supported by a 2% gain in comps. For the third and fourth quarters of fiscal 2025, it anticipates comps growth of 2-3% each. Our model projects comparable sales growth of 2.9% in the third quarter and 2.0% in the fourth quarter of fiscal 2025.

Ross Stores had earlier raised its store-expansion targets for the long term. With such robust store openings, management is confident of accomplishing at least 2,900 Ross Dress for Less and 700 dd's DISCOUNTS stores over time. Combined with its resilient off-price retail model, such efforts are expected to drive incremental sales and enhance overall profitability.

Shares of this Zacks Rank #3 (Hold) company have gained 21.3% against the industry’s 0.3% drop in the past three months.

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This article originally published on Zacks Investment Research (zacks.com).

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