Tuesday, July 29, 2014

Company Review: Ross Stores (ROST)

I purchased ROST a couple weeks ago. It has solid numbers but appears to be falling recently. The story there is that ROST is predicting "only" an 8%-10% growth rate long term and everyone had been enjoying the high double digits. It still seems undervalued despite that.


ROSS STORES INC (ROST)
Last Updated: Q2 2014


Description: Ross Stores, Inc. is an off-price apparel and home fashion chain in the United States. The Company operates two brands of off-price retail apparel and home fashion stores: Ross Dress for Less (Ross) and dd’s DISCOUNTS. Ross offers designer apparel, accessories, footwear, and home fashions for the entire family at everyday savings of 20% to 60% off department and specialty store regular prices. Its merchandise offerings also include, but are not limited to, small furniture and furniture accents, educational toys and games, luggage, gourmet food and cookware, watches, and sporting goods.


How do they make money: Selling apparel and accessories that are slightly damaged or stitched wrong at a huge discount.


Key Brands: None company wide but sell many name brand clothes.



Company Overview
Ross also owns a chain of discount stores called dd’s Discounts. Unsure of the % mix


Best category: Juniors
Best geographic region: Texas


Strong buyback culture: Every year since 1993


Risks
Brick and Mortor store vs online: Their average sale is $10 which is hard to cover for shipping and handling. With returns, shipping etc that is hard to do online. Since Ross sells name brands at half off for their regular price there is less margin difference between them and online retailers.


Competitors
The TJ Companies (TJX)
The Steinmart (SMRT)

Company Fundamentals



Fastgraphs.com shows that its average P/E ratio is actually its support in the past 3 years. 




Company Stats
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014e
5y Avg
10y Avg
Share Price
$11.33
$14.65
$12.79
$14.87
$21.36
$31.63
$47.53
$54.09
$74.93
$81.03
$57.84
$36.42
EPS
0.85
0.95
1.17
1.77
2.31
2.86
3.53
3.88
3.88
4.21
3.67
2.54
EPS Growth
-
11.76%
23.16%
51.28%
30.51%
23.81%
23.43%
9.92%
0.00%
8.51%
13.13%
20.26%
P/E
13.33
15.42
10.93
8.40
9.25
11.06
13.46
13.94
19.31
19.25
15.40
13.44
P/B
5.5
3.9
4.1
3.3
2.2
2.8
4
5
6.3
5
4.62
4.21


EPS growth for a retailer is very high and fairly consistent.
EPS growth has slowed from previous years causing a hit to share price but long term growth projection of the company is still good.


Dividend Stats
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014e
5y Avg
10y Avg
Dividend
$0.13
$0.16
$0.20
$0.24
$0.35
$0.47
$0.59
$0.71
$0.80
$0.92
$0.70
$0.46
Dividend Yield
1.15%
1.09%
1.56%
1.61%
1.64%
1.49%
1.24%
1.31%
1.07%
1.14%
1.25%
1.33%
Share buyback %
2.73%
3.17%
3.65%
4.18%
5.20%
4.17%
4.35%
3.14%
3.24%
-
3.73%
3.76%
Div Growth
-
23.08%
25.00%
20.00%
45.83%
34.29%
25.53%
20.34%
12.68%
15.00%
21.57%
24.64%
EPS Payout Ratio
15.29%
16.84%
17.09%
13.56%
15.15%
16.43%
16.71%
18.30%
20.62%
21.85%
18.78%
17.19%


Dividend growth has been slightly higher than the EPS growth but payout ratio is still very low allowing for large future dividend growth. Even with the lower projected growth rate there is a lot of room for dividend raises.

Earning Report Notes
Q1 2014
EPS: $1.15 (+7% Y/Y)
Sales: +6%
Operating Margin: 14.6% (very high for a retailer)
26 Ross stores and 7 Discount stores opened in quarter (75 Ross and 25 Discount stores planned for the year)
Share buyback plan: $550 million a year (~3.5% a year)
Estimate $4.15 EPS for the year.


Q4 2013
EPS: $1.02
Sales: +2%


Full Year
EPS: $3.88 (+13%)
Sales: +3%
Operating Margin: 13.1%


Barbara Rentler new CEO June 1st.



Company and Industry specific commonly used acronyms and terms
None

Resources
Company Website: http://www.rossstores.com/#
Transcripts: http://seekingalpha.com/symbol/ROST/transcripts

Disclaimer: The investments and trades discussed are not recommendations for others. I am not a financial planner, financial adviser, accountant, or tax adviser. The financial actions I talk about are for my own portfolio and money and only suited for my own risk tolerance, strategy, and ideas. Copying another person's financial moves can lead to large losses. Each person needs to do their due diligence in researching and planning their own actions in the financial markets.