Here's Why Ross Stores (ROST) is Poised for Growth in 2024

Core Insights - Ross Stores, Inc. (ROST) is experiencing positive momentum due to effective strategic initiatives and strong fundamentals, with a notable 24.7% increase in share price over the past six months, outperforming the industry growth of 12.9% [1] - The Zacks Consensus Estimate for fiscal 2023 anticipates sales of $20.1 billion and earnings per share (EPS) of $5.36, reflecting year-over-year increases of 7.5% and 22.4% respectively, while fiscal 2024 estimates are $21 billion in sales and $5.83 EPS, indicating growth of 4.3% and 8.8% [1] Financial Performance - The company has benefited from improved merchandise margins and reduced distribution, domestic freight, and occupancy expenses, leading to a 260-basis points decline in the cost of goods sold as a percentage of revenues, which enhanced operating margins in Q3 fiscal 2023 [2] - Merchandise margins increased by 235 basis points year over year, attributed to lower ocean freight costs, while distribution expenses decreased by 45 basis points, domestic freight by 40 basis points, and occupancy costs leveraged by 25 basis points [2] - Comparable store sales improved by 5% due to increased customer traffic during the quarter [2] Future Outlook - Ross Stores anticipates an improved operating margin for Q4 fiscal 2023, projected between 11.3% and 11.5%, compared to 10.7% in the same quarter last year, driven by lower domestic freight and distribution costs [3] - The company has successfully executed its store expansion plans, opening 97 stores in the first nine months of fiscal 2023, and expects to end the fiscal year with 1,764 Ross stores and 345 dd's DISCOUNTS stores, marking a net addition of 94 stores [4] - Long-term expansion targets have been raised, aiming for 2,900 Ross stores and 700 dd's DISCOUNTS stores, representing a 20% increase in potential store growth targets, totaling 3,600 stores [4] Business Model and Market Position - Ross Stores operates a chain of off-price retail apparel and home accessories stores targeting value-conscious consumers aged 25 to 54 in middle-to-upper middle-class households, maintaining a strong value proposition through competitive pricing [5] - The off-price model allows for effective micro-merchandising, enhancing product allocation and margins, demonstrating the company's ability to meet consumer demand for value [5] Investment Considerations - The company is positioned for growth in 2024, supported by a Value Score of B and a Zacks Rank of 3 (Hold) [6]