Ross Stores’ Same-Store Sales Growth: A Consistent Track Record

The second quarter of fiscal 2015 marked the 26th consecutive quarter of positive same-store sales growth for Ross Stores (ROST). The last time the company reported a fall in its same-store sales growth was in the fourth quarter of fiscal 2008.

Same-store sales is an important performance metric for the retail industry. It measures the change in a retail chain’s sales from existing outlets over a certain period of time on a year-over-year basis. It excludes the impact of stores closed or opened in the measurable period.

Ross Stores and TJX Companies (TJX) each reported same-store sales growth even in adverse economic conditions. As indicated in the above graph, Ross Stores and TJX Companies reported same-store sales growth in fiscal 2008, while the same-store sales of their department store peers such as Dillard’s (DDS), Macy’s (M), Nordstrom (JWN), Kohl’s (KSS), and JCPenney (JCP) saw significant falls.

The value-driven, bargain-oriented business model of off-price retailers resonates well with consumers even during volatile macroeconomic times. Ross Stores’s ability to continuously deliver attractive bargain deals on its merchandise is supported by its strong supplier relationships.

Ross Stores’ opportunistic purchases of merchandise from suppliers and its lean business model help the company to pass the benefits of lower prices on to its consumers.

Moreover, unlike department and specialty stores, Ross Stores generally does not require manufacturers to provide promotional allowances, return privileges, or other facilities such as delayed deliveries of merchandise.

In fact, for most of its orders, only one delivery is made to one of the company’s five distribution centers. These flexible requirements facilitate further discounts on in-season purchases, which can be passed on to consumers.

In fiscal 2014, Ross Stores reported same-store sales growth of 3% on a year-over-year basis. Juniors was the best performing category and the Midwest was the strongest region in fiscal 2014. TJX Companies, Macy’s, and Nordstrom reported same-store sales growths of 2%, 0.7%, and 4%, respectively, in the fiscal year ended January 31, 2015.

Ross Stores and TJX Companies together constitute 2% of the portfolio holdings of the SPDR S&P Retail ETF (XRT).

In the first half of fiscal 2015 ended August 1, 2015, Ross Stores reported same-store sales growth of 5%. In the next part of this series, we’ll discuss the company’s strong inventory management abilities.