| Valuation method | Value, £ | Upside, % |
|---|---|---|
| Artificial intelligence (AI) | 65.30 | -65 |
| Intrinsic value (DCF) | 62.51 | -67 |
| Graham-Dodd Method | 20.00 | -89 |
| Graham Formula | 56.10 | -70 |
Ross Stores, Inc. is a leading off-price retail apparel and home fashion chain operating under the Ross Dress for Less and dd's DISCOUNTS brands. Headquartered in Dublin, California, the company serves middle- to moderate-income households with discounted apparel, accessories, footwear, and home fashions. Ross Stores differentiates itself by offering brand-name merchandise at 20–60% below department and specialty store prices, leveraging opportunistic buying strategies and efficient supply chain management. As of July 2022, the company operated approximately 1,950 stores across 40 U.S. states, the District of Columbia, and Guam. Ross Stores capitalizes on the growing demand for value-oriented retail, positioning itself as a key player in the $50B+ U.S. off-price sector. The company's dual-brand strategy (Ross for moderate-income and dd's DISCOUNTS for budget-conscious shoppers) provides broad demographic reach in the competitive consumer cyclical space.
Ross Stores presents an attractive investment case as a well-established off-price retailer with consistent revenue growth (FY2024 revenue: $21.1B) and strong cash flow generation ($2.36B operating cash flow). The company's low-price positioning provides resilience during economic downturns, as evidenced by its historical outperformance during recessions. However, investors should note the elevated beta (1.177) reflecting sensitivity to consumer spending cycles. While the debt-to-equity ratio appears manageable (total debt: $5.68B vs. cash: $4.75B), rising labor costs and supply chain volatility could pressure margins. The dividend yield (~1.5%) provides modest income, but the primary appeal lies in Ross's store expansion potential (targeting 2,900+ locations long-term) and proven off-price model that continues taking market share from traditional department stores.
Ross Stores maintains competitive advantages through its disciplined inventory management and vendor relationships that enable 20–60% discounts on branded merchandise. Unlike full-price retailers, Ross's opportunistic buying model allows it to capitalize on manufacturer overruns and department store cancellations. The company operates with lower SG&A expenses (18–19% of sales vs. 25–30% for department stores) through no-frills store formats and limited marketing spend. Geographically, Ross has denser store coverage in Western states compared to rivals, with room for expansion in the Northeast. Its dd's DISCOUNTS brand competes directly with dollar stores at lower price points while maintaining higher-margin apparel focus. The main competitive threat comes from TJX Companies' Marshalls/T.J. Maxx (2.5x larger store count) which benefits from greater scale in vendor negotiations. Ross differentiates through slightly lower price points and more localized assortments. The rise of off-price e-commerce (particularly Nordstrom Rack) presents a long-term disruption risk, though Ross's core demographic shows less online migration than premium retailers.