EUR 850.00 For Business Accounts Only

Morningstar | Despite Intense Competition, Ross’ Blend of Value and Store Experience Should Continue to Resonate.

Boasting a fast-turning inventory of high-value branded merchandise, Ross' store experience and value proposition should continue to resonate with customers despite intense competition, leading to our assessment that its competitive advantages are durable. Ross and the off-price channel have benefited from the decline of traditional, full-price retailers, and despite signs of top-line improvement at department stores, we anticipate the firm will continue to perform as customers seek bargains.Ross' results are enabled by its strong merchandising operation and proprietary inventory management system, which allow for a rapidly changing assortment of opportunistically purchased items. It aims to be a partner of choice for vendors looking to sell excess products, accepting incomplete assortments without return privileges, paying promptly, and stocking brands discreetly (allowing them to avoid creating pricing pressure in the full-price channel that can ensue if their labels are viewed as a constant discount option). We believe this flexibility is a product of the treasure-hunt shopping experience and Ross' distribution and merchandising agility.Ross has long enjoyed ample availability of attractively priced products, which we expect to persist. Mutable customer tastes, the proliferation of alternative distribution channels, and the inherent variability associated with demand, which can vary with weather or other unpredictable external factors, should leave room for off-price retailers to source products attractively, capitalizing on their vendor relationships and ability to offer favorable purchase terms.Although competition is fierce and digital rivals are building a presence in Ross' core apparel and home categories, we contend that the retailer is relatively well-protected, as its fairly low-frills shopping experience and significant discounts (around 20%-70%) result in competitive prices and superior economics after considering shipping and return costs. While we believe there is room for higher-priced value-oriented online retailers that can better absorb shipping costs, such as gilt.com, we think the loftier prices limit competition with Ross.