How Ross Stores Is so Successful

2018-03-06T22:47:00.000Z

Ross Stores, a discount chain that competes with TJ Maxx and Marshalls, continues to post strong sales.
It's a rare bright spot in a struggling retail industry.
But a visit to a Ross store in Richmond, Virginia, showed products in complete disarray.

Ross Stores has been deemed a "retail treasure" and a "rarity" by Morgan Stanley analysts for its strong sales and earnings growth at a time of widespread distress in the industry.

The discount chain — which competes with stores like TJ Maxx and Marshalls — has opened more than 500 new stores since 2010. It now has more than 1,600 US locations and has reported soaring same-store sales as much of the brick-and-mortar retail industry is struggling.

In the company's most recent quarter, overall sales grew 16% to $4.1 billion, and same-store sales rose 5%, on top of 4% growth last year.

Much like warehouse chain Costco, Ross eschews the decor and frills of traditional retailers. The bare-bones philosophy allows them to pass savings of up to 60% on to customers.

We went to a Ross store in Richmond, Virginia, to see how this "treasure" is luring so many customers when department stores are seeing sales and traffic plunge.

We were surprised to find the store in disarray.

It looked like a tornado had ripped through the shoe department.

Shoes were strewn all over the floor and benches, and there was a bra hanging from one shelf.

The hat display was equally jarring.

The socks clearly needed some attention as well.

And the rugs were a mess.

Everywhere we looked, it was a disaster.

Yet other parts of the store were empty.

It looked as though the store were going out of business. (I checked, and it's not.)

Merchandise was loosely grouped into sections — like toys, shoes, and furniture — but it was hard to see any real organization beyond that.

In every department, there were empty shelves and items on the floor.

Apparently, the tornado that hit the shoe department made its way over to the lingerie department as well.

Bras covered the floor.

The kids' section was a sad jumble of random toys.

And like the rest of the store, a quarter of the merchandise was left on the floor.

Many products were also out of place.

Throughout the store, we found several abandoned carts.

Most of the lone carts were empty.

We spotted only two employees in the store who weren't working at the registers.

They were both restocking the apparel department.

Customers didn't seem to mind the mess. There was a steady line of people checking out while we visited and more than 20 shoppers throughout the store.

The messy environment is likely a product of Ross's efforts to keep prices low by investing less in labor and infrastructure — like construction and display costs — than full-priced department stores.

Those cost savings are passed on to consumers, who, based on Ross' earnings, are willing to deal with a mess for the sake of discounts.

Ross' success is a bright spot in an otherwise gloomy retail industry.

It has more than 1,600 stores throughout the US ...

... and the company plans to open 100 new stores this year.

The new stores will consist of 75 locations under the Ross Dress for Less banner and 25 locations under the dd's Discounts locations.

Ross' earnings for the most recent fiscal year grew 10% to $14.1 billion.

Same-store sales for the full year grew 4%, on top of 4% growth the previous year.

Meanwhile, department stores like Macy's, JCPenney, Sears, and Kmart have been closing hundreds of stores.

While analysts are saying the department store closures are necessary, they say Ross has plenty of room to grow its physical presence.

Unlike most other stores, Ross is "immune" to the growth of e-commerce because of the treasure-hunt experience and low prices it provides customers in stores, the analysts said.

"Although there is some background noise in the industry, which talks down the importance of physical shops, we believe that these remain a vital route to growth for off-price players and see no reason why Ross should slow the pace of development," Neil Saunders, the managing director of GlobalData Retail, wrote in May.

So, American consumers, prepare to see a lot more stores like this.

The chain hailed by Wall Street as a 'retail treasure' runs the most disastrous store we've ever seen

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Business Insider tells the innovative stories you want to know

Business Insider tells the innovative stories you want to know

Business Insider tells the innovative stories you want to know

The chain hailed by Wall Street as a 'retail treasure' runs the most disastrous store we've ever seen

We were surprised to find the store in disarray.

It looked like a tornado had ripped through the shoe department.

Shoes were strewn all over the floor and benches, and there was a bra hanging from one shelf.

The hat display was equally jarring.

The socks clearly needed some attention as well.

And the rugs were a mess.

Everywhere we looked, it was a disaster.

Yet other parts of the store were empty.

It looked as though the store were going out of business. (I checked, and it's not.)

Merchandise was loosely grouped into sections — like toys, shoes, and furniture — but it was hard to see any real organization beyond that.

In every department, there were empty shelves and items on the floor.

Apparently, the tornado that hit the shoe department made its way over to the lingerie department as well.

Bras covered the floor.

The kids' section was a sad jumble of random toys.

And like the rest of the store, a quarter of the merchandise was left on the floor.

Many products were also out of place.

Throughout the store, we found several abandoned carts.

Most of the lone carts were empty.

We spotted only two employees in the store who weren't working at the registers.

They were both restocking the apparel department.

Customers didn't seem to mind the mess. There was a steady line of people checking out while we visited and more than 20 shoppers throughout the store.

The messy environment is likely a product of Ross's efforts to keep prices low by investing less in labor and infrastructure — like construction and display costs — than full-priced department stores.

Those cost savings are passed on to consumers, who, based on Ross' earnings, are willing to deal with a mess for the sake of discounts.

Ross' success is a bright spot in an otherwise gloomy retail industry.

It has more than 1,600 stores throughout the US ...

... and the company plans to open 100 new stores this year.

The new stores will consist of 75 locations under the Ross Dress for Less banner and 25 locations under the dd's Discounts locations.

Ross' earnings for the most recent fiscal year grew 10% to $14.1 billion.

Same-store sales for the full year grew 4%, on top of 4% growth the previous year.

Meanwhile, department stores like Macy's, JCPenney, Sears, and Kmart have been closing hundreds of stores.

While analysts are saying the department store closures are necessary, they say Ross has plenty of room to grow its physical presence.

"Accelerating department store closures and weak fundamentals in remaining stores presents opportunity for Ross to continue to gain market share," Morgan Stanley analysts wrote in a note last year.

Unlike most other stores, Ross is "immune" to the growth of e-commerce because of the treasure-hunt experience and low prices it provides customers in stores, the analysts said.

So, American consumers, prepare to see a lot more stores like this.

Business Insider tells the innovative stories you want to know

Business Insider tells the innovative stories you want to know

Business Insider tells the innovative stories you want to know

Business Insider tells the innovative stories you want to know

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Business Insider tells the innovative stories you want to know

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