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Ross Stores: The Upside Could Be Priced In

Apr. 05, 2021 4:09 PM ETRoss Stores, Inc. (ROST)2 Comments
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  • ROST's quarterly revenue fell 4% Y/Y. Government stimulus checks may have kept revenue from falling further.
  • Margins faltered as COVID-related costs rose. I expect revenue and margins to stabilize as the economy reopens.
  • ROST has $4.8 billion in cash and positive cash flow. Robust liquidity should sustain the company.
  • ROST and broader financial markets are up by double digits Y/Y. Some of the upside could be priced in. I rate ROST a hold.
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Consumer Spending Falls For 2nd Month To Lowest Level Since 2009
Photo by Justin Sullivan/Getty Images News via Getty Images

The pandemic severely hurt business activity. Shelter-in-place policies left millions of Americans stuck at home in order to stem the spread of COVID-19. The lion's share of shopping occurred online. I was concerned about

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The Shock Exchange has a B.A. in economics and MBA from a top 10 business school. He has over 10 years of M&A / corporate finance experience. Currently head the New York Shock Exchange, financial literacy program based in Brooklyn, NY.His book, "Shock Exchange: How Inner-City Kids From Brooklyn Predicted the Great Recession and the Pain Ahead", predicted pain ahead for the U.S. economy and financial markets.In 2014 the law firm of Kirby, McInerney, LLP brought a class action lawsuit against Molycorp, Inc. for "materially misleading statements" in its financial statements. Kirby, McInerney used investigative journalism from the Shock Exchange to buttress its case. That's the discipline the Shock Exchange brings to every situation he covers for SA.

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Comments (2)

Its no longer a strong buy and agree it is a hold at 125. Longer-term, the company is a great executor and has stable, seasoned, successful management.

Reading the tea leaves, the company is experimenting with a smaller footprint for stores which can dramatically expand their potential TAM. Remember they slowed the expansion in 2021 but are testing a smaller store. My guess is they ramp it up in 2022+ which will probably cause some excitement.

A possible bear case is a break in the business model due to the demise of the department store model and rise of direct to consumer sales for its previous reservoir of inventory - Longer term it bears watching. But, back to my original comment, the CEO has been there a long time and seen a lot --- I'd give her the benefit of the doubt in managing through it. She's smarter than me.
Mbrot profile picture
ROST is flat from feb last year. IMO we are set up for a major breakout. Ross is an un-appreciated re-opening stock. It behaves a money tree, and I'm going to let it grow. If you do not own it, take a position now, if it ever falls you get a chance to buy cheaper, but if you wait, IMO you will never see prices this low again.
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