Most U.S. retailers produced better results last quarter than they did in the first few months of 2017. Nevertheless, the vast majority of them posted second-quarter adjusted earnings that were flattish or down on a year-over-year basis.

Ross Stores (NASDAQ:ROST) was the biggest exception. The off-price giant reported strong sales growth and a 15% jump in earnings per share, outpacing its larger off-price rival TJX (NYSE:TJX). With American consumers still laser-focused on getting the most bang for their buck, Ross Stores' success is likely to continue for the foreseeable future.

Sales momentum continues in the second quarter

Ross Stores bucked a retail industry sales slowdown in the first quarter with a solid 3% comparable-store sales increase. Even TJX -- usually a strong performer -- only managed 1% comp-sales growth during the same period, with a flat performance at its flagship "Marmaxx" segment, which consists of T.J. Maxx and Marshalls stores in the United States.

TJX bounced back last quarter, with comp sales up 2% at Marmaxx. Furthermore, a stellar 7% comp-sales increase at the smaller HomeGoods chain powered 3% comp-sales growth on a companywide basis.

However, Ross Stores still outpaced TJX, posting a 4% comp-sales gain in the second quarter. Total revenue rose 8% year over year, as Ross Stores continued to open new stores at a robust pace.

The exterior of a Ross Dress for Less store

Ross Stores posted strong 8% sales growth last quarter. Image source: Ross Stores.

Superior margin performance continues

Along with delivering steady sales growth, Ross Stores has also been producing excellent margin performance recently. In the first half of fiscal 2018, operating margin has reached 15%, up slightly from 14.9% a year earlier.

In the second quarter specifically, operating margin increased by 0.5 percentage points year over year, to 14.9%. This paved the way for Ross Stores' strong earnings per share (EPS) growth.

By contrast, segment margin for TJX's Marmaxx division fell to 14% in the first half of fiscal 2018 from 14.6% in the prior-year period. The other TJX divisions had even lower segment margins. Furthermore, the TJX segment-margin figures don't include corporate overhead, a significant expense that accounts for more than 1% of the company's revenue.

Ross Stores' stellar margin performance indicates that it's probably not as close to saturating the U.S. market as TJX. New T.J. Maxx and Marshalls stores are more likely to cannibalize existing ones than a new Ross Dress for Less location. Ross Stores is also benefiting from big inventory reductions that it has implemented over the past few years.

Plenty of room to run

Ross Stores has been posting double-digit earnings growth for years on end. The company has a very successful formula for long-term EPS growth: 5%-6% annual square-footage growth and 3%-5% comp-sales increases are sufficient to drive 7%-10% total revenue growth annually. Meanwhile, a program of steady share buybacks reduces the share count by 3%-4% every year.

As long as Ross Stores' profit margin remains strong, this formula will keep EPS growing at a double-digit rate. Given that American consumers are increasingly gravitating toward retailers like Ross Stores that are perceived to provide the most "value," this growth model could hold up for a long time.

Indeed, there's plenty of white space for Ross Stores to continue growing. The company only operates in 37 states today. It has no stores at all in several populous states, including New York, Ohio, Michigan, Massachusetts, and Minnesota. It also has plenty of room to grow in its existing markets -- especially for its smaller, lower-price "dd's DISCOUNTS" chain.

Despite Ross Stores' ample growth opportunities, the stock trades for less than 17 times forward earnings. This puts it at a slight discount to the broader market, surprisingly enough.

Ross Stores almost certainly has above-average earnings growth potential. This makes it a great stock for long-term investors to buy and hold. I plan to do just that.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.