Late last month, off-price retail giant TJX Companies (TJX -0.83%) reported another quarter of strong results. Comparable store sales surged 6% in Q4, the company's third consecutive quarter of 6% or better comp sales growth. This allowed TJX to keep earnings per share roughly flat despite facing significant cost pressures.

On Tuesday, Ross Stores (ROST -2.10%) reported slightly less impressive sales results but stronger earnings growth than its larger rival. Furthermore, the No. 2 off-price retailer is on track to continue its momentum in 2019.

Consistent performance continues

Ross Stores reported a 4% comp sales increase for the fourth quarter, building on a 5% comp sales gain in the prior-year period. Comp sales also rose 4% for fiscal 2018 as a whole. It was the fourth consecutive year that comp sales growth held at that level.

EPS reached $1.20 at Ross Stores last quarter, or $1.13 excluding the impact of a one-time tax gain. That met the average analyst estimate and came in near the high end of management's most recent guidance range of $1.09 to $1.14. Adjusted EPS was $0.88 in the prior-year period. Most of Ross Stores' increase in adjusted EPS was driven by tax reform (which lowered the company's federal tax rate), but even on a fully comparable basis, EPS rose about 7% last quarter.

For the full year, adjusted EPS surged to $4.19 from $3.24 a year earlier, including a roughly $0.70 tailwind from tax reform.

Check out the latest earnings call transcript for Ross Stores.

The exterior of a Ross Dress for Less store.

Ross Stores posted solid sales and earnings growth last year. Image source: Ross Stores.

Management noted that the company could have done even better last quarter but was hindered by a merchandise planning misstep that impacted the company's ladies apparel business. Ross Stores didn't have the right merchandise assortments in its stores to fully meet customer demand, leading to lost sales and incremental pressure on its operating margin.

A solid 2019 forecast

Weakness in the ladies apparel business will continue to pressure sales and earnings in the first quarter. Ross Stores expects 0% to 2% comp sales growth this quarter, with EPS between $1.05 and $1.11 compared with $1.11 a year ago.

Fortunately, off-price retailers can typically recover quickly from merchandise mistakes. For example, TJX ran into trouble in the fall of 2017 but recovered to post strong results throughout the past year. Thus, Ross Stores is likely to be back on track by the second quarter.

For the full year, Ross Stores is projecting EPS between $4.30 and $4.50 on a 1% to 2% comp sales gain. This forecast is probably quite conservative. In recent years, the company has routinely exceeded the high end of its initial full-year sales and earnings forecasts.

Ross Stores plans to open approximately 75 Ross Dress for Less stores and 25 dd's DISCOUNTS stores during fiscal 2019, while closing or relocating 10 stores. That will expand its store base by more than 5% from the 1,717 locations it had at the end of fiscal 2018. The company also raised its quarterly dividend by 13% to $0.255 per share and announced that it plans to repurchase $2.55 billion of stock over the next two fiscal years, up from $1.95 billion over the past two years.

A solid choice for investors

Right now, TJX is posting more impressive sales growth than Ross Stores. TJX stock is also slightly cheaper, trading for 20 times forward earnings compared with 21 times forward earnings for Ross Stores.

However, Ross Stores probably has more runway for growth than TJX, due to its smaller size. Indeed, management believes the company could eventually operate 3,000 stores in the U.S., up 75% from its year-end total of 1,717.

Additionally, Ross Stores offers investors more stability than its larger rival. First, it earns higher margins. Last year, its pre-tax margin was 13.7% compared with 10.8% for TJX. Second, whereas Ross Stores operates stores only in the U.S., TJX gets nearly a quarter of its revenue from international markets -- introducing risks from exchange rate volatility, economic weakness abroad, and (in the near term) Brexit.

With that in mind, Ross Stores looks like a solid bet for investors who want to gain exposure to the booming off-price sector without taking on the additional risk associated with TJX's global footprint.