Investing in the right industries can significantly boost your portfolio's returns, and discount retail stores are a prime example. Affordable apparel and home goods may not sound like a moneymaking business idea, but there will always be solid demand for these goods. Sector leaders like Ross Stores (ROST +0.17%) and TJX Companies (TJX 0.67%) have stomped the broader market in the long run, and they seem well positioned for continued long-term growth.
Here's how these two discount retailer giants can help you reach that millionaire milestone in just a few decades.
NASDAQ: ROST
Key Data Points
Ross Stores: "Dress for Less"
Ross operates the largest off-price apparel and home fashion chain in the U.S., with 1,764 locations, offering name-brand and designer merchandise at 20% to 60% off department store prices. It also runs 345 dd's DISCOUNTS stores with moderately priced merchandise at 20% to 70% off.
The company sources its goods through direct purchases from manufacturers and suppliers. Ross looks for treasure troves of excess inventory, canceled orders, and overproduction to populate its flow of high-quality, in-season merchandise at deep discounts.
This opportunistic buying strategy allows Ross to provide significant savings on brand-name and designer items, and its "Dress for Less" tag line has become a cultural touchstone over the years. The company's price-centric business model is crystal clear to the average consumer.
The company's growth drivers include:
- Expanding footprint: Ross plans to open 90 new stores in 2024, including 75 Ross and 15 dd's DISCOUNTS locations, broadening its market reach and customer base.
- Popular product mix: Accessories and children's apparel are top-performing categories, driving consistent customer traffic and sales growth.
- Cultural appeal: The "Dress for Less" tagline resonates with shoppers, making Ross a go-to destination for brand-name and designer goods at significant discounts.
- Operational efficiency: By keeping distribution, incentive, and freight costs low, Ross maintains strong profit margins.
- Strong financial results: Ross increased its Q1 2025 earnings per share (EPS) by 34% year over year, while sales rose 8% to $4.9 billion. The report exceeded Wall Street's consensus estimates across the board.
NYSE: TJX
Key Data Points
TJX Companies: A high-end spin on bargain-bin goods
TJX operates several retail chains, including T.J. Maxx, Marshalls, and HomeGoods. These chains offer a wide range of products at discounted prices, but with a higher-end branding focus than the Ross Stores empire. With a carefully monitored brand portfolio and 4,972 stores across nine countries plus six international e-commerce sites, TJX is a formidable player in the discount retail sector.
The company's growth drivers include:
- Diverse brands and products: TJX carries a wide variety of brand-name and designer merchandise, offering customers the allure of high-quality goods at lower prices.
- Upscale shopping experience: With well-organized store layouts and an emphasis on the "treasure hunt" experience, Marshalls and T.J Maxx provide a more upscale shopping experience than most of their discount-store peers.
- International reach: The company's extensive international presence allows it to capitalize on global growth opportunities and mitigate regional economic fluctuations. The HomeSense and TK Maxx brands cast a growing shadow over markets like the U.K., Germany, and the Netherlands, with smaller but surging branches in Canada and Australia as well.
- Financial stability: Consistent financial performance and profitability make TJX an attractive option for long-term investors. In last week's first-quarter report, TJX showed a robust 3% same-store sales growth and a Street-stumping bottom-line profit.
A long-term investing strategy
Investing in the stock market can seem daunting, but a simple, automated strategy can make it manageable and effective.
You can build a million-dollar portfolio without beating the market at all. The S&P 500 (^GSPC 0.24%) index has seen a compound average growth rate of 10.4% in the last 35 years. Let's imagine investing $200 per month in an S&P 500 index fund or exchange-traded fund (ETF), setting it to reinvest dividends in more shares along the way and leaving it alone. You can automate the whole process and largely forget about it.
Thanks to the magic of compound returns over many years, you should pass the million-dollar mark after 37 years with $1.06 million in your pocket. And it only took $88,800 of your hard-earned money to get there -- assuming the legendary index keeps up its average growth rate for a few more decades.
How TJX and Ross fit into a simple wealth-building plan
Past performance is never a guarantee of future results, and the discount retail sector has seen its fair share of bankruptcies. That being said, TJX and Ross have been around for decades, and their stocks have crushed the S&P 500, both recently and in the long haul.
Check out the compound annual growth rates (CAGR) of these discount retail giants over a variety of time periods. These are total returns, which includes reinvestment of dividends:
|
Stock or Index |
30-Year CAGR |
10-Year CAGR |
1-Year Total Return |
|---|---|---|---|
|
Ross Stores |
22.4% |
16.4% |
39.2% |
|
TJX Companies |
19.4% |
15.6% |
34.7% |
|
S&P 500 |
10.6% |
12.9% |
28.2% |
Data collected from YCharts on 5/27/2024. Table by author.
So these stocks can slow way down and still bring you that million-dollar growth in 36 years or less. Or they can keep up their market-beating growth and bring you to that goal much faster.
Again, no promises that Ross and TJX will keep firing on all cylinders for several more decades, but the companies have a pretty clear history of long-term success. Including them in a diversified portfolio of long-term winners could help you make $1 million.
