Off-price retailer Ross Stores
Fiscal fourth-quarter revenues, which an included an extra week, spiked 14% to $1.6 billion, though same-store sales inched up only 1%. Keep in mind that during the year-ago period, same-store sales increased 6%.
Ross has spent several years investing in information technology systems to improve its inventory management, forecasting, and labor costs. The company has also focused on reducing markdowns and getting better pricing on distribution. So far, the results are encouraging: The gross profit margin increased 60 basis points, and operating margin improved 1.15 percentage points year over year.
Those margin improvements may sound like rounding errors, but they're significant for a company of Ross' size. The margin improvements helped boost fiscal fourth-quarter net income by 35%, to $0.66 per share.
At 20 times earnings, Ross is in line with the valuations of peers like TJX Companies
With operating cash flows exceeding $506.8 million last year, Ross not only has the capital to build more stores, but also to buy back stock and pay dividends. The company increased its dividend by 25%, and it plans to buy back $200 million in stock in 2007. Foolish investors prize these qualities, and they make Ross a solid pick for any Foolish watch list.
Dress for success in further Foolishness:
- At Ross, a Discount in the Margins
- Ross Stores Fails to Impress
- Ross Stores Ramping Up: Fool by Numbers