August 18, 2017
Ross Stores is breaking all the rules of traditional retail, and it has become an unstoppable force as a result.
Many of the retailer’s stores are messy and disorganized, with aisles of empty shelves and bare walls.
In some stores, the fitting rooms are “dirty,” the service is “horrible,” and merchandise is mislabeled, ink-stained, broken, or damaged, according to an analysis of dozens of customer reviews on Yelp.
But in those same reviews, customers complaining about the state of the stores admit they love shopping in them for the “insane” deals.
“I LOVE SHOPPING AT ROSS!” one customer wrote on Yelp, adding that she feels like she’s “robbing the bank” when she finds deals there.
Another wrote: “I love this place for cheap clothes. It’s just always so dirty, dank and full of screaming children.”
The company’s most recent quarter far outshined the rest of the industry, with overall sales gains of 8% to $3.4 billion, and same-store sales gains of 4%, on top of 4% growth last year.
The company’s shares soared more than 10% on the news Friday.
Ross owns more than 1,500 stores in 37 states under the banners “Ross Dress For Less” and “dd’s DISCOUNTS,” and it’s opening more than 80 stores annually at a time when department stores are losing sales and shutting down hundreds of stores.
Ross has generated a loyal following with its steep discounts on designer brands and its constantly revolving selection of merchandise. This keeps shoppers coming back again and again.
“Their customers are of an older demographic who have been loyal for years and will not be easily taken over by Amazon,” said Eric Ervin, CEO of Reality Shares, an ETF issuer and research firm whose funds own holdings in Ross Stores. “Even nine years after the financial crisis, the American consumer still wants to shop with an attention toward saving money while purchasing high-quality products.”
The chaotic store environment, which would be scorned at a traditional department store, adds to the excitement of the treasure hunt at Ross.
For many customers, scoring a good deal is made all the more satisfying when they spent time sorting through messy piles of clothes for a specific size or hunting down the only version of a specific table that has no nicks or scratches.
For this unique experience, Ross has become “unAmazonable,” — in other words, immune to the rise of Amazon, says Oliver Chen, an analyst for Cowen & Co.
In a research note, Chen said the company’s quarterly performance “adds to our conviction that the business model has un-Amazonable characteristics given a focus on offering exceptionally low prices, a treasure hunt bricks-and-mortar experience, and agility and speed to respond to up-trending and down-trending categories.”
Not only is Ross opening stores while department stores are shedding them, but the company is also opting to stay offline when most retailers are pouring money into their ecommerce operations.
Investors and analysts are encouraging this strategy for Ross. For most other retailers, it would be seen as a death wish.
“We believe Ross is a secular winner in the battle between moderate department stores and off-price retail,” Morgan Stanley analysts wrote in a note published Friday. “Consumers increasingly prefer the off-price ‘better brands at lower prices’ value proposition over moderate department stores’ private label merchandise despite the easier shopping experience.”Share