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Ross Stores gains traction with new “value-oriented” customers

Pleasanton, Calif. – Ross Stores Inc. sounded a lot like Wal-mart Stores during the off-price chain’s presentation today at the Piper Jaffray Consumer Conference, attributing at least part of its recent successes to new “value-oriented” customers.

“If we look at what’s driven our business over the last 12 moths, closures of competitive retailers are certainly part of it,” explained Michael O’Sullivan, evp, chief administrative officer. “But there’s also clearly a new value orientation that the customer now has. Even a customer who didn’t shop at Mervyn’s but previously shopped at The Gap or a Macy’s or anywhere else is more value-oriented and more value conscious now than she was six months ago, and we’re benefitting from that.”

He added that Ross Stores also has made further strides by “executing well our assortments at our stores and inventory levels, and the flow of fresh products are helping our business.”

The company, which operates 922 Ross Dress for Less stores and 52 dd’s Discounts units, is considered the country’s second largest off-price retailer, having reported $6.5 billion in revenues in 2008.

Recently, the company reported record first-quarter earnings “that significantly outperformed our initial expectations and guidance,” said John Call, svp, cfo. Sales grew 9% to $1.7 billion, and same store sales were up 3%.

“We are pleased with our recent business trends and believe they are especially noteworthy considering today’s very challenging retail environment,” Call said.

O’Sullivan elaborated on inventory improvements of late.

“We’re operating on leaner inventory levels than in the past,” he said. “Average store [inventories] have been in the low double digits since last year,” and the retailer is planning to maintain this course this year.

While apparel remains at the crux of the chain’s merchandise mix, home is not far behind.

At both Ross Dress for Less and dd’s Discount stores, ladies’ apparel makes up about one-third of the assortment, and home occupies about one-fourth. The remaining categories – men’s, accessories, shoes and children’s – comprise 10% to 15% of total sales.

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