Ross Foresees 2,000 Stores

The 25,000-sf dd's stores target consumers with household incomes of $30,000 to $40,000 per year, "one of the fastest-growing demographics in the country," Ross says. The dd's stores carry apparel, footwear and accessories for men, ladies, juniors, and children at discounts at 20% to 70%. "Although the value focus is similar to Ross, the brand content is different," Balmuth said, with "mostly moderate department store and national discount store brands."

Ross expects to end fiscal 2004 with 649 stores in 26 states and Guam, including the 10 new dd's Discounts, which would represent growth of 14% in its store count. The company expects to open 85 to 90 net new locations in 2005, including another 10 dd's in the second half of next year. "We have the potential to more than triple our existing store base over the next several years to over 2,000 Ross and dd's stores combined," Balmuth said.

Balmuth's comments about expansion came as Ross Stores Inc. reported earnings of $38.1 million ($0.26 per share) for the quarter ended Oct. 30, compared with $50.5 million ($0.33 per share) for the comparable period last year. Fiscal 2004 third quarter sales rose 5% to more than $1 billion, from $977 million for the quarter ended Nov. 1 last year, but comparable store sales for the period declined 3% from the previous year.

Balmuth blamed some of the slipping in Ross's financial performance to "merchant reporting issues related to our Core Merchandising System." He explained that the recently implemented merchandise reporting system suffered from problems that created merchandise imbalances, which in turn "negatively impacted both sales and operating margin during the third quarter." Nonetheless, Ross still shows strong cash flows that can fund its expansion, the company said in its earnings announcement.