Ross wants to let you dress (and lots more) for less. A leading off-price apparel retailer (behind TJX Cos. and Kohl's), Ross operates about 1,200 Ross Dress for Less and dd's DISCOUNTS stores that sell mostly closeout merchandise, including men's, women's, and children's clothing, at prices well below those of department and specialty stores. While apparel accounts for more than half of sales, Ross also sells small furnishings, toys and games, luggage, and jewelry. Featuring the Ross "Dress for Less" trademark, the chain targets 18- to 54-year-old white-collar shoppers from primarily middle-income households. Ross and dd's stores are located in strip malls in more than 30 states, mostly in the western US and Guam.
Ross Stores operates two brands of off-price retail apparel and home fashion stores: Ross Dress for Less and dd's DISCOUNTS. Ross is the largest off-price apparel and home fashion chain, offering first-quality, in-season, name-brand, and designer apparel, as well as accessories, footwear, and home decor at between 20%-60% off department and specialty store regular prices. Launched in 2004, dd's DISCOUNTS serves one of the fastest-growing demographic markets in the US. The ultra-low-price spinoff, which offers brand-name apparel at a 20%-70% discount, has grown to about 115 locations in about 10 states, including big ones such as California, Florida, and Texas. The stores, which average 22,700 square feet, are located in strip shopping centers in urban and suburban neighborhoods.
The retailer operates four distribution processing facilities: two in California and one each in Pennsylvania and South Carolina. These distribution centers are the sole source of its stores merchandise. By 2015, Ross Stores anticipates investing in two new distribution centers and purchasing one of its distribution centers when its lease expires in 2013. Additionally, the discounter owns two and leases three other warehouse facilities for packaway storage. To distribute merchandise to stores on a regular basis, Ross Stores enlists the help of third-party cross docks. Shipments are made by contract carriers to stores between three and six times per week depending on the location.
Sales and Marketing
Ross Stores, which spent $68 million on advertising in fiscal 2013, relies primarily on television as a medium to share the Ross Dress for Less value proposition with its current and potential customers. The company believes that television advertising is the most efficient and cost-effective medium while it continues to use additional channels to build brand awareness. However, advertising for its dd's DISCOUNTS stores is focused on new store grand openings and local grass roots initiatives.
More than a quarter of Ross Stores are located in its home state of California, where discount department store operator Kohl's is expanding rapidly after acquiring about 30 stores that once belonged to defunct discount retailer Mervyn's. On the East Coast, Ross opened a new 1.3-million-sq.-ft. distribution center in South Carolina to support its growth in the southeastern US.
Ross Stores has seen its sales jump to $9.7 billion in fiscal 2013 from $5.9 billion in fiscal 2008.
The fast-growing chain saw its fiscal 2013 (ends January) sales increase more than 13% vs. the prior year, while its profits were up by 20% during the same reporting period. Ross Stores points to its launch of 74 net new stores during the year and a 6% increase in comparable store sales (defined as stores that have been open for more than 14 complete months).
Ross Stores' off-price business model appears to be just the right fit for both during and after the recession. Amid strong sales the retailer is adding stores. Over the past four years, the company has added about 235 new locations, including many dd's DISCOUNTS shops. New markets for the retailer include Illinois and the District of Columbia. Indeed, it entered Illinois in a big way in October 2011 with 12 stores in the Chicago area.
Going forward the company plans to continue adding stores in existing markets, while opening Ross and dd's stores in new markets. To boost its relationships with suppliers, Ross does not require them to provide markdown/promotional allowances or return privileges. This, combined with opportunistic purchases (closeouts such as manufacturer overruns and canceled orders), allows the company to obtain large discounts on merchandise. As a result, Ross Stores' customers typically pay 20% to 60% less than department and specialty store prices. Ross holds down costs by offering minimal service and few frills inside its stores.
The investment firm FMR LLC owns about 13% of the company's shares.