Retail / Off-Price Apparel · Deep dive

Ross Stores, Inc.

The perennial No. 2 in American off-price — 2,328 stores across Ross Dress for Less and dd's DISCOUNTS, an $81B market cap, and a first quarter fiscal 2026 that printed the largest comp of its 40-year history days after a new CEO from Boot Barn took the seat Barbara Rentler held for eleven years.

well positioned

A 17% Q1 fiscal 2026 comp (the largest in the company's 40-year history), a raised FY26 EPS guide to $7.50-$7.74, and a growth runway to a stated 3,600-store steady state give Ross the strongest near-term operating momentum in off-price — even as >50% China sourcing exposure, a first-year CEO from a very different retailer, and Shein/Temu apparel deflation are real and unresolved risks.

My take ★★ Very interesting ★ Interesting − Maybe ✗ Not interesting

Snapshot

Ross Stores is the second-largest off-price retailer in the United States, behind TJX and ahead of Burlington, selling brand-name apparel, footwear, home goods and accessories at 20-60% below department-store prices. As of mid-2026 it operates 1,952 Ross Dress for Less stores in 44 states and 376 dd’s DISCOUNTS stores in 23 states, ~111,000 associates, an ~$81.7B market cap and $22.8B of fiscal 2025 net sales (year ended January 31, 2026, +8% year over year, +5% comparable). Reshaped in 1982 by a Mervin Morris-led investor group that took a six-store Bay Area discounter and turned it into one of the strictest small-box, high-turn off-price operators in the country. IPO’d on NASDAQ in August 1985, launched dd’s DISCOUNTS in 2004, and ran under Barbara Rentler from February 2014 until February 2, 2025, when James Conroy — Boot Barn’s growth-era CEO — took the seat. His first quarter (Q1 fiscal 2026, ended May 2, 2026) printed a 17% comp and 13.4% operating margin, the largest single-quarter comp in Ross’s 40-year history.

Founding story

The Ross name is older than the company. Morris “Morrie” Ross opened a single women’s-apparel store in San Bruno, California in 1950 and sold it in 1958. By 1982 the chain had drifted to six stores with an unclear identity. That August, Mervin Morris — founder of Mervyn’s, the department-store chain he had built from a 1949 San Lorenzo store to hundreds of doors before selling to Dayton-Hudson in 1978 — led an investor group that bought it. Morris installed Stuart Moldaw as chairman and Don Rowlett as president and let them build the operating model. Moldaw had founded Pic-A-Dilly, Country Casuals and The Athletic Shoe Factory (and later co-founded Gymboree); Rowlett had built J. Brannam, F.W. Woolworth’s captive off-price experiment, into a 36-unit chain. Between them they knew the closeout market, the box economics and the buying discipline off-price needed. They converted the six junior department stores into full off-price units — the first of their kind in California — and hit 107 stores in three years and 156 by decade’s end. Ross went public on NASDAQ in August 1985 as ROST.

The second formative decision came in 2004: rather than acquire an existing chain, Ross built dd’s DISCOUNTS in-house, opening the first three stores in Vallejo, San Leandro and Fresno on August 14, 2004, to reach a lower-income shopper the flagship banner did not naturally hit. dd’s now runs 376 units across 23 states, and management’s stated long-term target is 700 dd’s alongside 2,900 Ross doors — 3,600 in total, versus 2,328 today.

How it works

The mechanics are simple, the discipline is hard. Ross does not commit to seasonal orders months in advance at full wholesale. A concentrated buying organization out of Dublin and New York scours the market for closeouts: brand overstocks, cancellations, factory runs the department stores did not buy, packaway held for reintroduction. Purchases are opportunistic, in-season, and often in oddly shaped quantities. Goods flow into stores as a constantly rotating assortment on warehouse-style fixtures with no fixed walls between categories — any store can widen a department when a good lot lands.

The stores themselves are the marketing. Boxes are ~25,000-30,000 gross square feet in mostly Sunbelt strip centers, deliberately staffed thin, with the fixtures budget spent on quantity and turn. There is essentially no e-commerce: Ross ran a small ross.com pilot in the early 2010s and shuttered it. Unlike TJX (which runs Sierra as a real digital business), Ross has explicitly decided the treasure hunt does not translate profitably online. Real estate is generational: leases in second-generation 1990s power centers at rents well below what full-price specialty pays, and one of the fastest new-box paybacks in retail.

The 2025-2026 macro adds a twist that helps and hurts at once. Off-price buyers can absorb inventory that full-price importers refuse to place under new tariff schedules — creating unusually attractive closeout supply — but Ross itself sources over 50% of its direct imports from China, so its own goods carry the same duties. Management has been running a “China-plus-one” push into Vietnam, India, Malaysia and Bangladesh, with limited visibility on when duty pressure resolves.

Product and business overview

Ladies (~26-27% of net sales in recent 10-Ks) — the historical anchor category and the merchandising crown jewel; the widest closeout market and the highest inventory-turn risk.

Home accents, bed and bath (~25-26%) — the fastest-growing category over the past decade, giving Ross a real if smaller answer to HomeGoods.

Men’s (~14%), accessories, lingerie, fine jewelry and cosmetics (~14%), shoes (~13%), children’s (~7-8%) — the balance. Coverage is broad by design so any single closeout lot lands in a live department.

Ross Dress for Less (banner one) — 1,952 stores across 44 states as of mid-2026; the flagship value-plus-brand-name pitch.

dd’s DISCOUNTS (banner two) — 376 stores in 23 states; more moderate assortment, first-quality name-brand goods at 20-70% off, aimed at a household-income demographic below the Ross core shopper. Run as a distinct P&L with its own buyers.

No e-commerce channel of scale. Physical-only, deliberately. This is a moat when store traffic holds and a limitation when it does not.

Business model and pricing

Revenue is booked at the register on merchandise sales; no membership, no subscription, no meaningful digital layer. Fiscal 2025 net sales were $22.8B (+8%), on a 5% comparable-store gain, translating to $2.15B of net income and 11.9% operating margin — down from a pre-pandemic peak of ~13-14% but well above Burlington’s ~6% and comparable to TJX pretax margin at scale. Diluted EPS was $6.61, dinged by about $0.16 of tariff-related cost management called out explicitly. The pitch is 20-60% below department-store regular price on branded apparel at Ross and 20-70% below moderate/discount-store price at dd’s.

Fiscal 2026 guide, after the Q1 raise: comparable-store sales +6-7% on top of +5% last year, diluted EPS $7.50-$7.74 (+13-17%). Capital allocation is return-heavy: a new two-year $2.55B share repurchase authorization approved March 2026 (21% larger than the completed $2.1B program), and a quarterly dividend raised 10% to $0.445 (annualized $1.78). Ross has never cut its dividend, including through 2020.

Traction over time

The Q1 fiscal 2026 print is the number the bull case leans on and the number the bears distrust. A 17% comp against Wells Fargo’s mid-single-digit expectation is exceptional even accounting for calendar and weather help, and Ross explicitly attributed it to double-digit traffic growth across income, ethnicity and age cohorts — a broadening, not a narrowing, of the customer base. Management guided the rest of fiscal 2026 to a more normal 6-7% comp trajectory, so the Q1 print is not embedded in forward numbers.

Market analysis

The US off-price channel — TJX, Ross, Burlington, Ollie’s, Nordstrom Rack, Saks OFF 5TH and the department-store off-price arms — has been the fastest-growing bricks-and-mortar apparel format for two decades. Off-price runs closer to $130-140B in 2026 US retail sales, taking share from department stores continuously since the 2000s and, more recently, absorbing a re-shored value-consumer trip from Amazon and dollar stores. Structural tailwinds: (1) supplier chaos — every tariff surprise, department-store bankruptcy or brand-DTC pivot creates fresh closeout supply; (2) trade-down cycles — off-price gains share in every recession and never gives it back; (3) real-estate access — the death of mid-tier mall specialty leaves prime power-center boxes available. Structural headwinds: (1) apparel deflation from Shein and Temu resets the entry-price benchmark below Ross; (2) sourcing concentration in China means the “off-price wins tariffs” story is partly narrative — the goods carry the same duties; (3) the treasure-hunt trip is generational, and Gen Z discovery has moved to the For You Page.

Competitive intel

The competitor table sits in the frontmatter; the structural read is that Ross’s position is unusually strong within its category and unusually exposed outside it. TJX is the only peer at scale — bigger, more diversified, higher home-goods mix — but lost the comp race in Q1 fiscal 2026 by 13 points, an unusual gap where TJX normally wins on merchandising depth. Burlington is running the Ross playbook under a former Ross COO but still six-plus points behind on operating margin. Ollie’s is a real closeout competitor for non-apparel packaway, expanding into former Big Lots real estate. Below the category, Amazon, Walmart, Costco and Five Below contend for the same wallet in a downturn without replicating the model. Above it, Nordstrom Rack and Saks OFF 5TH address a higher price band. The genuinely new pressure is Shein and Temu, which redefined the price of a $15 top and moved discovery off the sales floor. Ross’s answer — physical brand-name closeouts at deep discount, thousands of new SKUs a week — is defensible but not extensible; it does not travel to a phone.

History and evolution

• 1950 — Morris “Morrie” Ross opens a women’s apparel store in San Bruno, California; sells in 1958.
• August 1982 — Mervin Morris (Mervyn’s founder) leads an investor group buying the six-store Bay Area Ross chain; Stuart Moldaw named chairman, Don Rowlett president; conversion to off-price begins.
• August 1985 — IPO on NASDAQ as ROST at ~100 stores.
• 1988-1995 — Sunbelt expansion; ~300 stores and $1.4B revenue by end of 1995.
• August 14, 2004 — dd’s DISCOUNTS launches (Vallejo, San Leandro, Fresno).
• February 3, 2014 — Barbara Rentler named CEO, succeeding Michael Balmuth (CEO since 1996).
• 2019 — Michael Hartshorn promoted to Group President and COO.
• 2020 — Pandemic closures drive Ross’s first modern comp decline (-14%); no dividend cut.
• October 1, 2021 — Adam Orvos promoted to CFO.
• October 28, 2024 — James Conroy announced as next CEO.
• February 2, 2025 — Conroy takes over; Rentler moves to advisory role through March 2027.
• May 2025 — Ross withdraws FY25 annual guidance citing tariff uncertainty.
• October 1, 2025 — William Sheehan becomes CFO; Orvos retires.
• March 2026 — FY25 results: $22.8B revenue (+8%), EPS $6.61; $2.55B new buyback + 10% dividend raise.
• May 21, 2026 — Q1 FY26: +21% sales, +17% comp, EPS $2.02, 13.4% operating margin — largest comp in company history; FY26 guide raised.
• June 2026 — Wells Fargo downgrades to Equal Weight at $245.
• August 20, 2026 — Q2 FY26 earnings release scheduled.

What people say

The case for. Bulls point to the Q1 fiscal 2026 print — the largest single-quarter comp in Ross’s 40-year history, with double-digit traffic growth across income, age and ethnic cohorts, operating margin 130-160 bps above plan, and a raised full-year EPS guide (Ross investor release, May 21, 2026). The median sell-side note frames Ross as the best-positioned off-price operator into a soft consumer given tariff-induced closeout supply, trade-down behavior, the two-banner structure that reaches both moderate and lower-income shoppers, and heavy capital return — a $2.55B buyback and 10% dividend raise announced March 2026. Management’s own runway math (2,900 Ross plus 700 dd’s) implies roughly 55% more units at some of the highest operating margins in US retail.

The complaints. Three places. Glassdoor’s 11,000+ Ross reviews (~3.3/5 in 2026, down 4% year over year) return relentlessly to chronic understaffing: “labor shaving” scheduling under a fixed payroll budget, three-person closing shifts, high turnover and burned-out HR staff. Customer-facing forums (Trustpilot, Yelp, Consumer Affairs, TikTok’s “Ross store messy” tag) hammer the physical experience: aisles of empty shelves, damaged and ink-stained merchandise, “always just one cashier” lines to the back of the store, dirty fitting rooms. Yahoo Finance’s 2025 headline: “One of the ugliest stores in retail is crushing its competition.” On the sell-side, Wells Fargo’s June 2026 downgrade to Equal Weight from Overweight at $245 flagged valuation after the Q1 re-rating; Seeking Alpha argued tariffs add “another huge layer of uncertainty” given over half of direct imports come from China. And the CEO transition itself is a live risk — an outside operator running a $22B off-price merchandising machine in Year One is not a profile Ross has ever run before.

Outlook: well positioned or at risk?

Well-positioned. Not without real risks, but the balance of evidence lands here.

The core case: Ross is producing double-digit sales growth and 13% operating margin in the current quarter, has 55% unit-growth headroom on its 3,600-store target, throws off enough cash to fund $1.275B a year of buybacks plus a raised dividend, and operates in the one bricks-and-mortar format that structurally benefits from the disruption hurting everyone else. Every tariff surprise, brand cancellation and department-store bankruptcy creates fresh closeout supply. Every stretched middle-income household is a Ross trade-down. Every dollar Shein and Temu take from entry-price apparel comes off Old Navy and Forever 21, not a $12 branded top at Ross.

The risks. First, >50% China sourcing exposure at a moment of unstable tariff policy — a real gross-margin liability the China-plus-one push has only partly resolved. Second, the CEO transition: Conroy built Boot Barn — a lifestyle brand — not an opportunistic-closeout merchandising machine, and his first tariff-driven margin quarter and first weak-consumer quarter are still to come. Third, the physical experience is a brand liability at the moment shoppers have unlimited-supply alternatives. Fourth, the sell-side has already re-rated after Q1, so the stock is priced for continued outperformance.

What flips the call. If merchandise margin compresses more than ~100 bps over the next four quarters and the “off-price wins tariffs” narrative fails to show up in gross margin. Or if Q1 turns out to be a one-quarter phenomenon and comps revert to 3-4% while Conroy has to prove out a new merchandising posture. Neither is the base case today.

How a challenger would attack it

Attack the experience Ross refuses to fund. Ross’s cost discipline is also its softest surface: three-person closing shifts, “always just one cashier,” ink-stained merchandise, a TikTok tag devoted to how messy the stores are, and a Yahoo Finance headline calling it one of the ugliest stores in retail. A challenger runs the same opportunistic-closeout buying model but spends the labor dollars Ross shaves — clean, curated, well-staffed treasure hunt at the same 20-60% discounts — and takes the shopper who wants the deal without the dig. The second vector is digital discovery on top of physical fulfillment: Ross has deliberately zero e-commerce and Gen Z discovery lives on the For You Page, so a challenger that pushes real-time, store-level inventory drops to social — this week’s lots, this store, today — converts the FYP into foot traffic in a way Ross’s no-digital doctrine structurally forbids; reversing it would mean rebuilding systems and admitting a decade-old strategic call was wrong. Third, sourcing: over half of Ross’s direct imports come from China, so a challenger built on domestic closeouts, returns liquidation and near-shore supply carries no tariff overhang and can price into Ross’s duty-inflated gross margin. Ross can’t counter quickly — its margin math depends on exactly the thin labor and China-heavy buys under attack.

Same playbook, new buyer

Off-price for the price bands and channels the big three skip. The clearest open shift is upmarket: Nordstrom Rack and Saks OFF 5TH are hobbled by their full-price parents, leaving premium and contemporary-brand closeouts without a disciplined independent operator — a “Ross for $80-200 price points” faces no healthy incumbent, and Ross won’t follow because its box economics, buyer network and dd’s-to-Ross ladder are tuned to moderate goods. Second, the dd’s playbook — first-quality name brands at 20-70% off for lower-income households — is a proven internal launch Ross has run in only 23 states with a 700-store ceiling; a Latino-focused or rural-market variant in the states dd’s hasn’t reached borrows a formula the incumbent has validated but is expanding at only ~25 doors a year. Third, geography: the small-box, high-turn, strip-center model barely exists in Mexico or Southeast Asia, where brand-hungry value consumers and growing closeout supply chains mirror 1980s America — and Ross, physical-only and wholly domestic for 40 years, has shown zero appetite for international complexity while it still has 55% unit runway at home. That runway is precisely why the adjacencies stay unguarded.

Sources and further reading

• Ross Stores Reports Robust First Quarter Sales and Earnings Results, Significantly Exceeding Guidance — Ross Stores IR, May 21, 2026. Q1 FY26 +17% comp, +21% sales, EPS $2.02, operating margin 13.4%, raised FY26 guide.
• Ross Stores Reports Fourth Quarter Earnings Well Above Guidance — Ross Stores IR, March 2026. FY25 $22.8B revenue, EPS $6.61, new $2.55B buyback, 10% dividend raise.
• Ross Stores Names James G. Conroy as Next Chief Executive Officer — Ross Stores IR, October 28, 2024. CEO transition; Rentler advisory role.
• Ross Stores Announces CFO Succession Plan — Ross Stores IR, February 20, 2025. William Sheehan succeeds Adam Orvos October 1, 2025.
• Ross Stores Inc. Tariff Challenges and Strategic Pivot Impact — Monexa, July 16, 2025. Over 50% China sourcing exposure; China-plus-one strategy; 45 bp Q1 2025 merchandise-margin decline.
• Ross Stores kicks off 2026 store openings — Mass Market Retailers, 2026. FY26 plan: ~110 net openings (85 Ross + 25 dd’s); long-term 2,900 Ross + 700 dd’s target.
• The TJX Companies, Inc. Reports Q2 FY26 Results — TJX IR, August 2026. TJX consolidated Q2 FY26 comp +4%; HomeGoods +9%; Marmaxx below plan.
• Ross Leads in Q2 2026 as Off-Price Growth Concentrates at the Value End — Placer.ai, 2026. Foot-traffic data showing Ross leading off-price in Q2 2026.
• Ross Stores Slides as Recent Analyst Downgrade and Profit-Taking Weigh on Shares — Quiver Quantitative, 2026. Wells Fargo downgrade to Equal Weight; $245 price target.
• One of the ugliest stores in retail is crushing its competition — Yahoo Finance, 2025-2026. Physical-experience critique of Ross’s chaotic store standard.
• Ross Stores Reviews (11,183) on Glassdoor — Glassdoor. Employee reviews averaging ~3.3/5 with recurring understaffing themes.
• History of Ross Stores, Inc. (FundingUniverse) — FundingUniverse. 1982 buyout, Moldaw/Rowlett, 1985 IPO, expansion timeline.
• Ross Stores Launches New Off-Price Concept (dd’s DISCOUNTS) — Ross Stores IR, 2004. dd’s DISCOUNTS launch and target demographic.