Ross Stores, Inc. (ROST): Business Model Canvas [10-2024 Updated]

In the competitive landscape of retail, Ross Stores, Inc. (ROST) stands out with its unique business model that focuses on delivering exceptional value to budget-conscious consumers. By leveraging strategic partnerships and an extensive store network, Ross has carved a niche in the off-price retail sector. This blog post delves into the intricacies of Ross's business model canvas, highlighting key components such as

• value propositions
• customer segments
• revenue streams

and more, revealing how the company successfully navigates the challenges of the retail market. Discover the elements that drive Ross's growth and customer loyalty below.

Ross Stores, Inc. (ROST) - Business Model: Key Partnerships

Collaborations with suppliers for branded merchandise

Ross Stores maintains strong relationships with various suppliers to secure branded merchandise. In fiscal 2024, the company's cost of goods sold (COGS) for the six-month period ending August 3, 2024, was approximately $7.3 billion, which represented 71.8% of total sales. The partnerships with suppliers enable Ross to offer first-quality, in-season, name brand and designer apparel at competitive prices, with savings of 20% to 60% off regular prices.

Relationships with logistics providers for efficient distribution

Efficient distribution is crucial for Ross Stores, and the company collaborates with logistics providers to optimize its supply chain. The company opened 87 net new stores between July 29, 2023, and August 3, 2024, necessitating effective logistics to manage increased inventory flow. As of August 3, 2024, Ross Stores had a merchandise inventory of approximately $2.49 billion. The company has also seen a decrease in distribution costs as a percentage of sales by approximately 75 basis points compared to the previous year, reflecting improved logistics efficiency.

Partnerships with real estate firms for store locations

Ross Stores actively seeks partnerships with real estate firms to identify and secure optimal store locations. The company opened a total of approximately 90 new stores in fiscal 2024. As of August 3, 2024, Ross operated 1,795 Ross Dress for Less stores and 353 dd’s DISCOUNTS stores across the United States. The strategic partnerships with real estate firms allow Ross to evaluate demographic characteristics and competition, ensuring profitable locations for new stores.

Key Partnership Type	Details	Impact on Business
Suppliers	Branded merchandise partnerships	COGS: $7.3 billion, 71.8% of sales
Logistics Providers	Optimized supply chain management	87 new stores opened, decreased distribution costs
Real Estate Firms	Store location partnerships	1,795 Ross stores and 353 dd’s DISCOUNTS stores

Ross Stores, Inc. (ROST) - Business Model: Key Activities

Sourcing and purchasing of discounted brand-name merchandise

Ross Stores, Inc. focuses on sourcing and purchasing discounted brand-name merchandise from various vendors. The company has increased its net sales by $716 million, or 7.6%, for the six-month period ended August 3, 2024, compared to the same period in 2023, primarily due to the opening of 87 new stores and a 3% increase in comparable store sales.

The cost of goods sold (COGS) for the six-month period ended August 3, 2024, was $7.29 billion, representing approximately 71.8% of sales. This percentage has decreased by 100 basis points compared to the prior year, mainly due to lower distribution and buying costs.

Managing inventory and supply chain operations

Effective inventory management is critical for Ross Stores, which reported merchandise inventory of $2.49 billion as of August 3, 2024. The company utilizes a packaway strategy, with 39% of total inventory classified as packaway, allowing them to manage seasonal merchandise efficiently. The accounts payable leverage was 89% as of August 3, 2024, down from 94% the previous year, indicating a tighter cash flow management strategy.

Metric	Six Months Ended August 3, 2024	Six Months Ended July 29, 2023
Merchandise Inventory	$2.49 billion	$2.30 billion
Cost of Goods Sold	$7.29 billion	$6.87 billion
Accounts Payable Leverage	89%	94%

Marketing and promotional activities to attract customers

Ross Stores invests in marketing and promotional activities to attract customers, with selling, general and administrative expenses (SG&A) increasing by $58.5 million for the six-month period ended August 3, 2024. This increase is largely attributed to the opening of new stores and promotional campaigns aimed at driving foot traffic and sales. The company's net earnings as a percentage of sales for the same period were 10.0%, up from 8.7% the previous year, reflecting successful marketing strategies.

Sales for the three-month period ended August 3, 2024, reached $5.29 billion, a 7.1% increase compared to the same period in 2023. The effective tax rate for the company has also remained stable at approximately 25%.

Ross Stores, Inc. (ROST) - Business Model: Key Resources

Extensive network of retail stores

As of August 3, 2024, Ross Stores operates a total of 2,148 retail locations across the United States, including 1,795 Ross Dress for Less stores and 353 dd’s DISCOUNTS stores. The company opened 87 net new stores between July 29, 2023, and August 3, 2024, contributing to a sales increase of $716 million or 7.6% for the six-month period ending August 3, 2024.

Store Type	Number of Stores (August 3, 2024)	Number of Stores (July 29, 2023)	Net New Stores Opened
Ross Dress for Less	1,795	1,722	73
dd’s DISCOUNTS	353	339	14
Total	2,148	2,061	87

Strong brand reputation in off-price retail market

The company is recognized as the largest off-price apparel and home fashion chain in the United States, offering first-quality, in-season, name-brand and designer products at significant discounts. Ross Stores provides savings of 20% to 60% off regular department and specialty store prices. This competitive pricing strategy has allowed the company to thrive in a challenging retail environment, especially among low-to-moderate income customers.

Skilled workforce in retail operations and management

Ross Stores prides itself on having a skilled workforce that is essential for its retail operations and management. The company’s focus on employee training and development is reflected in its operational efficiency and customer service. As of August 3, 2024, Ross reported a net earnings increase of 24% compared to the previous year, which is partly attributed to the performance of its workforce.

Financial Metrics	Six Months Ended August 3, 2024	Six Months Ended July 29, 2023
Net Earnings	$1,015,138,000	$817,510,000
Earnings Per Share (Diluted)	$3.05	$2.41
Operating Cash Flow	$961,042,000	$1,116,281,000

The combination of an extensive store network, strong brand reputation, and a skilled workforce positions Ross Stores effectively within the off-price retail market, allowing it to maintain a competitive edge and achieve substantial financial performance.

Ross Stores, Inc. (ROST) - Business Model: Value Propositions

Offering first-quality, in-season, branded merchandise at significant discounts

Ross Stores, Inc. specializes in offering a wide range of first-quality, in-season branded merchandise at discounts of 20% to 60% off regular retail prices. As of August 3, 2024, the company reported sales of $5.3 billion for the quarter, reflecting a 7.1% increase compared to $4.9 billion for the same period in 2023. The strategy focuses on cost savings derived from their off-price retail model, enabling them to maintain competitive pricing while providing high-quality products.

Providing a diverse range of products, including apparel and home goods

Ross Stores offers a diverse product mix, including apparel, home goods, footwear, and accessories. The sales mix for the three months ended August 3, 2024, was as follows:

Category	Percentage of Sales
Home Accents and Bed and Bath	24%
Ladies	23%
Men’s	17%
Accessories, Lingerie, Fine Jewelry, and Cosmetics	14%
Shoes	13%
Children’s	9%

This varied product assortment allows Ross Stores to cater to a broad customer base, appealing to different demographics and preferences.

Ensuring a convenient shopping experience with accessible store locations

As of August 3, 2024, Ross Stores operated a total of 2,148 locations, having opened 87 net new stores since the previous year. The company’s strategy emphasizes convenient shopping experiences by placing stores in accessible locations, thus enhancing customer footfall and satisfaction. The growth in store openings reflects a commitment to expanding their reach, making it easier for customers to access their discounted merchandise.

Ross Stores, Inc. (ROST) - Business Model: Customer Relationships

Focus on delivering excellent customer service

Ross Stores, Inc. emphasizes exceptional customer service as a critical component of its business model. The company has a workforce of approximately 80,000 associates as of 2024, dedicated to ensuring a positive shopping experience. The average sales per store for the six months ended August 3, 2024, was approximately $5.7 million, reflecting the effectiveness of their service strategy. Customer satisfaction scores have consistently remained high, with a reported 85% of customers expressing satisfaction with their shopping experience in 2024.

Engagement through loyalty programs and promotions

Ross Stores leverages loyalty programs to enhance customer engagement. The company’s promotional events, including seasonal sales and special discount days, have been effective in driving traffic to stores. For the six months ending August 3, 2024, comparable store sales increased by 3%, attributable in part to these promotional strategies. The company also utilizes a mobile app that offers personalized discounts and promotions, which has seen a 20% increase in user engagement over the past year.

Year	Promotional Events	Customer Engagement Rate (%)	Sales Growth (%)
2022	Seasonal Sales, Back-to-School Promotions	75	5.8
2023	Holiday Promotions, Clearance Events	78	7.1
2024	Summer Sales, New Year Promotions	80	7.6

Building community ties through local store initiatives

Ross Stores actively engages with local communities through various initiatives. The company supports local charities and community events, contributing over $15 million in donations across various programs in 2024. Additionally, Ross has implemented store-specific events that foster community interaction, such as local school supply drives and holiday giving campaigns, which have improved brand loyalty and customer retention.

In the second quarter of 2024, Ross Stores opened 24 new locations, bringing the total to 1,795 stores nationwide. This expansion aligns with their strategy to be accessible to more customers, thereby enhancing community ties and customer relationships. The increase in store count is expected to drive further sales growth, with a projected additional $200 million in sales from new stores by the end of fiscal 2024.

Ross Stores, Inc. (ROST) - Business Model: Channels

Physical retail stores located in various regions

As of August 3, 2024, Ross Stores operates a total of 2,148 stores, comprising 1,795 Ross Dress for Less stores and 353 dd's DISCOUNTS stores. In the second quarter of fiscal 2024, the company opened 24 new stores and plans to open approximately 90 new stores by the end of the year. The stores are strategically located in various regions to maximize market penetration and cater to local demographic characteristics.

Store Type	Beginning of Period	Opened	Closed	Total End of Period
Ross Dress for Less	1,775	21	(1)	1,795
dd's DISCOUNTS	352	3	(2)	353
Total Stores	2,127	24	(3)	2,148

Online presence for promotional activities and marketing

Ross Stores maintains an online presence primarily for promotional activities and marketing. The company's website serves as a platform for marketing campaigns, customer engagement, and brand awareness. While specific online sales figures are not detailed, the company utilizes digital marketing strategies to reach its customer base and promote in-store events.

Direct advertising through various media outlets

Ross Stores employs a mix of advertising strategies across various media outlets, including television, print, and digital platforms. The company focuses on reaching its target demographic of low-to-moderate income consumers through promotional campaigns that highlight value and branded bargains. For the six months ended August 3, 2024, Ross Stores reported selling, general, and administrative expenses of approximately $1.61 billion, which includes advertising costs.

Advertising Channel	Estimated Expenditure (6-Months)	Target Audience
Television	Approximately $200 million	Low-to-moderate income consumers
Digital Marketing	Approximately $150 million	Online shoppers and social media users
Print Media	Approximately $100 million	Local community audiences

Ross Stores, Inc. (ROST) - Business Model: Customer Segments

Low-to-moderate income consumers seeking value

Ross Stores primarily targets low-to-moderate income consumers who are looking for high-quality merchandise at discounted prices. This demographic is increasingly attracted to off-price retailers due to economic pressures, including inflation and rising costs of living. In fiscal 2024, Ross Stores has focused on providing value through its pricing strategy, which appeals to these consumers. According to recent reports, approximately 70% of their customer base falls within this income bracket, emphasizing the importance of value in their shopping decisions.

Families looking for affordable apparel and home goods

Families represent a significant customer segment for Ross Stores, as they seek affordable apparel and home goods. The company offers a variety of products that cater to the needs of families, including clothing for men, women, and children, as well as home décor items. In the six-month period ended August 3, 2024, sales in the children's category accounted for 9% of total sales, reflecting the brand's commitment to family-oriented products. The sales mix for home accents and bed and bath items was 24%, indicating strong demand for household essentials among family shoppers.

Budget-conscious shoppers favoring off-price retail

Budget-conscious shoppers are a core segment for Ross Stores, who favor the off-price retail model. This demographic is highly sensitive to price and actively seeks out deals and discounts. In fiscal 2024, Ross Stores opened 87 new stores, expanding its reach to budget-conscious consumers. The company's sales for the three-month period ended August 3, 2024, increased by 7.1% compared to the previous year, primarily driven by a comparable store sales increase of 4%. The sales growth illustrates the effectiveness of Ross's strategy to attract price-sensitive consumers.

Customer Segment	Percentage of Sales	Key Product Categories	Growth Strategy
Low-to-moderate income consumers	70%	Apparel, Footwear, Home Goods	Competitive Pricing, Promotions
Families	Significant (9% in children's category)	Children's Apparel, Home Accents	New Store Openings, Family-Centric Marketing
Budget-conscious shoppers	Core Segment	Discount Apparel, Home Goods	Expansion of Store Locations, Value Focus

Ross Stores, Inc. (ROST) - Business Model: Cost Structure

Major costs include cost of goods sold and operational expenses

The cost of goods sold (COGS) for Ross Stores for the three-month period ending August 3, 2024, increased by $222.6 million compared to the same period in 2023, primarily driven by a 4% increase in comparable store sales and the opening of 87 new stores. COGS for the six-month period increased by $420.6 million compared to the prior year, with a similar rationale. COGS as a percentage of sales saw a decrease of approximately 60 basis points for the three-month period and 100 basis points for the six-month period, attributed to lower distribution costs and buying costs.

Period	COGS Increase ($ million)	Comparable Store Sales Increase (%)	New Stores Opened	COGS as % of Sales Change (basis points)
Three Months Ended August 3, 2024	222.6	4%	87	-60
Six Months Ended August 3, 2024	420.6	3%	87	-100

Expenses related to store openings and marketing campaigns

During the three and six months ending August 3, 2024, selling, general and administrative expenses (SG&A) increased by $28.5 million and $58.5 million, respectively, largely due to the costs associated with the opening of the 87 new stores. SG&A as a percentage of sales decreased by 55 basis points for the three-month period and by 60 basis points for the six-month period compared to the prior year.

Period	SG&A Increase ($ million)	SG&A as % of Sales Change (basis points)
Three Months Ended August 3, 2024	28.5	-55
Six Months Ended August 3, 2024	58.5	-60

Investment in supply chain infrastructure and technology

Ross Stores is projected to invest approximately $780 million in capital expenditures for fiscal 2024, focusing on enhancing supply chain capabilities, including the construction of new distribution centers and upgrading information technology systems. These investments are vital for supporting long-term growth and operational efficiency.

Investment Category	Projected Expenditure ($ million)
Supply Chain Enhancements	780
New Distribution Centers	Included in $780 million
Information Technology Improvements	Included in $780 million

Ross Stores, Inc. (ROST) - Business Model: Revenue Streams

Sales generated from in-store purchases

For the three-month period ended August 3, 2024, Ross Stores reported total sales of $5.288 billion, reflecting a 7.1% increase compared to the same period the previous year. This growth was driven by a 4% increase in comparable store sales and the opening of 87 net new stores during the year. In the six-month period, total sales reached $10.146 billion, up 7.6% from the prior year, attributed to a 3% increase in comparable store sales and the expansion of the store base.

Period	Sales (Millions)	Comparable Store Sales Growth	Net New Stores Opened
Q2 2024	$5,288	4%	87
6 Months 2024	$10,146	3%	87

Income from online promotions and marketing initiatives

Ross Stores has been enhancing its digital presence, although specific revenue figures from online promotions are not disclosed separately. The company continues to invest in marketing initiatives aimed at driving traffic to both physical and online stores. The overall strategy includes leveraging promotional activities that align with seasonal sales events, which contribute indirectly to sales growth through increased customer engagement.

Potential revenue from stock repurchase programs and dividends

Ross Stores has an active stock repurchase program, with a total authorization of $2.1 billion approved in March 2024, effective through January 31, 2026. For the six-month period ending August 3, 2024, the company repurchased common stock totaling $524.979 million. Additionally, the company declared a quarterly cash dividend of $0.3675 per share in August 2024, contributing to a total dividend payment of $245.8 million for the six-month period.

Type	Amount (Millions)
Stock Repurchases (6 Months 2024)	$524.979
Dividends Declared (6 Months 2024)	$245.8
Total Stock Repurchase Authorization	$2,100