Retail Concussion: Consumer Spending Smacked in the Head! (ROST)

We’re talking about Ross Stores today (NASDAQ:ROST), the discount specialists with 2000 outlets scattered across the land.

Why?

Because the stock has been climbing even as people stopped spending.

Clothing on Sale

Ross operates predominantly in the apparel space, and yes, we all need clothes.  But when a bricks and mortar retailer climbs by nearly 70% inside five months (44% in just over 30 days) because of an earnings beat based on declining expectations, you gotta stop and wonder.

Look at the guy’s cannon shoes!

More than that, the stock posted its best-ever two week gain in company history—and that in the midst of one of the worst consumer spending environments of the last decade.

Let’s look at the fundamentals.

• First, P/E is 28.14 (a clothes peddler, remember),
• Dividend Yield is a threadbare 1.07%,
• Price to Book is an extra-large 9.69, and, perhaps most importantly…
• EPS this year were DOWN 11.70%, while…
• Q/Q sales and earnings were DOWN 4.60% and 20.20%, respectively.

And they have the chutzpah to call it an ‘earnings beat’.

Of course, everyone is expecting the world over the next twelve months; that’s the job of corporations and the analysts who follow them.

But we’re not buying it.

As far as we’re concerned, this sucker’s ready for the hamper.

Here’s the chart—

May it be the will of Our Maker to keep our heads, not believe the lies, and profit from this one like a band of Baghdadi thieves!

With kind regards,

Hugh L. O’Haynew

Follow @HughLOHaynew