How Does Ross Stores Make its Money?

Ross Stores is the second-largest off-price retailer in the United States, operating approximately 1,800 Ross Dress for Less and 350 dd’s DISCOUNTS stores across 43 states. Off-price retailers purchase brand-name and designer merchandise at deep discounts from manufacturers and department stores, then sell it to consumers at 20-60% below regular retail prices. Ross’s treasure-hunt shopping experience — where inventory constantly changes — drives frequent store visits and impulse purchases. The off-price model has proven extremely resilient across economic cycles: in recessions, consumers trade down to off-price, and in strong economies, they continue shopping for deals. Ross targets middle-income consumers, while dd’s DISCOUNTS serves more moderate-income shoppers.

Ross Stores (ROST) Business Model

Ross Stores Competitors

Ross Stores’s key competitors and comparable public companies in the retail sector include TJX Companies, Costco, Walmart, and Dollar General. Each of these companies competes for market share, investor attention, and revenue in overlapping segments. See how Ross Stores stacks up by comparing their revenue breakdown, margins, and growth metrics.

Revenue Breakdown

Segment20242023YoY Growth
Ross Dress for Less$18,500$17,500+5.7%
dd’s DISCOUNTS$2,400$2,100+14.3%
Total Revenue$21,200$20,400+3.9%

Ross Dress for Less — 87% of Revenue

The flagship off-price retail chain operating approximately 1,800 stores across 43 states, selling brand-name apparel, accessories, footwear, and home fashions at 20-60% below department store regular prices. Revenue grew 5.7% in 2024, driven by comparable store sales growth and new store openings. Ross Dress for Less targets the moderate-income consumer ($50,000-$100,000 household income) and positions itself as the value alternative to department stores like Macy’s, Nordstrom, and Kohl’s.

The off-price buying model is the key competitive advantage: Ross employs a large team of buyers who purchase merchandise opportunistically — taking advantage of manufacturer overruns, retailer order cancellations, late-season inventory, and packaging changes. Because these buying opportunities are unpredictable and time-sensitive, the store inventory constantly rotates, creating a “treasure hunt” shopping experience that drives frequent visits (Ross customers visit more frequently than department store shoppers). The model is also recession-resistant — during economic downturns, consumers trade down from full-price retailers to off-price, providing a counter-cyclical tailwind.

dd’s DISCOUNTS — 11% of Revenue

A smaller off-price chain operating approximately 350 stores, positioned below Ross Dress for Less to serve more moderate-income and lower-income consumers. Revenue surged 14.3% in 2024, making it the faster-growing segment. dd’s DISCOUNTS sells brand-name merchandise at even deeper discounts than Ross and targets customers with household incomes below $50,000. Stores are located in neighborhoods and strip malls serving lower-income communities, often in markets where Ross Dress for Less is not present.

dd’s DISCOUNTS has significant whitespace for expansion — management has identified a long-term target of 600+ stores (roughly double the current count), concentrated primarily in Sun Belt states and underserved urban markets. The segment’s rapid growth reflects both new store openings and strong comparable store sales as the value proposition resonates with budget-conscious consumers facing persistent inflation in food and housing costs.

Ross Stores (ROST) Income Statement

Metric20242023
Total Revenue$21,200$20,400
Cost of Revenue$15,200$14,700
Gross Profit$6,000$5,700
Operating Expenses$3,200$3,100
Operating Income$2,800$2,600
Net Income$2,100$1,900

All values in millions USD unless otherwise stated.

Financial data sourced from Ross Stores SEC Filings.

Ross Stores (ROST) Key Financial Metrics

  • Gross Margin: 28.3%
  • Operating Margin: 13.2%
  • Revenue Growth: 3.9%

Is Ross Stores Profitable?

Yes, Ross Stores is solidly profitable with margins that are strong for off-price retail. The 28.3% gross margin reflects the favorable economics of buying opportunistic merchandise at deep discounts from suppliers and selling it at prices still well below full retail — the spread between purchase cost and selling price is the off-price margin advantage. The 13.2% operating margin is impressive for a brick-and-mortar retailer and benefits from low-cost store formats (no-frills environments with minimal fixtures, racks rather than folded displays, limited signage) and low marketing spend (Ross spends very little on advertising compared to full-price retailers because treasure-hunt bargain-seeking drives organic store traffic). Net income grew 10.5% to $2.1 billion on 3.9% revenue growth, demonstrating operating leverage as same-store sales growth flows to the bottom line with minimal incremental costs.

Ross Stores (ROST): What to Watch

  1. Comparable store sales growth — Comp store sales growth is the most important operational metric. As consumers face persistent housing and food inflation, the trade-down effect to off-price retail should sustain positive comps, but any reversal would signal weakening demand.
  2. New store opening pace — Ross targets a long-term store count of 2,900+ Ross Dress for Less and 600+ dd’s DISCOUNTS locations (currently ~2,150 total). The pace of new store openings and new market entry determines long-term revenue growth.
  3. Merchandise margin trends — The quality and quantity of off-price buying opportunities (closeouts, cancellations, overruns) fluctuate with the retail environment. When full-price retailers struggle and over-order, off-price merchants have more buying opportunities at better prices.
  4. dd’s DISCOUNTS profitability and expansion — dd’s is the higher-growth, earlier-stage segment with significant whitespace. Demonstrating that dd’s can achieve Ross-like operating margins while doubling its store count is key to the long-term growth algorithm.
  5. E-commerce disruption (or lack thereof) — Ross has deliberately avoided e-commerce, arguing that the treasure-hunt, in-store experience cannot be replicated online and that off-price margins are too thin for shipping economics. This strategy has worked as competitors like TJX have also avoided significant online investment, but ongoing monitoring of online off-price competition (ThredUp, Poshmark, Amazon Outlet) is warranted.

Ross Stores (ROST) Financial Summary

Ross Stores is the second-largest US off-price retailer with approximately 1,800 Ross Dress for Less and 350 dd’s DISCOUNTS stores selling brand-name merchandise at 20-60% below regular retail prices. Revenue grew 3.9% to $21.2 billion in 2024, with the flagship Ross Dress for Less (87%) growing 5.7% and dd’s DISCOUNTS (11%) surging 14.3% as value-conscious consumers trade down from full-price retailers. The 28.3% gross margin and 13.2% operating margin are strong for brick-and-mortar retail, reflecting the favorable economics of opportunistic buying and low-cost store formats. Net income grew 10.5% to $2.1 billion. The growth story is about continued store count expansion toward 3,500+ total locations and the structural consumer shift toward off-price retail, which benefits during both strong and weak economies.