Ross Hurt by Home in 3Q

Pleasanton, Calif. —The sale of home goods at Ross Stores was down in the mid-single digits during the third quarter and will take some time to rebound, stated executives during the company's third quarter conference call.

“The home business has struggled,” said Michael Balmuth, vice chairman and CEO. “Home is the slowest thing to come around as it's a slower turning business.” However, “We have confidence in our home strategy, and I don't see any need to change it.”

In another challenge, employees found their productivity hampered as they grappled with a new merchandising system implemented in April. The learning curve, in turn, had an effect on the company's lackluster third quarter numbers.

“We suffered lower-than-expected productivity as our associates learn the new technology,” Balmuth said. “There are new procedures and processes, and we will have new standards coming from IT.”

But tough times don't mean the company is backing off on growth plans. Ross grand-opened 10 of its new dd's Discounts stores this month in California.

dd's Discounts is an off-price concept targeting lower income consumers. The stores look to offer values on brand name fashions carried in moderate department stores.

The 25,000-square-foot stores carry apparel, footwear and accessories, as well as large sizes for both men and women, at discounts of 20 to 70 percent. dd's also offer bargains on an assortment of fashions and necessities for the home.

The stores, Balmuth said, “Are performing to our expectations,” adding that he sees the potential for adding 500 dd's locations over the next five to 10 years.

In terms of traditional Ross Stores, Balmuth said the company plans to open 85 to 90 net locations and 10 dd's locations in the second half of next year — or 1,000 stores by the end of 2008.

“Our long-term goal is 15 percent or better annual earnings per share growth,” he said.