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The juniors section at the Ross Dress for Less store in Livermore. While most retailers have been watching their sales drop, Ross Dress for Less has had solid sales increases and raised its earnings guidance earlier this month.
WALNUT CREEK -- Galen Breisacher made his first visit to Ross Dress for Less the other night in search of a pair of shoes and belt he could buy cheap and fast.

"It's more affordable than Nordstrom," he said. "I'm trying to cut back on spending. I used to go to Nordstrom three times a month. Now I go maybe once a month."

Breisacher's introduction to Ross illustrates a major shift in consumer spending: trading down in response to economic concerns.

The trend maybe bad for retailers that are losing shoppers' dollars, but it has been a major boost for Pleasanton-based Ross Stores Inc.

The company raised its fourth-quarter earnings estimate by a penny to a range of 68 to 69 cents per share and reported that its January sales rose 9 percent. Sales at Ross stores open longer than a year, a benchmark used to measure a retailer's health, rose 1 percent in January.

In recent months, many retailers have lowered their estimates and posted sales drops.

"When our customers' budgets are pressured, that gives them more reasons to look to Ross," said Katie Loughnot, the company's vice president of investor relations. "As people look to save money, instead of going to a department store or specialty store, they come to Ross for the same brand-name fashions."

Ross is an off-price retailer, which means it sells merchandise for lower prices than manufacturers' suggested prices.

The goods they carry come directly from the same manufacturers that supply department stores and other retailers, many of which have started pulling back on merchandise orders.


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"Benefiting Ross is the fact that the merchandise availability in the market from the vendors has given them better status name brands," said Mark Montagna, an analyst with CL King & Associates in New York. "And, they are getting better quantities of those brands."

Ross is not allowed to name the brands it carries because of agreements with the manufacturers, but they carry similar labels as major department stores such as Macy's and Nordstrom.

The difference is price and the quantities available of a particular product. Many of Ross' items, for example, are one of a kind or aren't stocked in every size.

"Most of the time when you go into Ross, you expect everything to be 50 percent off; a lot times you can find stuff 70 percent off," said Lori Grannis, author of the blog BargainShopperLady.com. "Anytime I'm looking for a gift, I usually go to Ross. ... Say I only allotted $30 for a gift; I can go to Ross and get a $60 value for something nice, like maybe a wedding gift."

Loughnot said some of Ross' strongest performing categories include shoes, home decor, housewares and women's apparel, especially dresses. These categories have tanked at many other stores.

"We tend to weather this type of economic hardship compared with other retailers," she said.

Part of Ross' appeal could be that it's easier for shoppers to justify deals when they are trying to cut expenses or shop less.

"Look at this shirt; regular price is $32, and here it's $15," said Sandy Gonzalez of Walnut Creek, while shopping at Ross recently. "I come in frequently to see what's new, so I can score."

Another regular, Janet Brown of Danville, said she doesn't always find anything to buy but still wants to look.

"I don't want to pay full price at Macy's," she said. "I think everybody's forced (to) cut back right now. I'm just coming (in) less and buying less."

STATISTICS:

Ross Stores Inc.

Headquarters: Pleasanton

Annual Sales: $5.6 billion in 2006

Locations: 841 Ross Dress for Less and 52 dd's Discount stores

52-Week Stock Price Range: low $21.23, high $35.17

Current: $29.45

Blanca Torres covers retail and consumer issues. Reach her at 925-943-8263 or btorres@bayareanewsgroup.com. Read her blog, Shop Talk, at http://www.ibabuzz.com/shoptalk/.