Clothing Discounters Offer a Retail Bright Spot

By Austen Hufford and Ezequiel Minaya Features Dow Jones Newswires

Discount clothing sellers offered investors a rare alternative Thursday to woes in the retail sector, saying bargain-hunting customers are continuing to shop at value-focused stores.

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Shares of Ross Stores Inc. and Gap Inc. -- boosted by its discount brand Old Navy -- jumped in post-market trading Thursday after they posted better-than-expected results.

Shares of Gap jumped 6.5%, undergirded by Old Navy, which was the only global brand in the company to post growing same-store sales for the quarter.

Shares of off-price clothing retailer Ross jumped 11% as it saw advancing sales for its latest three-month period, supporting the thinking that while online sellers like Amazon.com have hammered away at traditional retailers, shoppers will still visit brick-and-mortar stores to hunt through bins for deals.

"It's clear to us that the consumer continues to favor retailers that offer compelling value," Ross Financial Head Michael Hartshorn said on a call with analysts.

Gap Chief Executive Art Peck noted on his call that a majority of the company's total business comes from the value segment, including Old Navy and outlet stores. He said the company sees opportunities to invest, particularly in the value space.

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A number of other clothing retailers, especially mall-based shops, have struggled in recent years. Shares of L Brands Inc. dropped 3.6% Thursday after the parent of Victoria's Secret cut its earnings forecast late Wednesday.

Same-store sales -- a closely watched metric that tracks sales at established stores that haven't been recently opened or closed -- at Ross climbed 4% from the same quarter a year before. At Old Navy, same-store sales, which includes online sales, climbed 5%, while the metric retreated 1% at the eponymous Gap brand and shrank 5% at Banana Republic.

Earlier this week, TJX Cos, the parent of the T.J. Maxx, Marshalls and HomeGoods off-price chains, said sales excluding newly opened or closed locations rose 3%, extending a string of gains.

At Ross, revenue rose 7.9% to $3.43 billion in the latest quarter as net earnings increased to $316.5 million from $281.9 million a year before. Earnings were 82 cents on a per-share basis, up from 71 cents previously. Analysts polled by Thomson Reuters had expected revenue of $3.37 billion on adjusted earnings per share of 77 cents.

Gap saw revenue fall 1.4% to $3.8 billion, but came in above analysts' expectations of $3.77 billion. Profit increased to $271 million, or 68 cents a share, from $125 million, or 31 cents a share a year before. Gap saw adjusted profit per share of 58 cents, above the 52 cents analysts were expecting.

Write to Austen Hufford at austen.hufford@wsj.com and Ezequiel Minaya at ezequiel.minaya@wsj.com

(END) Dow Jones Newswires

August 17, 2017 19:12 ET (23:12 GMT)