* Shares down 2.0 pct; TJX falls 0.3 pct

(Adds CEO comment, details on inventory, byline; updates share
activity)

By Phil Wahba

NEW YORK (Reuters) - Ross Stores Inc
reported a higher quarterly profit, helped by bargain hunters
and lean inventories, but the off-price retailer said sales
could be flat or lower during the holidays.

Ross and larger rival TJX Cos Inc buy excess
inventory from vendors and sell the brand name goods at prices
much as 60 percent lower than department stores. Both companies
have won market share at the expense of other U.S. retailers
during the economic slowdown.

Sales at Ross stores open at least a year rose 4 percent
during the second quarter ended on July 31, while overall sales
rose 8 percent to $1.91 billion. The strongest categories
included housewares, dresses and shoes.

But Chief Executive Officer Michael Balmuth warned that the
chain's gains could slow and said it was still difficult to
predict the pace of economic recovery. Retail executives
catering to high- and low-income consumers made similar remarks
this week, saying spending could slow in the second half of the
year.

Shares of Ross fell 2.0 percent on Thursday, while TJX
slipped 0.3 percent

Ross said it expected same-store sales to rise 1 percent to
2 percent in the current quarter, but to be flat to possibly
down 1 percent in the fourth quarter, including the key holiday
selling season.

TJX, whose stores include the T.J Maxx chain, reported a
higher profit on Tuesday and warned same-store sales could be
flat or down this quarter and next. Both TJX and
Ross face tough comparisons, having logged strong gains in the
year-earlier periods.

Ross's net income in the second quarter rose 25 percent to
$129.3 million, or $1.07 per share, from $103.4 million, or 82
cents per share, a year earlier.

The analysts' average forecast was $1.07 per share,
according to Thomson Reuters I/B/E/S.

The Pleasanton, California-based company said much of the
profit increase came from leaner inventory, which fell 1.1
percent.

Ross expects third-quarter earnings of 79 cents to 83 cents
per share, compared with Wall Street estimates of 80 cents. For
the full year, the retailer forecast a profit of $4.18 to $4.27
per share, compared with analysts' expectations of $4.20.
(Reporting by Phil Wahba; editing by John Wallace and Lisa Von
Ahn)