Why Ross Stores Stock Gained 20% in November

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What happened

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Off-price retailer Ross Stores (NASDAQ: ROST) stock jumped 20% higher last month, according to data provided by S&P Global Market Intelligence compared to a 2.8% increase for the broader stock market.

The rally put Ross Stores stock back above the market's 18% gain so far in 2017 after it had logged losses as great as 17% earlier in the year.

So what

November's gain followed an earnings report by the retailer that showed healthy operating trends heading into the holiday season. Comparable-store sales growth was 4% in the third quarter, while management had predicted a more modest expansion of between 1% and 2%. Ross Stores' earnings also beat expectations by rising to $0.72 per share due to surprisingly strong profit margins.

Now what

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CEO Barbara Rentler and her team reacted to the improving operating position by raising their forecast for the holiday season. They now expect Ross Stores to expand comps by between 2% and 3% rather than the 1% to 2% uptick they had predicted back in August. At the same time, struggles among full-price retailers, especially department-store chains, should generate opportunities for the company to secure quality inventory at a discount. That should help keep Ross Stores' positive growth streak alive, while supporting continued healthy returns for shareholders.

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Demitrios Kalogeropoulos has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.