This chain hailed by Wall Street as a ‘retail treasure’ is the most disastrous store we’ve ever seen

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Business Insider/Hayley Peterson

Ross Stores has been deemed a “retail treasure” and a “rarity” by Morgan Stanley analysts for its strong sales and earnings growth at a time of widespread distress in the industry.

The discount chain last week reported same-store sales growth of 3%, which was driven by higher traffic and increases in how much customers are spending per transaction.

Ross also reported better-than-expected earnings of $321 million, or $0.82 per diluted share, versus the $290.6 million, or $0.73 per diluted share that analysts had predicted.

We went to a Ross store in Richmond, Virginia, to see how this “treasure” is luring so many customers when department stores are seeing sales and traffic plunge.

We were surprised to find the store in total disarray.

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Business Insider/Hayley Peterson

It looked like a tornado had ripped through the shoe department.

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Business Insider/Hayley Peterson

Shoes were strewn all over the floor and benches, and there was a bra hanging from one shelf.

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Business Insider/Hayley Peterson

The hat display was equally jarring.

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Business Insider/Hayley Peterson

The socks clearly needed some attention, as well.

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Business Insider/Hayley Peterson

And the rugs were a mess.

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Business Insider/Hayley Peterson

Everywhere we looked, it was a disaster.

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Business Insider/Hayley Peterson

Yet other parts of the store were completely empty.

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Business Insider/Hayley Peterson

It looked as though the store was going out of business. (I checked, and it’s not.)

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Business Insider/Hayley Peterson

Merchandise was loosely grouped together into different sections like “toys,” “shoes,” and “furniture,” but it was hard to see any real organization beyond that.

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Business Insider/Hayley Peterson

In every department, there were empty shelves and items on the floor.

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Business Insider/Hayley Peterson

The tornado that had hit the shoe department apparently made its way over to the lingerie department, as well.

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Business Insider/Hayley Peterson

Bras covered the floor.

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Business Insider/Hayley Peterson

The kids’ section was a sad jumble of random toys.

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Business Insider/Hayley Peterson

And like the rest of the store, a quarter of the merchandise was left on the floor.

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Business Insider/Hayley Peterson

Throughout the store, we found a number of abandoned carts.

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Business Insider/Hayley Peterson

Most of the lone carts were empty.

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Business Insider/Hayley Peterson

We spotted only two employees in the store that weren’t working at the registers.

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Business Insider/Hayley Peterson

They were both restocking the apparel department.

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Business Insider/Hayley Peterson

Customers didn’t seem to mind the mess. There was a steady line of people checking out while we visited and more than 20 shoppers throughout the store.

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Business Insider/Hayley Peterson

The messy environment is likely a product of Ross’s efforts to keep prices low by investing less in labor and infrastructure (like construction and display costs) than full-priced department stores.

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Business Insider/Hayley Peterson

Those cost savings are passed on to consumers, who — based on Ross’s earnings — are willing to deal with a mess for the sake of discounts.

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Business Insider/Hayley Peterson

Ross’s success is a bright spot in an otherwise gloomy retail industry.

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Business Insider/Hayley Peterson

It has about 200 stores throughout the US, and plans to open 80-90 stores each year over the next several years.

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Business Insider/Hayley Peterson

Meanwhile, department stores like Macy’s, JCPenney, Sears, and Kmart are closing hundreds of stores.

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Business Insider/Hayley Peterson

While analysts are cheering the department store closures as necessary, they say Ross has plenty of room to grow its physical presence.

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Business Insider/Hayley Peterson

“Accelerating department store closures and weak fundamentals in remaining stores presents opportunity for Ross to continue to gain market share,” Morgan Stanley analysts wrote in a recent note.

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Business Insider/Hayley Peterson

Unlike most other stores, Ross is “immune” to the growth of e-commerce because of the treasure-hunt experience and low prices it provides customers in stores, the analysts said.

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Business Insider/Hayley Peterson

“Although there is some background noise in the industry which talks down the importance of physical shops, we believe that these remain a vital route to growth for off-price players, and see no reason why Ross should slow the pace of development,” Neil Saunders, CEO of GlobalData Retail, wrote last week.

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Business Insider/Hayley Peterson

So, American consumers: prepare to see a lot more stores like this.

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Business Insider/Hayley Peterson