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

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

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Take peek inside a Ross store in Virginia
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Take peek inside a Ross store in Virginia

Photo credit: Business Insider/Hayley Peterson

We were surprised to find the store in total disarray.

Business Insider/Hayley Peterson
 

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

Business Insider/Hayley Peterson

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

Business Insider/Hayley Peterson

The hat display was equally jarring.

Business Insider/Hayley Peterson

The socks clearly needed some attention, as well.

Business Insider/Hayley Peterson
 

And the rugs were a mess.

Business Insider/Hayley Peterson

Everywhere we looked, it was a disaster.

Business Insider/Hayley Peterson

Yet other parts of the store were completely empty.

Business Insider/Hayley Peterson
 

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

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.

Business Insider/Hayley Peterson

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

Business Insider/Hayley Peterson

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

Business Insider/Hayley Peterson
 

Bras covered the floor.

Business Insider/Hayley Peterson

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

Business Insider/Hayley Peterson

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

Business Insider/Hayley Peterson

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

Business Insider/Hayley Peterson

Most of the lone carts were empty.

Business Insider/Hayley Peterson

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

Business Insider/Hayley Peterson

They were both restocking the apparel department.

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.

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.

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.

Business Insider/Hayley Peterson

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

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.

Business Insider/Hayley Peterson

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

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.

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.

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.

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.

Business Insider/Hayley Peterson

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

Business Insider/Hayley Peterson
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