By Mihir Dalal

BANGALORE, Nov 19 (Reuters) - Off-price retailer Ross Stores Inc (ROST.O) posted an in-line quarterly profit, helped by better margins, but the company maintained its fourth-quarter earnings forecast which was below market expectations, sending its shares down 4 percent.

Ross Stores Spring 2009

Though the company posted solid third-quarter results, "the market was looking for a slight beat and looking for a raise to the 4Q outlook that didn't materialize," Jefferies analyst Randal Konik said in a note.

"While the guidance is likely conservative, with the company not raising their outlook, gives us signals that management is starting to rein in the expectations bar and that the level of earnings upside over the next 12 months could wane," Konik said.

Ross' low prices for branded merchandise, from clothes to home goods, have attracted consumers seeking deep discounts amid the recession, but there are questions if the company can maintain its market share as the economy starts coming off its lows, and consumer spending becomes less restrained.

Earlier this week, rival TJX Cos Inc (TJX.N) had posted a higher-than-expected quarterly profit but its shares fell as investors questioned whether the company could hold on to shoppers once the economy improves.

Ross confirmed its fourth-quarter earnings forecast of 88 to 94 cents a share, below analysts' average estimate of 99 cents a share, according to Thomson Reuters I/B/E/S.

Third-quarter net income was $105.1 million, or 84 cents a share, up from $57.3 million, or 44 cents a share, a year ago.

Operating margin grew about 385 basis points while gross margin rose by 340 basis points, helped partly by a fall in freight and distribution expenses as a percent of sales.

Earlier in November, the company reported quarterly revenue rose 12 percent to $1.74 billion.

Ross, like other off-price chains, buys excess apparel, accessories and home goods in bulk from manufacturers to sell them at deep discounts.

Shares of Ross were down $1.26 at $44.81 Thursday (19 November) morning on Nasdaq. (Editing by Jarshad Kakkrakandy)