Ross Stores Surpasses Sales and Comp Sales Forecasts

Retailer opened 31 stores in June and July 2016

r1Discount retailer Ross Stores Inc. (NASDAQ: ROST) announced its Q2 FY16 financial results on August 18th, 2016. Ross Stores reported FY15 revenues of $11.9 billion.

The Dublin, California-based Company operates Ross Dress for Less, the largest off-price apparel and home fashion chain in the U.S. with 1,317 locations in 34 states, the District of Columbia and Guam as of July 30th, 2016. Ross offers name brand and designer apparel, accessories, footwear and home fashions at savings of 20% to 60% off department and specialty store regular prices every day. The Company also operates 184 dd’s DISCOUNTS in 14 states as of July 30th, 2016 that feature a more moderately-priced assortment of name brand apparel, accessories, footwear and home fashions at savings of 20% to 70% off moderate department and discount store regular prices every day. Read more about Ross Stores’ financial results below.

Q2 FY16 financial highlights

r2During Q2 FY16, Ross Stores’ sales rose 7.2% to $3.18 billion, surpassing forecasts of $3.13 billion, and growing more than the 5.1% reported in Q1 FY16. Comparable store sales were up 4% during Q2 FY16, beating predictions of a 1% to 2% range. The Company posted stronger-than-expected results, defying mounting concerns for the wider retail sector, as many of its peers reported dismal sales and announced their plans to shut down low-traffic stores. The discount retailer bucked the trend of decreased foot traffic, which has plagued other retailers as they struggled to keep pace with the growing reliance of consumers on online players.

With both sales and comp sales ahead of forecasts, the Company achieved higher merchandise gross margin, driven by a 50 basis point increase in operating margin to 14.4%, up from 13.9% in the same period last year.

In all, Ross Stores said its profit grew to $281.9 million, or $0.71 per share, in Q2 FY16, a growth from $258.6 million, or $0.63 per share, a year earlier.

H1 FY16 financial highlights

For H1 FY16, Ross Stores’ sales grew 6% Y-o-Y to $6.27 billion, with comparable store sales up 3% versus a 5% gain in the same period last year. Net earnings grew to $573 million from $541 million in the prior year period, while EPS jumped 9% to $1.44 versus the year-ago period.

Other highlights

r3Store update: At the end of Q2 FY16, Ross operated 1,501 stores as compared to 1,424 stores in the year-ago quarter. On July 18th, 2016, Ross Stores announced the opening of 24 Ross Dress for Less and 7 dd’s DISCOUNTS stores across 15 different states in June 2016 and July 2016. These new locations are part of the Company’s 2016 expansion plans to add approximately 70 Ross and 20 dd’s DISCOUNTS locations throughout the year.

The 31 new locations include the addition of 10 stores in the newer Midwest market, with 4 of those locations in Wisconsin. Over the long-term, the Company plans to open 2,000 Ross Dress for Less and 500 dd’s DISCOUNTS locations.

r4Share repurchase: During Q2 FY16, Ross repurchased 3.1 million shares and 6.2 million shares during H1 FY16, for an aggregate price of $176 million in the quarter and $352 million year-to-date. The Company plans to buy back a total of $700 million in common stock during FY16 to complete a two-year $1.4 billion authorization.

Guidance for FY16

The stronger quarter prompted the discount retailer to raise its FY16 earnings guidance to a range of $2.69 a share to $2.75 a share, up from a previous forecast of $2.63 per share to $2.72 per share.

For Q3 FY16, the Company is forecasting a same store sales gain of 1% to 2% on top of a 3% increase in the prior year, and EPS of $0.52 to $0.55 compared to $0.53 in the year-ago period. For Q4 FY16, the Company is forecasting same store sales to grow 1% to 2% versus a 4% increase last year, with EPS of $.73 to $.76, up from $0.66 in the year-ago period.

Stock Performance

r5Ross Stores’ stock ended the day at $62.24, slipping 0.10%, at the close on Wednesday, August 31st, 2016, having vacillated between an intraday high of $62.42 and a low of $61.82 during the session. The stock’s trading volume was at 2,604,329 for the day. The Company’s market cap was at $24.92 billion as of Wednesday’s close.

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