Despite financial pressure on a core shopper coping with the effects of inflation, Ross Stores posted higher than anticipated sales and earnings for the second quarter.
Net earnings were $527.1 million, or $1.59 per diluted share, versus $446.3 million, or $1.32 per diluted share, in the year-previous quarter.
A Zacks Investment Research analyst consensus estimate had earnings at $1.49 per diluted share and revenues at $5.25 billion.
Comparable store sales advanced 4% in the quarter year over year, the company reported. Total sales increased 7% to $5.29 billion from the year-prior period.
Barbara Rentler, Ross CEO, said in a conference call that cosmetics and children’s were the strongest merchandise categories in the quarter. Gains were geographically broad-based. She indicated that customers responded to a greater emphasis on conspicuous values at both the Ross Dress for Less and dd’s Discount banners.
In announcing the financial results, Rentler said, “Second quarter sales and earnings were above our expectations as our stronger value offerings resonated with our customers. Operating margin increased 115 basis points to 12.5% compared to the prior year period. Our improved profitability relative to last year benefited from higher sales and lower distribution and incentive costs that were partially offset, as expected, by lower merchandise margins.”
As she looks ahead to the remainder of 2024, Rentler said that Ross’s low-to-moderate income customers are dealing with higher prices on essentials, which will pressure their discretionary spending. For its part, she said, Ross faces tougher sales comparisons in the back half of 2024 amidst an uncertain economic climate.
“As such, we continue to maintain a cautious approach to forecasting our sales,” Rentler said. “For both the third and fourth quarters, we are planning comparable sales growth of 2% to 3% on top of 5% and 7% gains, respectively, in 2023. If the second half of 2024 performs in line with these sales projections, earnings per share for the third quarter are projected to be $1.35 to $1.41 versus $1.33 last year and $1.60 to $1.67 for the fourth quarter, compared to $1.82 in 2023. This updated earnings guidance now reflects additional efficiencies we expect to achieve in the second half of 2024.”
Rentler added, “Delivering the great values that our off-price customers have come to expect from us is more important than ever, especially given the continued pressures they face from the high costs of necessities. Thus, to maximize our prospects for ongoing market share gains, we will stay laser-focused on providing our shoppers the most quality branded bargains available in the marketplace.”
