Ross Stores Gains In Q2, Raises Store Growth Potential

Ross Stores gained in the second quarter with increases in both sales and earnings. The off-price retailer also raised its long-term store growth potential for both its namesake chain and DD’s Discounts division.

Earnings per share for the second quarter ended August 4 were $1.04, up from $.82 in last year’s second quarter. Net earnings grew to $389 million, compared to $317 million in the prior year.

Net sales rose 9% to $3.7 billion, with comparable store sales up 5% over previous second quarter.

For the first half, earnings per share were $2.15, up from $1.64 last year. Net earnings were $808 million versus $638 million in the first half of 2017. Sales for the first six months of 2018 rose 9% to $7.3 billion, with comparable store sales up 4% over the 2017 first half. Both the second quarter and year-to-date earnings results include the benefit of tax reform legislation.

Barbara Rentler, CEO, Ross Stores, said, “We are pleased with the above-plan growth we delivered in both sales and earnings in the second quarter. Though better than expected, operating margin of 13.8% was down from last year as higher merchandise margin and leverage on occupancy and buying costs were more than offset by a combination of unfavorable timing of packaway-related expenses, higher freight costs, and this year’s wage investments.”

Looking ahead to the second half, the company gave a somewhat cautious outlook. Rentler said, “While we hope to do better, given our robust multi-year comparisons, we continue to forecast same store sales to grow 1% to 2% for both third and fourth quarters.”

The company did raise its outlook in terms of its future expansion prospects.

“We are excited to announce that we have raised our long-term projected store potential to 3,000 locations, up from the previous target of 2,500,” said Rentler. “This is based on our research that indicates we can now further increase penetration in both existing and new markets. As a result, we believe that Ross Dress for Less can grow to about 2,400 locations across the country, up from our prior target of 2,000, and that DD’s Discounts can ultimately become a chain of approximately 600 stores, versus our previous projection of 500. This higher store potential provides us with a considerable amount of long-term growth opportunities given our current store base of 1,453 Ross Dress for Less and 227 DD’s Discounts.”