Home a top performer at Ross Stores in Q1
May 19, 2011,
Pleasanton, Calif. - Home, along with dresses and shoes, was among Ross Stores' best categories during the first quarter, with single to low double-digit sales increases in these areas.
Ross' overall sales and earnings for the period were better than expected, noted vice chairman and ceo Michael Balmuth during the off-pricer's conference call with analysts, considering "very tough comparisons in the prior year."
Sales increased 7% to $2.075 billion, and comparable store sales were up 3% on top of a 10% gain in 2010.
Pack-aways were up for the quarter as Ross continues to take advantage of good buys in the marketplace. This, too, "helped us drive results in the first quarter," Balmuth said.
As a result, Ross is expanding its merchant organization as it continues "getting access to increasing availability of product in the marketplace," he said. "We're seeing sizable amounts of product in the marketplace. We don't know if it is directly attributable to the price increases or to sales not materializing to the degrees of forecasts. But it's a very good buying market out there, as our pack-away models show."
Pricing is not heavily affecting the retailer just yet, Balmuth said.
"We expect pricing to be more impactful as we move into the second quarter and through the back half," he continued.
Pricing inflation "like this is a disruption in our industry," he added. "We are fortunate that we have a flexible model and we can see how this plays out. We operate this business with a lot of liquidity."
To help make pricing decisions, Ross is becoming vigilant about how and where other retailers are raising prices.
"Manufacturers want retails to be raised in mainstream stores, and we're seeing them try to do this. But we don't know how effective it is or isn't yet. We have our eyes attuned to it," Balmuth said. "Now it's become a way of life [for us] to monitor everything going on as it relates to mainstream retails."
Looking at price increases by category, Balmuth said hikes depend on the product.
"Some have had a minimal impact, and others cotton-based [products] have had the highest," he went on. "In some cases, it's in the low double digits and others in the single. It all depends on the sector and manufacturer. Some are absorbing more and others are passing on more increases, that is as specific as I can be."
Store expansion remains a focus this year, when Ross plans to open about 60 Ross stores and about 22 dd's Discount units. This includes the retailer's initial entry into Illinois and Arkansas with about 15 locations set to open in the fall.
For its second quarter Ross is forecasting same store sales to increase 2% to 3% and earnings per share of $1.15 to $1.20, up from last year's $1.07. This represents 7% to 12% projected growth on top of 30% and 52% increases for the second quarters of 2010 and 2009, respectively.
In addition, the chain is raising its earnings per share guidance for the fiscal year to $5.16 to $5.31, above its initial guidance of $4.90 to $5.10. The updated range represents projected growth of 11% to 15% over earnings per share of $4.63 in fiscal 2010.
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