Ross Stores reports spectacular Q1

Home goods a key performer at off-pricer

Pleasanton, Calif. – Off-price retailer Ross Stores registered strong sales and profit gains in the first quarter, with the home department helping to lead the way.

“Shoes and home were the top performing merchandise categories, both with same store sales gains in the high-teen percentage range” said Michael Balmuth, vice chairman and ceo, during yesterday's quarterly conference call.

Ross saw a 14% upswing in sales to $1.9 billion for the quarter ended May 1, with comps up 10%.

Earnings per share of $1.16 were 61% above EPS of 72 cents for the same period one year ago. Record Q1 net earnings of $142.3 million were 56% ahead of year-ago profit of $91.4 million.

During the question-and-answer period, John Call, svp and cfo, emphasized the scope of home in the company’s merchandise mix. “Home is slightly over 20% of our business,” he said in response to an analyst’s question, “and probably could end up over time in the mid-20s.”

Giving a nod to macro-economic conditions and to consumers rabid for value purchases, Balmuth lauded his team for its execution improvements, which included faster supply chain metrics, higher turnover rates on goods, and the recently completed rollout of Ross Stores’ micro-merchandising strategy.

“Operating margin for the quarter grew about 320 basis points to a record 12.1%,” he noted. This was achieved by a 230 basis point improvement in gross margin and a 90 basis point cut in SG&A costs.

Call said the Q1 comp gain of 10% was “driven by high single-digit growth in the number of transactions, combined with a low single-digit decrease in the size of the average basket.”

In spite of the strong performances, Ross Stores held to its previous guidance for the second quarter and issued a conservative outlook for the full fiscal year. The company projects Q2 sales to rise 7% to 8%, helped by the addition of 12 new Ross Dress for Less and three new dd’s Discount locations; comps to rise 3% to 4%; and EPS of 95 cents to 99 cents.

Full 2010 fiscal year guidance is for EPS growth of 16% to 20% to $4.11 to $4.24, up from $3.54 in fiscal 2009. Ross execs stressed that second-half and full-year comparisons of both earnings and comp gains will be up against strong prior-year levels, much more so than Q1 comparisons.

Ross currently operates 967 Ross Dress for Less doors and 54 of the lower-priced dd’s Discounts, and asserts dd’s Discounts has not reached “critical mass” in terms of store count. Balmuth did say dd’s Discounts should be “slightly profitable in 2010, before allocations for corporate expense.” The chain is slated to grow by 15 locations this year, which represents a somewhat accelerated expansion over previous plans.



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See the September 2017 issue of Home & Textiles Today. In this issue, we look at the Attack of the Killer Third Tier: Monster off-pricers are climbing to the top of the food chain, plus New Products: 40 pages of new products debuting at the New York Home Fashions Market; Home Stores: TJX unveils first U.S. HomeSense store; Clicks to Bricks: Boll & Branch moves from digital to physical retailing; and much more... See details!