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Ross Stores Inc. (ROST - Analyst Report), one of the leading off-price retailers of apparels and home accessories, came up with first-quarter fiscal 2013 earnings of $1.07 per share, surging 15.1% from 93 cents earned in the year-ago quarter, primarily attributable to its ability to attract bargain hunters who value both quality and price. However, quarterly earnings came in line with the Zacks Consensus Estimate.

Let’s Dig Deep

Net sales for the 13-week period ended May 4, increased 8% to $2,539.9 million from $2,356.8 million in the prior-year quarter. This also surpassed the Zacks Consensus Estimate of $2,523.0 million. Comparable store sales for the 13-week period ended May 4 increased 3% versus 9% growth registered for the 13 weeks ended Apr 28, 2012.

During the quarter, Juniors and Accessories were the beat-performing categories, while Pacific Northwest, the Southwest and Calif. registered strong growth on a regional basis.

Gross profit, in dollar terms, increased 9.4% to $741.1 million from $677.7 million in the year-ago quarter, while gross margin improved 40 basis points (bps) to 29.2%. The year-over-year expansion in gross margin was primarily due to lower cost of goods sold as a percentage of sales.

Operating income for the quarter elevated 11.6% to $379.2 million from the prior-year level of $339.9 million. Operating margin expanded 50 bps to 14.9% benefiting from higher merchandise gross margin and favorable timing of expenses.

Other Financial Aspects

Ross Stores ended the first quarter with cash and cash equivalents of $714.2 million compared with $741.1 million at the end of the prior-year quarter. During the quarter, Ross Stores generated $352.9 million of cash from its operational activities. This will enable the company to make capital investments, pay dividends and repurchase shares.

As of May 4, 2013, the company possessed long-term debt of $150.0 million and shareholders' equity of $1,875.3 million.

During the quarter, the company bought back 2.3 million shares for $138 million. Looking ahead, the company plans to repurchase stock worth $550 million in fiscal 2013, under its 2-year $1.1 billion authorization approved in Jan 2013.

Guidance

Based on the solid first-quarter results, Ross Stores initiated its comps and earnings forecasts for the second quarter and fiscal 2013. The company projects second-quarter comps to grow in the range of 1% to 2%. Further, the company expects earnings per share in the range of 89 cents – 93 cents, representing an increase of 10% - 15% against growth of 27% registered in the second quarter of 2012.

For fiscal 2013, the company now expects earnings per share of about $3.70 - $3.81, versus its initial projection of $3.65 - $3.80 and fiscal 2012 earnings of $3.53.

A Look at the Zacks Rank

Currently, Ross Stores carries a Zacks Rank #3 (Hold). Other stocks worth considering in the retail-wholesale space are Conns Inc. (CONN - Snapshot Report), Dillard’s Inc. (DDS - Analyst Report) and Big 5 Sporting Goods Corp. (BGFV - Analyst Report). All these stocks hold a Zacks Rank #1 (Strong Buy).

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