Ross Delivers Strong 4Q Results

Ross Stores Inc. ( ROST - Snapshot Report ) , one of the leading off-price retailers of apparels and home accessories, came up with robust fourth-quarter fiscal 2012 results. The company’s reported earnings for the quarter surged 25.9% to $1.07 per share from the year-ago comparable quarter’s earnings of 85 cents primarily attributable to its ability to attract bargain hunters who value both quality and price.

Ross Stores’ efforts to trim down costs and reduce store inventories also benefitted the results. However, quarterly earnings were in line with the Zacks Consensus Estimate.

Let’s Dig Deep

Net sales for the 14-week period ended Feb 2, increased 15.1% to $2,760.6 million from $2,397.9 million in the prior-year quarter. This also surpassed the Zacks Consensus Estimate of $2,751.0 million. Comparable store sales for the 13-week period ended Jan 26 increased 5% versus 7% growth registered in the year-ago period.

Gross profit, in dollar terms, increased 17.5% to $767.0 million from $652.8 million in the year-ago quarter while gross margin improved 55 basis points (bps) to 27.78%. The year-over-year expansion in gross margin was primarily due to lower cost of goods sold as a percentage of sales.

Increased merchandise gross profit, leverage on operating expenses and rise in comparable store sales led to an elevation of 21.2% in operating income to $377.0 million from the prior-year level of $311.1 million. Consequently, operating margin for the quarter expanded 69 bps to 13.66%.

Other Financial Aspects

Ross Stores, which faces stiff competition from Sears Holdings Corporation ( SHLD - Analyst Report ) , Costco Wholesale Corporation ( COST - Analyst Report ) and Dollar Tree Inc. ( DLTR - Snapshot Report ) ended the fiscal with cash and cash equivalents of $646.8 million compared with $649.8 million at the end of fiscal 2011. During the fiscal year, Ross Stores generated $979.6 million of cash from its operational activities. This will enable the company to make capital investments, pay dividends and repurchase shares.

At the end of fiscal 2012, the company possessed long-term debt of $150.0 million and shareholders' equity of $1,766.9 million.

During the 12-month period, the company bought back 7.5 million shares for $450.0 million and completed its $900 million share repurchase program, which was authorized in 2011. The board of directors of Ross Stores authorized a new $1.1 billion share repurchase program in January this year, which is expected to be complete by Jan 2015. Apart from this, the company hiked its regular quarterly cash dividend by 21.0% to 17 cents per share.

Headquartered in Pleasanton, CA, Ross Stores operates through 1,091 ‘Ross Dress for Less’ stores in 33 states, the District of Columbia and Guam, as well as 108 dd's DISCOUNTS stores across 8 states. Currently, the company retains a Zacks Rank #3 (Hold).