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Ross Stores (ROST) Q2 Earnings & Sales Beat Estimates
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Shares of Ross Stores, Inc. (ROST - Free Report) jumped more than 5% following the robust second-quarter fiscal 2023 results, wherein the bottom and top lines beat the Zacks Consensus Estimate. Both metrics grew year over year. Despite inflation recovery, results gained from positive customer response. However, low-to-moderate income customers continue to reel under higher costs.
Ross Stores’ earnings of $1.32 per share beat the Zacks Consensus Estimate of earnings of $1.17. The metric also improved 19% from the $1.11 per share reported in the second quarter of fiscal 2022.
Total sales of $4,935 million rose 7.7% year over year and surpassed the consensus estimate of $4,745 million. In second-quarter fiscal 2023, comps improved 5%.
Strength in cosmetics and accessories aided the top line with broad-based growth across all geographic areas. dd’s DISCOUNTS’ performance was driven by better merchandise and moderating inflation.
Consequently, this Zacks Rank #3 (Hold) company’s shares have gained 7.9% in the past three months compared with the industry's growth of 3.4%.
Image Source: Zacks Investment Research
Q2 Insights
The cost of goods sold (COGS) of $3,569.4 million increased 5% year over year and exceeded our estimate of $3,476.8 million. As a percentage of sales, COGS was 73.3%, marking a year-over-year contraction of 100 basis points (bps). This was mainly driven by a higher merchandise margin, lower ocean freight costs and a 60-bps decline in domestic freight, which more than offset higher occupancy and distribution expenses.
Selling, general and administrative (SG&A) expenses of $807.9 million advanced 21% year over year and beat our estimate of $743.8 million. SG&A, as a percentage of sales, expanded 180 bps year over year to 16.4%. The increase resulted from higher incentive costs and store wages, which more than offset higher sales.
The operating margin remained flat year over year at 11.3% in second-quarter fiscal 2023.
Store Update
As of Jul 29, 2023, Ross Stores operated 2,034 outlets, including 1,722 Ross stores across 41 states, the District of Columbia and Guam, and 339 dd’s DISCOUNTS stores in 22 states.
In second-quarter 2023, the company opened 18 Ross and nine dd's DISCOUNTS stores. In fiscal 2023, it expects to open 100 stores, including 75 Ross and 25 dd’s DISCOUNTS. These openings do not include the plans to close or relocate 10 existing stores in fiscal 2023. For the fiscal third quarter, it intends to open 51 locations, including 43 Ross and eight dd’s DISCOUNTS locations.
Financials
Ross Stores ended the quarter with cash and cash equivalents of $4,583.6 million, long-term debt of $2,458.6 million, and total shareholders’ equity of $4,454.7 million.
The company bought back 2.2 million shares of common stock for $230 million in the fiscal second quarter. ROST is on track to repurchase the remaining $950 million under the existing plan in fiscal 2023.
Ross Stores, Inc. Price, Consensus and EPS Surprise
Driven by impressive quarterly results, management raised its second-half sales and earnings guidance. Comparable store sales for the third and fourth quarters of 2023 are expected to be up 2-3% and 1-2%, respectively. Total sales are anticipated to grow 4-6% year over year.
For the fiscal third quarter, earnings per share are envisioned to be $1.16-$1.21, up from the last-year quarter’s reported figure of $1.00. The operating margin for the fiscal third quarter is expected to be 10.3-10.5% compared with the last-year quarter’s reported figure of 9.8%, driven by gains from lower ocean and domestic freight costs, which more than offset increased incentive compensation and store wages.
Net interest income is projected to be $34 million, whereas it reported $2.8 million in the prior-year quarter, driven by higher interest rates and a strong cash balance. The tax rate is likely to be 25% and diluted shares outstanding are expected to be $337 million.
For fiscal 2023, comparable store sales are anticipated to be up 2-3%. Earnings are forecast to be $5.15-$5.26, whereas it reported $4.38 in the prior year.
The Zacks Consensus Estimate for BJRI’s 2023 sales and EPS indicates 5.6% and 405.9% growth, respectively, from the year-ago period’s reported levels. The company has a trailing four-quarter earnings surprise of 121.2%, on average.
Urban Outfitters, which engages in the retail and wholesale of general consumer products, currently sports a Zacks Rank #1. The expected EPS growth rate for three to five years is 18%.
The Zacks Consensus Estimate for Urban Outfitters’ current fiscal-year earnings suggests growth of 57.1% from the year-ago reported number. URBN has a trailing four-quarter earnings surprise of 12.2%, on average.
Walmart, which operates a chain of hypermarkets, discount department stores and grocery stores, currently carries a Zacks Rank #2 (Buy). The expected EPS growth rate for three to five years is 5.5%.
The Zacks Consensus Estimate for Walmart’s current financial-year sales suggests growth of 4.2% from the year-ago period’s actual. WMT has a trailing four-quarter earnings surprise of 12%, on average.
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Ross Stores (ROST) Q2 Earnings & Sales Beat Estimates
Shares of Ross Stores, Inc. (ROST - Free Report) jumped more than 5% following the robust second-quarter fiscal 2023 results, wherein the bottom and top lines beat the Zacks Consensus Estimate. Both metrics grew year over year. Despite inflation recovery, results gained from positive customer response. However, low-to-moderate income customers continue to reel under higher costs.
Ross Stores’ earnings of $1.32 per share beat the Zacks Consensus Estimate of earnings of $1.17. The metric also improved 19% from the $1.11 per share reported in the second quarter of fiscal 2022.
Total sales of $4,935 million rose 7.7% year over year and surpassed the consensus estimate of $4,745 million. In second-quarter fiscal 2023, comps improved 5%.
Strength in cosmetics and accessories aided the top line with broad-based growth across all geographic areas. dd’s DISCOUNTS’ performance was driven by better merchandise and moderating inflation.
Consequently, this Zacks Rank #3 (Hold) company’s shares have gained 7.9% in the past three months compared with the industry's growth of 3.4%.
Image Source: Zacks Investment Research
Q2 Insights
The cost of goods sold (COGS) of $3,569.4 million increased 5% year over year and exceeded our estimate of $3,476.8 million. As a percentage of sales, COGS was 73.3%, marking a year-over-year contraction of 100 basis points (bps). This was mainly driven by a higher merchandise margin, lower ocean freight costs and a 60-bps decline in domestic freight, which more than offset higher occupancy and distribution expenses.
Selling, general and administrative (SG&A) expenses of $807.9 million advanced 21% year over year and beat our estimate of $743.8 million. SG&A, as a percentage of sales, expanded 180 bps year over year to 16.4%. The increase resulted from higher incentive costs and store wages, which more than offset higher sales.
The operating margin remained flat year over year at 11.3% in second-quarter fiscal 2023.
Store Update
As of Jul 29, 2023, Ross Stores operated 2,034 outlets, including 1,722 Ross stores across 41 states, the District of Columbia and Guam, and 339 dd’s DISCOUNTS stores in 22 states.
In second-quarter 2023, the company opened 18 Ross and nine dd's DISCOUNTS stores. In fiscal 2023, it expects to open 100 stores, including 75 Ross and 25 dd’s DISCOUNTS. These openings do not include the plans to close or relocate 10 existing stores in fiscal 2023. For the fiscal third quarter, it intends to open 51 locations, including 43 Ross and eight dd’s DISCOUNTS locations.
Financials
Ross Stores ended the quarter with cash and cash equivalents of $4,583.6 million, long-term debt of $2,458.6 million, and total shareholders’ equity of $4,454.7 million.
The company bought back 2.2 million shares of common stock for $230 million in the fiscal second quarter. ROST is on track to repurchase the remaining $950 million under the existing plan in fiscal 2023.
Ross Stores, Inc. Price, Consensus and EPS Surprise
Ross Stores, Inc. price-consensus-eps-surprise-chart | Ross Stores, Inc. Quote
Outlook
Driven by impressive quarterly results, management raised its second-half sales and earnings guidance. Comparable store sales for the third and fourth quarters of 2023 are expected to be up 2-3% and 1-2%, respectively. Total sales are anticipated to grow 4-6% year over year.
For the fiscal third quarter, earnings per share are envisioned to be $1.16-$1.21, up from the last-year quarter’s reported figure of $1.00. The operating margin for the fiscal third quarter is expected to be 10.3-10.5% compared with the last-year quarter’s reported figure of 9.8%, driven by gains from lower ocean and domestic freight costs, which more than offset increased incentive compensation and store wages.
Net interest income is projected to be $34 million, whereas it reported $2.8 million in the prior-year quarter, driven by higher interest rates and a strong cash balance. The tax rate is likely to be 25% and diluted shares outstanding are expected to be $337 million.
For fiscal 2023, comparable store sales are anticipated to be up 2-3%. Earnings are forecast to be $5.15-$5.26, whereas it reported $4.38 in the prior year.
Stocks to Consider
Some better-ranked companies are BJ's Restaurants (BJRI - Free Report) , Urban Outfitters (URBN - Free Report) and Walmart (WMT - Free Report) .
BJ's Restaurants, which operates a chain of high-end casual dining restaurants in the United States, currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for BJRI’s 2023 sales and EPS indicates 5.6% and 405.9% growth, respectively, from the year-ago period’s reported levels. The company has a trailing four-quarter earnings surprise of 121.2%, on average.
Urban Outfitters, which engages in the retail and wholesale of general consumer products, currently sports a Zacks Rank #1. The expected EPS growth rate for three to five years is 18%.
The Zacks Consensus Estimate for Urban Outfitters’ current fiscal-year earnings suggests growth of 57.1% from the year-ago reported number. URBN has a trailing four-quarter earnings surprise of 12.2%, on average.
Walmart, which operates a chain of hypermarkets, discount department stores and grocery stores, currently carries a Zacks Rank #2 (Buy). The expected EPS growth rate for three to five years is 5.5%.
The Zacks Consensus Estimate for Walmart’s current financial-year sales suggests growth of 4.2% from the year-ago period’s actual. WMT has a trailing four-quarter earnings surprise of 12%, on average.