Fiscal 1Q16 earnings
Off-price retailer Ross Stores (ROST) is scheduled to announce its results for fiscal 1Q16, which ended April 30, 2016, on May 19. Analysts expect Ross Stores’ adjusted EPS to increase by 6.6% to $0.73 in 1Q16. The first quarter was the strongest period for Ross Stores in fiscal 2015. The company reported growth of 19.1% in its adjusted EPS in 1Q15.
Recap of past performance
Ross Stores’ earnings exceeded analysts’ estimates in all four quarters of fiscal 2015. In 4Q15, which ended January 30, 2016, Ross Stores’ adjusted EPS increased by 10% to $0.66. This growth was primarily driven by higher sales in the quarter.
The company’s adjusted EPS in fiscal 2015 increased by 13.6%, driven by higher sales and improvement in operating margin. The bottom line in fiscal 2015 also benefited from a reduction in the number of outstanding shares due to share repurchases. In fiscal 2015, Ross Stores repurchased 13.7 million shares of common stock for an aggregate purchase price of $700 million. Ross Stores constitutes 0.8% of the iShares Russell Mid-Cap Growth ETF (IWP).
The adjusted EPS of off-price retailers TJX Companies (TJX) and Burlington Stores (BURL) increased by 5.7% and 26.2%, respectively, in the fiscal year ending January 30, 2016. Upscale department store Nordstrom (JWN), which also operates off-price Rack stores, reported a 10.8% decline in its fiscal 2015 adjusted EPS due to the impact of growth investments. Overall, off-price retailers delivered a better performance than major department stores driven by the strength of their low-cost business models and attractive bargain deals.
Subdued company guidance
In March 2016, Ross Stores issued subdued guidance for fiscal 2016, citing uncertain and volatile macroeconomic and retail environments. The company expects its 1Q16 EPS to be in the range of $0.69–$0.72. This estimate range indicates that the company anticipates its 1Q16 EPS growth rate to be in the range of 0%–4%.
Ross Stores expects its fiscal 2016 EPS to be in the range of $2.59–$2.71, up 3%–8% compared to $2.51 in fiscal 2015.
In the next part of this series, we’ll look at the sales expectations for Ross Stores.