Ross Stores’ Off-Price Model Helps Deliver Strong Q1 Sales

Impressive sales growth

Ross Stores (ROST) generated sales of $3.59 billion in the fiscal first quarter, ahead of the analysts’ expectation of $3.54 billion. Ross Stores’ sales grew 8.5% on a year-over-year basis in the fiscal first quarter while its same-store sales were up 3.0%.

Leading off-price retailer TJX Companies (TJX) reported sales growth of 11.6% in the fiscal first quarter of 2019, which ended on May 5. Off-price retailers are consistently outperforming major department stores by attracting customers with their deep discounts. Macy’s (M) net sales rose 3.6% in the fiscal first quarter while JCPenney (JCP) reported a 4.3% decline in its retail net sales.

Ross Stores’ Off-Price Model Helps Deliver Strong Q1 Sales

Performance in Q1

Ross Stores’ (ROST) sales growth of 8.5% in the fiscal first quarter was an improvement compared to the 7.0% sales growth in the fiscal first quarter of 2017. The company’s same-store sales growth in the quarter was driven by higher customer traffic and a rise in the average basket size. However, unfavorable weather in the fiscal first quarter dragged down the same-store sales by more than 1.0%. The men’s merchandise category was the strongest category in the fiscal first quarter.

Sales outlook

For the fiscal second quarter, which ends on August 5, Ross Stores expects overall sales to rise 5.0%–6.0% from $3.4 billion in the fiscal second quarter of 2017. The company has been conservative about its top-line growth and expects its fiscal second-quarter same-store sales growth to reach 1.0%–2.0%.

We’ll discuss the company’s margins in the next part of this series.