Ross Stores Stock Falls on Lower-than-Expected Q2 Guidance

Mixed results

Off-price retailer Ross Stores (ROST) reported its results for the first quarter of fiscal 2019 after the financial markets closed on May 23. Ross Stores’ sales grew 5.8% to about $3.80 billion and were just 0.1% ahead of analysts’ estimate compiled by Refinitiv. The company’s same-store sales grew 2.0%. Ross Stores’ first-quarter sales were adversely impacted by weakness in the women’s apparel category.

Ross Stores’ first-quarter EPS grew 3.6% to $1.15 and included a $0.02 benefit associated with favorable timing of expenses. The company expects this benefit to reverse over the remainder of fiscal 2019. Analysts were expecting EPS of $1.12. Ross Stores’ sales growth in the fiscal first quarter again reflected the strength of off-price retailers compared to major department stores like Kohl’s (KSS) and Nordstrom (JWN), which reported a decline in their first quarter top line. Despite beating first-quarter expectations, Ross Stores stock was down 1.2% as of 2:56 PM today as the company’s second-quarter EPS guidance fell short of analysts’ expectations.

Ross Stores Stock Falls on Lower-than-Expected Q2 Guidance

Outlook

Ross Stores expects its fiscal 2019 second-quarter EPS in the range of $1.06 to $1.11 compared to $1.04 in fiscal 2018’s second quarter. Analysts expected EPS of $1.14 for the second quarter. The company expects its second quarter same-store sales in the range of 1% to 2%.

Ross Stores now expects its fiscal 2019 EPS in the range of $4.38 to $4.52 compared to the previous outlook range of $4.30 to $4.50. Analysts were expecting EPS of $4.52 for fiscal 2019. Higher wages and increased freight costs are expected to put pressure on the company’s earnings.

Ross Stores is on track to open about 100 stores in fiscal 2019, including 75 Ross Dress for Less stores and 25 dd’s Discounts stores.