Ross Stores Exceeds Holiday Expectations

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Rising Costs Continue to Impact Low-Income Customers

Ross Stores Inc. late Tuesday exceeded expectations for its holiday quarter but startled investors with concerns about the ongoing impact of higher living costs on its customers.

While inflation has shown signs of easing, the off-price retailer highlighted the persistent macroeconomic and geopolitical uncertainty, noting that housing, food, and gasoline expenses remain high and are squeezing the discretionary spending of low- to moderate-income shoppers.

In light of these challenges, the company expressed a cautious outlook for the year ahead, emphasizing the need for a conservative approach to business forecasting in 2024.

Impressive Financial Performance

Ross reported earnings of $610 million, or $1.82 per share, in the fourth quarter, up from $447 million, or $1.31 per share, in the same period last year. Sales climbed to $6 billion compared to $5.2 billion a year ago, with a 7% increase in comparable-store sales over the prior year.

Analysts had anticipated earnings of $1.66 per share on sales of $5.8 billion, along with a 3.4% rise in same-store sales – figures that were surpassed by the retailer’s stronger performance.

Customer Response and Future Strategy

The company attributed its better-than-expected sales results to the favorable reception of improved assortments of quality branded products across its stores. Ross Chief Executive Barbara Rentler emphasized the positive response from customers as a driving factor behind the successful quarter.

Ross Projects Growth in Same-Store Sales for 2024

Ross has announced that it expects its same-store sales to grow between 2% to 3% in 2024, following a 5% gain in 2023. The projected earnings per share (EPS) for 2024 are estimated to be between $5.64 and $5.89, with first-quarter EPS expectations ranging from $1.29 to $1.35.

FactSet Consensus vs. Ross Projections

The FactSet consensus predicts a 2024 EPS of $5.40 per share and a first-quarter EPS of $1.26, showing a variance compared to Ross’s own forecasts.

Strong Fourth-Quarter Performance

Ross saw a significant increase in its fourth-quarter operating margin, rising to 12.4% from 10.7% year over year. This growth was attributed to strong same-store sales, lower freight costs, and partially offset by higher discounts.

In an effort to reward shareholders, Ross’s board approved a 10% increase in the company’s dividend, raising it to 36.75 cents per share. The dividend is set to be paid on March 29 to stockholders of record as of March 15.

Focus on Delivering Quality Bargains

Ross remains focused on providing a wide range of quality branded bargains for its customers in the upcoming year. CEO Rentler emphasized that this focus is crucial for gaining market share both in the short and long term.

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