Ross Stores Earned 91 Cents per Share for Q3

This morning, Ross Stores (ROST) reported fiscal Q3 earnings of 91 cents per share. Sales rose 7% to $3.5 billion. The important metric, same-store sales, rose by 3%. Going into this quarter, Ross told us to expect earnings between 84 and 88 cents per share, and same-store sales growth of 1% to 2%. Wall Street had been expecting 90 cents per share.

Barbara Rentler, Chief Executive Officer, commented, “Both sales and earnings for the quarter were ahead of our forecast, despite being up against very strong multi-year comparisons. Though above plan, operating margin of 12.4% was down from last year as higher merchandise margin was more than offset by increases in freight costs and this year’s wage investments.”

Ms. Rentler continued, “During the third quarter and first nine months of fiscal 2018, we repurchased 2.9 million and 9.4 million shares of common stock, respectively, for an aggregate price of $278 million in the quarter and $807 million year-to-date. We remain on track to buy back a total of $1.075 billion in common stock during fiscal 2018.”

For Q4, which is the important holiday quarter, Ross projects same-store sales growth of 1% to 2%. For EPS, they see that ranging between $1.09 and $1.14 per share. That’s the same as the previous guidance but it now includes a gain of seven cents per share due to the resolution of a tax matter. For the entire year, Ross sees earnings of $4.15 to $4.20 per share.

This is basically what I expected. Their Q3 guidance was low, but that’s what they often do. Wall Street wasn’t fooled. The outlook for Q4 is the same as before. Still, the stock gapped down more than 7% at the open. This was on top of a pronounced slide over the last seven days. At today’s low, Ross was down nearly 9%. From the low, the stock was off more than 20% from its high of just eight trading days ago. All of this happened, even though the company did exactly what they said they’d do.

Update: Ross lost 9.38% today to close at $82.64 per share. The stock dropped at the open, then rallied, but gradually pulled back at the end of the day.

Posted by on November 20th, 2018 at 9:00 am


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