Ross Stores continues upward growth in Q4 and fiscal 2017

3/6/2018
Strong merchandise margin and gains across same-store sales contributed to Ross Stores’ growth in the fourth quarter and fiscal year.

For the quarter ended Feb. 3, the off-price retailer earned $451 million, compared to $301 million in the 13 weeks ended January 28, 2017. Earnings per share were $1.19, up from $.77 in the same period last year.

Sales for the quarter jumped 16% to $4.1 billion. Comparable store sales rose 5%, compared to a 4% gain for the same period in the prior year.

For the full fiscal year, earnings per share grew to $3.55, compared to $2.83 in the 52 weeks ended January 28, 2017. Net earnings were $1.4 billion, compared to $1.1 billion last year. Sales for the fiscal year grew 10% to $14.1 billion. Comparable store sales were up 4%, on top of a 4% increase in 2016.

Results for both the 2017 fourth quarter and fiscal year include a per share benefit of approximately $.10 from the 53rd week, and $.21 from the recently enacted tax reform legislation. Excluding these items, earnings per share on a 52-week basis increased 14% for both the quarter and fiscal 2017, compared to the prior year.

“Despite our own difficult multi-year comparisons and a very competitive retail climate, sales and earnings were well ahead of our expectations for both the fourth quarter and the full year,” said Barbara Rentler, the company’s CEO. “Fourth quarter operating margin grew 95 basis points to 14.6%, up from 13.6% in the prior year. This improvement was driven by a combination of strong merchandise margin, expense leverage from solid gains in same store sales, and the impact of the 53rd week. For the 2017 fiscal year, operating margin increased 50 basis points to a record 14.5%.”

While the company is encouraged by its recent strong sales and earnings results, internal challenges — as well as a very competitive retail environment — are encouraging the company “to continue taking a prudent approach to forecasting our business in 2018,” Rentler said.

The company’s Board of Directors also approved an increase in the stock repurchase authorization for 2018 to $1.075 billion, up from the previous $875 million. The board also approved a higher quarterly cash dividend of $.225 per share, up 41% over the prior year. This quarterly dividend is payable on March 30, to stockholders of record as of March 19.

As a result, for fiscal 2018, which ends Feb.2, 2019, the off-price retailer is forecasting same store sales to grow 1% to 2%, on top of 4% gains in each of the past three years. The company plans to open about 100 new stores, including 75 Ross Dress for Less and 25 dd’s Discounts locations. Fiscal 2018 earnings per share are projected to be $3.86 to $4.03, up from $3.55 for the 53 weeks ended February 3, 2018.

“Our fiscal year and first quarter 2018 guidance ranges include a per share benefit of approximately $.69 and $.16, respectively, from the recently enacted tax legislation, Rentler said.

The company’s 2018 ranges also reflect Ross’ plans to make competitive wage and benefit-related investments, “including raising our minimum wage to $11.00 per hour. We believe these actions will allow us to continue to attract and retain talented associates,” she added.
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