Ross rolling, but holidays are worrisome

Ross Stores didn’t let a surprisingly strong third quarter comp increase go to its head and maintained a cautious view of consumer spending.



Sales at the company increased 8% to nearly $2.6 billion and same store sales increased 4%. Net income increased to $193 million, or 93 cents a share, from $172 million, or 80 cents a share.



"We are pleased with the better-than-expected sales and earnings we achieved in the third quarter,” said Ross Stores CEO Barbara Rentler. “These results were driven by our ongoing ability to deliver compelling bargains to our customers, which drove above-plan sales gains and strong merchandise gross margins. Operating margin for the quarter grew 55 basis points due to a 40 basis point improvement in cost of goods sold and a 15 basis point decline in selling, general and administrative expenses."



Despite the strong showing, especially compared to the weaker top line growth rival TJX Companies reported earlier in the week, Rentler maintained a cautious view of the holidays.



"As we enter the fourth quarter, our merchants have acquired a wide array of exciting and sharply-priced name brand fashions and gifts to appeal to today's value-focused shoppers,” Rentler said. “That said, we believe it is prudent to maintain a cautious outlook given the ongoing uncertainties in the macro-economic environment and the likelihood of an intensely competitive and promotional holiday season. As a result, while we hope to do better, we are maintaining our current guidance for the fourth quarter."



That guidance envisions the company’s fourth quarter same store sales increasing only 1% to 2% and earnings in the range of $1.05 to $1.09 compared to $1.02 the prior year.