Ross Stores earnings top estimates, sales fall short as business ‘slowed’
Ross Stores reported mixed third-quarter results with earnings ahead of analysts’ estimates but disappointing sales.
The off-price retailer said that business during the quarter slowed from the first part of the year, citing weather conditions and cautious consumers, but it also said it could have done better on its merchandising initiatives.
“We identified execution issues in some businesses that we believe we can correct,” CEO Barbara Rentler said on the company’s earnings call. “We missed some volume due to not moving quickly enough on certain product shifts.”
In October, Ross Stores appointed James Conroy as CEO, former chief of Boot Barn, succeeding 40-year company veteran Rentler, effective Feb. 2. As part of the company’s succession plan, she will remain as an advisor through March 31, 2027.
Asked about the change in leadership and her role, Rentler told analysts that her focus will be on merchandising and supporting Conroy as he transitions into the CEO role.
“I don't foresee changes to our brand strategy, which is crucial for market share gains,” she said. “Jim complements our existing strengths in merchandising and operations."
Ross reported net income of $489 million, or $1.48 a share, for the quarter ended Nov. 2, compared with $447 million, or $1.33 a share, in the year-ago period. Analysts had expected earnings of $1.40 a share.
Operating margin for the quarter was 11.9%, up from 11.2% last year amid lower incentive, freight and distribution costs. Sales rose to $5.07 billion, missing estimates of $5.15 billion, from $4.9 billion. Same-store sales rose 1%.
“We are disappointed with our third-quarter sales results as business slowed from the solid gains we reported in the first half of 2024,” said Rentler in the earnings release. “Although our low-to-moderate income customers continue to face persistently high costs on necessities pressuring their discretionary spending, we believe we should have better executed some of our merchandising initiatives.”
In addition, a combination of severe weather during the quarter from Hurricanes Helene and Milton, along with unseasonably warm temperatures, also negatively impacted Ross’ results, she added.
Ross added 43 new Ross stores and four DD’s Discounts stores during the third quarter, for a total of 1,836 Ross locations in 43 states, the District of Columbia and Guam, and 356 DD’s Discounts stores in 22 states.
