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Ross Stores Q3 tops estimates; raises forecast

Ross reported third-quarter revenue of $4.6 billion.

Ross Stores is feeling upbeat about the holiday season amid a better holiday selection and ongoing sales momentum.

“We continue to expect a very promotional holiday selling season and ongoing inflationary headwinds to pressure our low-to-moderate income customers,” stated CEO Barbara Rentler. “That said, we face our easiest sales and earnings comparisons in the fourth quarter and are raising our guidance given our third quarter sales momentum and improved holiday assortments.”

In October, Ross said it had completed its 2022 expansion plans, which called for the addition of 99 new stores. The company has set a long-term goal to row to at least 2,900 Ross Dress for Less and 700 DD's Discount locations over time.

The off-price retailer reported net income of $342 million, or $1.00 a share, for the quarter ended Oct. 29, compared with $385 million, or $1.09 a share, in the year-ago period. Analysts expected earnings of $0.81 per share.

Revenue totaled $4.6 billion, in line with last year, ahead of estimates for $4.37 billion. Same-store sales fell 3%, after a 14% gain during the prior-year quarter.

 “Third quarter results were above our expectations as we delivered stronger values throughout our stores,” stated CEO Barbara Rentler. “Operating margin for the period was 9.8% versus 11.4% last year, reflecting the deleveraging effect from the comparable sales decline as well as pressure from higher markdowns and unfavorable timing of packaway-related costs.”

Ross now expects fourth-quarter same-store sales to be flat to down 2% on top of a 9% gain in the prior year, with earnings per share forecasted to be in the range of $1.13 to $1.26. Based on its year-to-date results and our fourth quarter forecast, earnings per share for fiscal 2022 are now projected to be in the range of $4.21 to $4.34 versus $4.87 last year.

“There remains a high level of uncertainty in today’s macroeconomic and geopolitical environment that continues to negatively impact consumer sentiment and demand,” Rentler said. “However, we remain confident in the off-price business model, which offers both value and convenience. Given consumers’ heightened focus on both of these attributes, it should bode well for our ability to expand our market share and profitability in the future.”

During the third quarter, Ross repurchased 2.8 million shares of common stock for an aggregate price of $244 million. The company remains on track to buy back a total of $950 million in common stock during fiscal 2022 under our two-year $1.9 billion repurchase program that extends through fiscal 2023.

Headquartered in Dublin, Calif., Ross had fiscal 2021 revenues of $18.9 billion. The company operates 1,696 Ross stores in 40 states, the District of Columbia, and Guam. It also operates 323 DD’s Discounts stores in 21 states.

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