Ross Stores reported net earnings in the second quarter rose 22.7 percent as same-store sales grew 5 precent. The off-pricer also increased the company’s long-term store growth potential.
Earnings per share for the second quarter ended August 4, 2018 reached $1.04, up from 82 cents last year. Net earnings grew to $389 million compared to $317 million in the prior year. Sales rose 9 percent to $3.7 billion with comparable store sales up 5 percent over the 13 weeks ended August 5, 2017. This is on top of a 4 percent increase in same store sales for the 13 weeks ended July 29, 2017.
For the six months ended August 4, 2018, earnings per share were $2.15, up from $1.64 last year. Net earnings were $808 million versus $638 million in the first half of 2017. Sales for the first six months of 2018 rose 9 percent to $7.3 billion with comparable store sales up 4 percent over the 26 weeks ended August 5, 2017. This compares to a same store sales gain of 4 percent for the 26 weeks ended July 29, 2017. Both the second quarter and year-to-date earnings results include the benefit of tax reform legislation.
Barbara Rentler, chief executive officer, commented, “We are pleased with the above-plan growth we delivered in both sales and earnings in the second quarter. Though better than expected, operating margin of 13.8 percent was down from last year as higher merchandise margin and leverage on occupancy and buying costs were more than offset by a combination of unfavorable timing of packaway-related expenses, higher freight costs and this year’s wage investments.”
Rentler continued, “During the second quarter and first six months of fiscal 2018, we repurchased 3.2 million and 6.5 million shares of common stock, respectively, for an aggregate price of $273 million in the quarter and $529 million year-to-date. As planned, we expect to buy back a total of $1.075 billion in common stock during fiscal 2018.”
Looking ahead to the second half, Rentler said, “While we hope to do better given our robust multi-year comparisons, we continue to forecast same store sales to grow 1 percent to 2 percent for both third and fourth quarters. If sales perform in line with this guidance, earnings per share for the third quarter ending November 3, 2018 are forecasted to be $.84 to $.88, up from $.72 a year ago. For the 13 weeks ending February 2, 2019, earnings per share are projected to be $1.02 to $1.07 versus $1.19 for the 14 weeks ended February 3, 2018. Last year’s fourth quarter included a per share benefit of $.14 from a one-time revaluation of deferred taxes and $.10 from the 53rd week. Based on our first half results and second half guidance, earnings per share for the 52 weeks ending February 2, 2019 are now planned to be in the range of $4.01 to $4.10.”
Commenting on the company’s future expansion prospects, Rentler said, “We are excited to announce that we have raised our long-term projected store potential to 3,000 locations, up from the previous target of 2,500. This is based on our research that indicates we can now further increase penetration in both existing and new markets. As a result, we believe that Ross Dress for Less can grow to about 2,400 locations across the country, up from our prior target of 2,000, and that DD’s Discounts can ultimately become a chain of approximately 600 stores, versus our previous projection of 500. This higher store potential provides us with a considerable amount of long-term growth opportunities given our current store base of 1,453 Ross Dress for Less and 227 DD’s Discounts.”
