Ross Stores Inc. reported earnings fell 47.8 percent in the fourth quarter as same-store sales declined 6 percent.

Earnings for the 13 weeks ended January 30, 2021 reached $238 million or 67 cents per share, down from $456.1 million, or $1.28, a year ago. Earnings were short of Wall Street’s consensus estimate of $1.00.

Sales for the fourth quarter of 2020 were $4.2 billion, down 4.8 percent from $4.41 billion a year ago. The sales and comp decline reflect the negative impact from the upsurge of COVID-19 during the peak holiday selling season. Sales were just below Wall Street’s consensus estimate of $4.27 billion.

For the 2020 fiscal year, earnings per share were $0.24 on net income of $85 million, which includes a one-time, pre-tax charge of $240 million or $0.54 per share for the year from the refinancing of $775 million in senior notes. That compares to earnings of $1.66 billion, or $4.60 a share, a year ago.  Total sales for 2020 declined to $12.5 billion from $16.0 billion.

Barbara Rentler, chief executive officer, commented, “While our fourth quarter sales exceeded our expectations, the upsurge of the virus resulted in lower-traffic, especially in California, our largest state, where we were subject to more stringent occupancy and operating hour restrictions.”

Rentler continued, “Fourth quarter operating margin of 9.5 percent declined versus last year as an increase in merchandise margin was more than offset by the deleveraging effect on expenses from lower sales, and higher supply chain and COVID-related operating costs.”

Reinstates Quarterly Cash Dividend
The company’s Board of Directors recently authorized the reinstatement of the quarterly cash dividend at a rate of $0.285 per share. This quarterly dividend is payable on March 31, 2021 to stockholders of record as of March 16, 2021.

Rentler noted, “The resumption of our dividend payout in 2021 reflects our strong cash position and confidence in the company’s long-term prospects.”

First Quarter Guidance and Fiscal 2021 Outlook
Ross said its guidance and results throughout fiscal 2021 will be reported versus fiscal 2019. Ross said it believes the significant impact from the extended closure of operations in the spring of 2020, and the ongoing headwinds caused by COVID-19 throughout last year, make this a more relevant basis for comparison.

Rentler commented, “As we enter 2021, there remains limited visibility regarding the pandemic and the pace and magnitude of an economic recovery. Given these factors, we are providing specific guidance for only the first quarter and a general outlook for the year.”

Rentler continued, “Comparable store sales for the 13 weeks ending May 1, 2021 are projected to be down 1 percent to down 5 percent compared to the 13 weeks ended May 4, 2019. Earnings per share for the 2021 first quarter are forecast to be $0.74 to $0.86, reflecting the deleveraging effect from the projected decline in same-store sales, increased supply chain costs, higher wages, and ongoing COVID-related expenses.”

Rentler added, “With the continued roll-out of vaccines, potential additional government stimulus, and likely pent-up consumer demand, we expect comparable store sales to strengthen as we move through the year. However, earnings will continue to be affected by the aforementioned cost pressures throughout the year and thus profitability will be well below recent historical high levels.”

Rentler further noted, “With regard to our expansion plans, we remain very optimistic about our longer-term growth opportunities. That said, we planned a more moderate pace of store openings this year, especially in the spring. For fiscal 2021, we expect to add about 60 new locations, consisting of approximately 40 Ross Dress for Less and 20 dd’s DISCOUNTS.”

Rentler concluded, “Going forward, we are very confident that our talented management team, seasoned associates and robust financial foundation will enable us to navigate through these uncertain times. In addition, we believe our longer-term prospects remain bright. We operate in an attractive sector of retail that will be facing much less brick & mortar competition given the significant number of retail closures and bankruptcies. As a result, we believe we remain well-positioned to gain market share over time, especially given consumers’ heightened focus on value and convenience.”

Photo courtesy Ross Stores