Earnings Results
‘As we enter 2023, the macroeconomic and geopolitical environments remain highly uncertain,’ CEO says. ‘We believe it is prudent to remain conservative when planning our business.’
Ross Stores Chief Executive Barbara Rentler, in November, said she expected “a very promotional holiday selling season and ongoing inflationary headwinds to pressure our low-to-moderate-income customers.”
Bloomberg
Shares of Ross Stores Inc. slipped after hours on Tuesday, after the bargain retail chain offered up full-year and first-quarter forecasts that missed analysts’ expectations, as rising prices hit the chain’s lower-income consumers particularly hard.
The discount clothing and home-goods chain said it expected full-year same-store sales to be “relatively flat,” compared with FactSet forecasts for a 3% gain. It said it expected earnings per share of between $4.65 and $4.95, compared with FactSet estimates for $5.08.
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Ross Stores, Inc. reported its second quarter earnings results yesterday, and the news was not good. The company reported that rising prices are continuing to hit lower-income shoppers, resulting in a miss on expectations.
Ross Stores is a retailer of off-price apparel, accessories, home and beauty products. The company operates 1,588 stores in 39 states and the District of Columbia and an e-commerce site.
The company reported second quarter sales of $4.2 billion, a 3 percent drop from the prior-year quarter. Earnings per share (EPS) fell to $1.10, missing Wall Street’s expectations of $1.16 per share.
The company noted that while their sales were impacted by the pandemic, their biggest issue was a drop in sales among lower-income consumers, due to rising prices. Ross Stores had hoped that they could offset the higher prices with increased sales, but that didn’t come to pass.
In addition, the company issued weaker-than-expected guidance for the third quarter. They told analysts that same-store sales are expected to be flat to down in the low single digits for the quarter and warned that their earnings could range from a flat to a negative 6 percent.
CEO Barbara Rentler stated, “We continue to believe that our customers are feeling the effects of the rising cost of living, and we are seeing lower sales trends among lower-income shoppers.”
This news is a major blow for Ross Stores, as it appears that their lower-income customers are not spending as much as they had expected. This could put a strain on the company’s bottom line. However, the company still has a strong balance sheet and Rentler remains positive that their long-term outlook is sound.
Despite the poor earnings results, the shares of Ross Stores were up slightly in aftermarket trading. Investors may see this as an opportunity to buy into a discount retailer with a strong track record. It remains to be seen how the company will fair in the upcoming quarter, but the outlook is uncertain.
