Ross Stores Stock Jumps 8.34% on Earnings Beat

May 24

Ross Stores (ROST) has reported better-than-anticipated results and raised its guidance as it reduced costs. The off-price apparel and home goods retailer beat profit and sales forecasts, despite facing macroeconomic headwinds that squeezed its lower-income customers. CEO Barbara Rentler said the results came even as the company faced macroeconomic headwinds that squeezed their discretionary spending.

Ross Stores(ROST) reported first-quarter earnings per share (EPS) of $1.46, up from $1.09 a year ago, and revenue gained 8% from the year-ago quarter to $4.86 billion. Both exceeded forecasts. Same-store sales rose 3%. The improvement in profit stemmed primarily from reduced costs, as the company slashed expenses by $1 billion from the fourth quarter. Operating margin jumped 205 basis points to 12.2%, attributed mainly to lower distribution, incentive, and freight costs that were partially offset by the planned decline in merchandise margin.

Ross Stores (ROST) CEO Barbara Rentler said that continued uncertainty in the macroeconomic and geopolitical environments, including inflationary pressures, "continue to squeeze our low-to-moderate income customers' purchasing power." She said the company would keep managing inventory and expenses "tightly" to maximize sales and earnings growth the rest of the year. Based on first-quarter results and forward guidance, Ross Stores boosted its full-year EPS outlook to a range of $5.79 to $5.98, up from the previous estimate of $5.64 to $5.89.

Ross Stores shares (ROST) is up 8.3% at $142.72 as of the time of writing on Friday and have gained about 3% since the start of the year. The company's results echo that of its off-price peer TJX Cos, which posted better-than-expected first-quarter results and raised its annual profit forecast helped by easing costs and strong demand. With a Relative Strength Index (RSI) of 68.19, the stock is poised for further gains.