Ross Stores, Inc. (NASDAQ:ROST) Q1 2025 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call presents a mixed outlook. While there are positive aspects such as a share repurchase program and dividend increase, financial performance is moderate with flat EPS and operating margins. Challenges like tariffs, inflation, and supply chain issues create uncertainties. The Q&A section reveals management's cautious approach and limited visibility into future performance, especially concerning tariffs. Without strong guidance or new partnerships, and considering market uncertainties, the stock price is likely to remain stable in the short term, leading to a neutral sentiment.
Key Financial Performance
Earnings Per Share (EPS) $1.47, up from $1.46 last year.
Total Sales $5 billion, a 3% increase year-over-year.
Net Income $479 million, down from $488 million last year.
Operating Margin 12.2%, flat year-over-year.
Merchandise Margin Declined by 45 basis points due to higher ocean freight costs and initial tariff impacts.
Occupancy Costs Increased by 20 basis points.
Distribution Costs Increased by 5 basis points.
Filing Costs Declined by 50 basis points due to lower incentives.
SG&A Flat year-over-year, with lower incentive compensation offset by sales deleverage.
Share Repurchase 2 million shares repurchased for $263 million.
Net Interest Income Projected to be approximately $29 million.
Tax Rate Projected to be 24% to 25%.
Diluted Shares Outstanding Expected to be approximately 325 million.
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Operating Highlights
New Store Openings: Opened 16 new Ross and 3 dd’s discount locations in Q1 2025, planning approximately 90 new stores for the year.
Sales Performance: Total sales grew 3% to $5 billion, with comparable store sales flat versus last year.
Operating Margin: Operating margin of 12.2% was flat year over year.
Inventory Management: Total consolidated inventories were up 8% due to opportunistic buys; average store inventories were up 4%.
Share Repurchase: Repurchased 2 million shares for $263 million under a $2.1 billion authorization.
Tariff Impact: Discussed potential short-term pressure on profitability due to elevated tariffs, with strategies in place to minimize impact.
Market Positioning: Focus on maintaining a pricing umbrella below traditional retailers to deliver value to customers.
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Risk or Challenges
Tariffs Impact: The company is facing elevated tariffs, particularly on merchandise originating from China, which could lead to short-term pressure on profitability. They are working on strategies to mitigate this impact but acknowledge the unpredictability of trade policy.
Inflationary Pressure: There is expected modest but broad-based inflationary pressure across the retail industry, which may affect pricing strategies and overall profitability.
Supply Chain Challenges: The company has noted that the supply chain remains unpredictable, which could limit visibility into future performance and customer demand.
Consumer Sentiment: Deteriorating consumer sentiment is a concern that may impact customer demand and sales performance in the latter half of the fiscal year.
Store Growth and Closures: While planning to open new stores, the company also anticipates closing or relocating about 10 to 15 older stores, which could affect overall growth.
Market Uncertainty: There are too many unknown variables affecting the business environment, leading to the withdrawal of previously provided annual guidance.
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Guidance & Outlook
Store Growth: Opened 16 new Ross and 3 dd’s discount locations in Q1 2025, planning for approximately 90 new stores this year (80 Ross and 10 dd’s).
Inventory Management: Total consolidated inventories were up 8% year-over-year, with average store inventories up 4%. Packaway merchandise represented 41% of total inventory.
Share Repurchase: Repurchased 2 million shares for $263 million under a $2.1 billion authorization, on track to buy back $1.05 billion in stock during 2025.
Q2 2025 EPS Guidance: Projected earnings per share for Q2 2025 in the range of $1.40 to $1.55, including a cost impact of $0.11 to $0.16 from tariffs.
Q2 2025 Sales Guidance: Total sales forecast to increase 2% to 6% versus prior year, with comparable store sales projected to be flat to up 3%.
Operating Margin Guidance: Operating margin for Q2 projected to be in the range of 10.7% to 11.4%, including a negative impact of 90 to 120 basis points from tariffs.
Tax Rate Guidance: Projected tax rate of 24% to 25% for Q2 2025.
Net Interest Income Guidance: Expected net interest income of approximately $29 million.
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Shareholder Return Plan
Share Repurchase Program: During the first quarter, Ross Stores repurchased 2 million shares of common stock for an aggregate cost of $263 million under the company’s two-year $2.1 billion authorization approved by the board in March 2024. They remain on track to buy back a total of $1.05 billion in stock during 2025 and complete the program as planned.
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Key Q&A
Q:Could you elaborate on the cadence of comps or drivers of the sharp improvement that you cited as the first quarter progressed?
A:The sequential improvement was broad-based across the merchandise hierarchy. Most departments were performing nicely, and we guided to a flat to a plus three comp.
Q:Is there a way to walk us through strategies that you have in place to mitigate tariffs in the back half of the year?
A:We can mitigate costs by working with vendors for better pricing, being cautious with price increases, utilizing closeouts, and shifting country of origin.
Q:Should we expect the impact of tariffs to come down as we move through the year?
A:The second quarter impact included costs from orders in place when tariffs were announced, and we paused ticketing until we understood the tariff impact. There are too many variables to predict the back half.
Q:Do I have that right regarding the visibility in the back half relating to less certainty on product flows?
A:There’s availability of closeouts, but production in China came to a halt, which may create a gap. We believe we’re well-positioned to manage through that.
Q:Can you talk about your expectations for elasticity if you have to raise prices?
A:Elasticity will depend on the category and whether it’s discretionary or functional. We’re being strategic about pricing.
Q:Are there any opportunities for you to shift assortment to minimize the sourcing impact from China?
A:There’s flexibility, but it depends on the item and timing. Resourcing goods takes time, and we’re looking for value-branded products.
Q:What’s driving the strength in cosmetics?
A:Strong execution and a great assortment, with better brands contributing to the strength.
Q:Have you seen any changes in customer behavior in their spend?
A:There’s a slight shift towards more functional items versus discretionary items, but nothing glaringly different.
Q:Review of Unclear Management Responses
A:Management avoided giving a direct answer regarding the exact percentage of goods sourced from China expected by the end of the year, stating that flexibility is limited and they are not prepared to provide an exact number.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
China tariff
Cosmetics merchandise
Filing basis
Form Ks
Inc expectation
Ks Form
Officer afternoon
SEC Chief
Stores Inc
Stores price
Transcript Stores
authorization director
circumstance addition
comment start
cost authorization
dd discount
dd location
dd number
director track
discount brand
discount location
distribution basis
expectation afternoon
momentum circumstance
perform line
point Filing
policy environment
sale perform
session behalf
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tariff level
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time buying
trade policy
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visibility Stores
ROST Transcript
Ross Stores, Inc. (ROST) Q3 2025 Earnings Call Transcript
Unknown11-20
The earnings call summary presents a mixed outlook. While there are positive developments like store openings and strong comparable sales growth, the EPS guidance is lower than last year, and tariff costs impact profitability. The Q&A reveals cautious optimism with successful marketing and store refreshes but no plans to increase marketing spend. Overall, the company's strategic initiatives are promising, but financial guidance and tariff concerns temper expectations, leading to a neutral sentiment.
Ross Stores, Inc. (ROST) Q3 2026 Earnings Call Transcript
Positive11-20
The earnings call summary and Q&A indicate positive developments: 5-7% sales growth, strategic store openings, and effective marketing campaigns. Despite EPS guidance below last year's figures, optimistic guidance and strong consumer engagement suggest a positive outlook. Tariff impacts are being mitigated, and the company is expanding in high-potential regions. The stock is likely to react positively, with a prediction of a 2% to 8% increase over the next two weeks.
Ross Stores, Inc. (ROST) Q2 2025 Earnings Call Transcript
Positive8-21
The earnings call summary indicates a positive outlook with flat to 3% growth in comparable store sales, a robust share repurchase program, and initiatives like store refreshes and self-checkout pilots. Despite tariff impacts, management is optimistic about mitigating these through strategic pricing and inventory management. The Q&A further supports this with positive insights on branded strategy, distribution center investments, and unit growth opportunities. While there are some uncertainties, the overall sentiment leans positive, likely leading to a stock price increase of 2% to 8% over the next two weeks.
Ross Stores, Inc. (NASDAQ:ROST) Q1 2025 Earnings Call Transcript
Unknown5-23
The earnings call presents a mixed outlook. While there are positive aspects such as a share repurchase program and dividend increase, financial performance is moderate with flat EPS and operating margins. Challenges like tariffs, inflation, and supply chain issues create uncertainties. The Q&A section reveals management's cautious approach and limited visibility into future performance, especially concerning tariffs. Without strong guidance or new partnerships, and considering market uncertainties, the stock price is likely to remain stable in the short term, leading to a neutral sentiment.
ROST Report
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