Ross Stores: Sales Miss, Earnings Beat, Stock Surges

Ross Stores (NASDAQ: ROST) reported its third-quarter earnings on November 21, 2024, with sales below analyst estimates but earnings per share (EPS) beating expectations. Despite the sales miss, the company's stock soared 5.2% on the day. This article explores the reasons behind Ross Stores' mixed performance and the market's reaction to the earnings report.

Ross Stores' sales for the 13 weeks ended November 2, 2024, were $5.1 billion, up from $4.9 billion in the prior year but below analyst estimates. Comparable store sales increased by 1%, driven by a 11.9% operating margin, up from 11.2% last year. The company's EPS grew to $1.48, up from $1.33 in the prior year, beating analyst estimates by $0.15.

CEO Barbara Rentler attributed the sales shortfall to a combination of severe weather events, unseasonably warm temperatures, and merchandising initiatives that did not execute as planned. She noted that the company's low-to-moderate income customers continue to face persistently high costs on necessities, pressuring their discretionary spending. However, earnings were ahead of expectations, driven by lower incentive, freight, and distribution costs, which more than offset the planned decline in merchandise margin.



Ross Stores' stock performance following the earnings report was mixed. Shares initially fell 3.7% after the company reported sales below analyst estimates. However, the stock rebounded and closed up 5.2% on the day. This performance was in line with its competitors, as both Macy's (NYSE: M) and Kohl's (NYSE: KSS) also saw their stocks rise by 3.9% and 2.5% respectively. The broader retail sector, as represented by the SPDR S&P Retail ETF (XRT), also gained 1.8% on the same day.

Investors seemed to focus more on Ross Stores' earnings and guidance than its sales miss. The company's EPS of $1.48 were up from $1.33 in the prior year, and Ross Stores maintained its full-year earnings guidance. Additionally, the company's commitment to delivering compelling values to its customers may have reassured investors.

Ross Stores' Q3 earnings indicate a mixed performance, with sales growth of 1% below expectations but EPS growth of 11.3% beating estimates. The stock's 5.2% increase suggests investor confidence in the company's earnings strength and long-term prospects. Despite the sales shortfall, Ross Stores' earnings growth and focus on delivering value to customers may help maintain investor confidence in the company's future growth potential.

In conclusion, Ross Stores' Q3 earnings report showed a mixed performance, with sales below analyst estimates but EPS growth beating expectations. The company's stock soared 5.2% on the day, reflecting investor confidence in the company's earnings strength and long-term prospects. Ross Stores' ability to execute merchandising initiatives and manage external factors like weather will be crucial for maintaining sales momentum in the future.