Ross Stores Shines, Guides Fiscal Year 2025 Amid Economic Uncertainties
Ross Stores, Inc. (ROST) delivered stellar Q4 earnings, surpassing both EPS and revenue projections. Same-store sales surged by 7%, well above the anticipated 2-3% range, fueled by increased foot traffic and positive customer feedback on product offerings. Despite a steady average basket, slight gains in average unit retails offset slightly fewer units per transaction.
Operating margin for Q4 rose to 12.4% from last year's 10.7%, exceeding the projected 11.3-11.5%, primarily attributed to robust same-store sales and reduced freight expenses, slightly dampened by higher incentives.
The company's outlook for Q1 is optimistic, with anticipated EPS of $1.29-1.35, above the estimated $1.26. Q1 same-store comps are forecasted at 2-3%, with revenue growth expected to range from 6-8% year-over-year.
However, Ross Stores' guidance for FY25 presents a cautious stance, with anticipated EPS of $5.64-5.89, below estimates of $5.90. Same-store comps are forecasted to grow by 2-3%, with revenue growth projected at 2-4% year-over-year.
Alongside impressive earnings, Ross Stores announced a new two-year $2.1 billion stock repurchase program for fiscal years 2024 and 2025, coupled with a 10% increase in its quarterly dividend to $0.3675 per share.
The cautious FY25 guidance reflects lingering uncertainties in the macroeconomic and geopolitical landscapes. While inflation has eased, essential expenses such as housing, food, and fuel remain high, impacting the discretionary spending of low-to-moderate income consumers.
Despite the stock's consistent upward trajectory since late September, market response to the earnings may be subdued due to anticipated positive outcomes and the company's prudent outlook on consumer behavior. This strong performance bodes well for off-price retail counterpart Burlington Stores, set to report earnings tomorrow.