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Ross Stores: Results beat forecasts but guidance below expectations

06 March 2019

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by Anchor

US apparel Group, Ross Stores on Tuesday (5 March) reported a 4Q18 profit of $441.7mn, or $1.20/share, down from $450.7mn, or $1.19/share in 4Q17, but above the Refinitiv consensus estimate of $1.13/share. Revenue rose 1% YoY to $4.1bn – slightly above the consensus forecast of $4.05bn. Same-store sales grew 4% YoY, vs a 2.3% YoY FactSet estimate.

CEO Barbara Rentler said that sales and earnings “for both the fourth quarter and fiscal year outperformed our expectations,” noting that Ross Stores “… achieved these results despite our own challenging multi-year comparisons and weakness in our ladies apparel business during the holiday season.”

Looking ahead to FY19, Ross expects same-store sales as growing  between 1% to 2%, while earnings are slated to be c. $4.30-$4.50/ share.

Ross has also authorised a $2.55bn share buyback programme for two years, and a 13% YoY increase to its quarterly dividend – to USc25.5/share. Market Watch writes that at its recent share price, this new repurchase programme represents c. 8% of the company’s total market value and a 31% increase over the prior two-year $1.95bn authorisation (which was completed in January 2019).

Looking ahead, for FY19 the firm expects same-store sales to grow 1%-2% YoY on top of 4% gains in each of the past four years. FY19 EPS are projected to be $4.30 to $4.50, up from $4.26 for FY18. Ross said it plans to open c. 100 new stores this year, consisting of around 75 Ross Dress-for-Less and 25 dd’s DISCOUNTS locations. The projected operating margin for 2019 will be in the range of 13.2% to 13.4%, vs FY18’s 13.6%.

For 1Q19, Ross said on the conference call that, “given the recent underperformance in Ladies apparels, a business that becomes more important in the first quarter”, it is forecasting comparable store sales to be flat to up 2% YoY. 1Q19 EPS, meanwhile, are projected to be $1.5-$1.11 vs $1.11 for 1Q18.

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