Ross Stores Inc.
(
ROST
), one of the leading off-price retailers of apparels and home
accessories, posted its fourth-quarter 2011 results last week on
Thursday. Thus, the analysts roughly had a week to ponder over and
analyze the result. In the subsequent paragraphs, we will cover the
recent earnings announcement, analysts' estimate revisions as well
as the Zacks Rank and long-term recommendation on the stock.
Earnings Review
Ross Stores posted earnings of 85 cents per share for
fourth-quarter 2011, in line with the Zacks Consensus Estimate.
Earnings grew more than 23% from the prior-year figure of 69 cents
primarily due to the company's aptitude in providing attractive
brand name bargains to customers who value both quality and
price.
Net sales for the quarter increased 11.8% to $2,397.9 million
from $2,145.2 million in the prior-year quarter, beating the Zacks
Consensus Estimate of $2,390 million. The robust increase in net
sales was primarily backed by initiatives taken by the company to
keep merchandise fresh by reducing store inventories and providing
a wide range of fashion brands. Comparable store sales increased 7%
during the period.
Management Guidance
Ross Stores anticipates the profitability achieved in fiscal
2011 to continue through fiscal 2012 and projected same-store sales
growth in the 1% to 2% range for fiscal 2012 (52 weeks ending
January 26, 2013), compared with 5% gains in the prior two
years.
The company's earnings per share guidance for fiscal 2012 (53
weeks ending February 2, 2013), including one additional week, is
in the range of $3.12 to $3.27, representing a year-over-year
growth of 9% to 14%. The company expects the additional week to add
about 8 cents to 9 cents per share to earnings per share in
2012.
For the first quarter of fiscal 2012, the company expects
same-store sales to increase 1% to 2%, compared with gains of 3%
and 10% recorded in the first quarter of 2011 and 2010,
respectively. Earnings per share for the first quarter is expected
in the range of 82 cents to 86 cents, with an expected growth rate
of 11% to 16% from 74 cents earned in the first quarter of
2011.
(Read our full coverage on this earnings report:
Ross Meets on EPS, Sales Surge
)
Agreement of Analysts
Estimate revision trend for the upcoming first and second
quarters of fiscal 2012 mostly portrays positive sentiment among
the analysts covering the stock. Over the last 7 days, 1 out of 20
analysts revised his/her estimate in the upward direction for
first-quarter 2012. For the second quarter, 3 analysts (out of 19)
made an upward revision to their estimates, over the last 7 days
with no reverse movements.
Similarly, for fiscal 2012 and 2013, estimate revision trends
elicit a positive sentiment among most of the analysts covering the
stock. Over the last 7 days, 7 out of 21 analysts raised their
estimates for fiscal 2012 with no downward revisions. Besides, 2
analysts revisiting their estimates for fiscal 2013 have made
upward revisions over the last 7 days while none lowering their
forecasts.
Magnitude of Estimate Revisions
Given the limited earnings revision by the analysts over the
last 7 days, the Zacks Consensus Estimates for the first and second
quarter of 2012 as well as fiscal 2013 remained unchanged at 87
cents, 74 cents and $3.67 per share, respectively. However, over
the last 7 days, the Zacks Consensus Estimate for fiscal 2012 moved
up by 4 cents to $3.32 per share.
Our Take
Ross Stores and its subsidiaries operate two chains of off-price
retail apparel and home accessories stores in the United States.
These stores offer branded apparel, shoes, and accessories for the
entire family, as well as gift items, linens, and other
home-related merchandise. The company also offers small
furniture and furniture accents, educational toys and games,
luggage, gourmet food and cookware, watches, sporting goods, and
fine jewelry, which provide it with a competitive edge over its
rivals.
Ross Stores has implemented a micro-merchandising tool, through
which the company expects to enhance its total sales and
profitability by targeting expansion in its existing markets.
Moreover, Ross remains focused on new store growth, share buybacks,
and paying an attractive dividend even as many other retailers make
dramatic cutbacks, and has the financial strength to continue its
course and build shareholders' value.
However, the company faces intense competition from other
well-established players in the industry, such as
Kohl's Corporation
(
KSS
) and
Wal-Mart Stores Inc.
(
WMT
), which may dent its margins.
Currently, we have a long-term Outperform recommendation on the
stock. Moreover, Ross Stores holds a Zacks #2 Rank, which
translates into a short-term Buy rating.
About Earnings Scorecard:
As a PhD from MIT, Len Zacks proved over 30 years ago that
earnings estimate revisions are the most powerful force impacting
stock prices. He turned this ground breaking discovery into two
of the most celebrating stock rating systems in use today. The
Zacks Rank for stock trading in a 1 to 3 month time horizon and
the Zacks Recommendation for long-term investing (6+ months).
These "Earnings Estimate Scorecard" articles help analyze the
important aspects of estimate revisions for each stock after
their quarterly earnings announcements. Learn more about earnings
estimates and our proven stock ratings at
http://www.zacks.com/education/
KOHLS CORP (
KSS
): Free Stock Analysis Report
ROSS STORES (
ROST
): Free Stock Analysis Report
WAL-MART STORES (
WMT
): Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment
Research