Earnings Scorecard: Ross Stores - Analyst Blog


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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
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing , Business , Stocks
Referenced Symbols: KSS , ROST , WMT

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