Ross' 1Q Sales Up, Raises Guidance - Analyst Blog

By Zacks Equity Research,

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Ross Stores Inc. ( ROST ), one of the largest off-price apparel and home fashion chain retailers in the U.S., came up with stronger-than-expected sales and same-store sales numbers for the four weeks and first quarter ended April 28, 2012, prompting management to raise its first-quarter earnings guidance.

Driven by strong consumer demand for the company's wide array of discounted brands, Ross Stores' comparable sales in April 2012 increased 7% on top of 10% growth registered in the prior-year period, beating its own guidance range of positive 1%-2% growth. Consequently, the company's total sales for the four-week period surged 11% to $725 million compared with $651 million in the year-ago period.

Further, Ross Stores' first-quarter sales increased 14% to $2,357 million from $2,075 million in the year-ago quarter, primarily driven by strong comparable store sales growth. Currently, the Zacks Consensus Estimate for the quarter is $2,324 million. Comparable sales during the quarter grew 9% from the prior-year quarter.

We believe robust sales in the quarter were mainly driven by favorable weather condition across the markets, where the company operates and its continued focus on value, which boosted the company's merchandise and geographic sales.

On the back of the remarkable comps performance, management raised its earnings forecast for the first quarter of 2012. The company now expects earnings per share in the range of 92 cents to 93 cents compared with its prior guidance of 89 cents to 91 cents, reflecting a 24% to 26% increase from the year-ago quarter's earnings of 74 cents per share. Currently, the Zacks Consensus Estimate for the quarter is 93 cents per share.

Peer Performance

One of Ross Store's competitors, Gap Inc. ( GPS ) registered a decline of 2% in its April 2012 same-store sales. Meanwhile, another competitor, Nordstrom Inc. ( JWN ), reported positive same store sales of 7.1% for the month of April 2012.

Our Recommendation

Ross Stores and its subsidiaries operate two chains of off-price retail apparel and home accessories stores in the U.S. 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 attractive dividend payouts even as many other retailers are implementing dramatic cutbacks, and has the financial strength to continue its course and build shareholders' value.

Ross' shares maintain a Zacks #2 Rank, which translates into a short-term Buy rating. We have a long-term Outperform recommendation on the stock.

GAP INC (GPS): Free Stock Analysis Report
NORDSTROM INC (JWN): Free Stock Analysis Report
ROSS STORES (ROST): Free Stock Analysis Report
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Zacks Investment Research

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 Stocks: GPS , JWN , ROST

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