Ross Stores Inc.
), one of the leading off-price retailers of apparels and home
accessories, recently posted earnings of 93 cents per share for
first-quarter 2012, in line with the Zacks Consensus Estimate.
Earnings grew 26% from the prior-year adjusted level of 74 cents
a share, primarily due to the company's ability to attract bargain
hunters who value both quality and price. Moreover, favorable
weather conditions in the company's operating regions also
benefited the results.
Let's Dig Deep
Net sales for the quarter increased 14% to $2,356.8 million from
$2,074.6 million in the prior-year quarter, and beat the Zacks
Consensus Estimate of $2,338.0 million. This 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 9%
during the period.
Gross profit in dollar terms increased 14.2% to $677.7 million
from $593.4 million in the year-ago quarter primarily due to lower
cost of goods sold as a percentage of sales. Consequently, gross
profit margin expanded 20 basis points year over year at 28.8% from
28.6% in the year-ago quarter.
Increased merchandise gross profit, leverage on operating
expenses and rise in comparable store sales led to a 19.6% increase
in operating income to $339.9 million from the prior-year level of
$284.2 million. Consequently, operating margin for the quarter
expanded 70 basis points to 14.4%.
Other Financial Aspects
Ross Stores, which faces stiff competition from
Wal-Mart Stores Inc
), ended the quarter with cash and cash equivalents of $741.1
million compared with $671.0 million at the end of the prior-year
During the reported quarter, Ross generated $297.3 million of
operating cash flows. This will enable the company to make capital
investments, pay dividends and repurchase shares. At the end of the
quarter, the company had a long-term debt of $150.0 million and
shareholders' equity of $1,610.6 million.
During the quarter, the company bought back 2.0 million shares
for $111 million under its existing $900 million share repurchase
program authorized last year. The company has completed its first
stage of the program by buying back $450 million of shares during
fiscal 2011. Now the company plans to repurchase $450 million in
Buoyed by strong results in the first quarter, Ross Stores
increased its guidance for fiscal 2012. The company expects
earnings per share in the range of $3.26 to $3.37 compared with the
earlier guidance of $3.12 - $3.27, and represents 14% to 18%
year-over-year growth. The current Zacks Consensus Estimate stands
at $3.37 per share for fiscal 2012.
For the second quarter of fiscal 2012, the company expects
same-store sales to increase 3% to 4%, compared with gains of 5%
and 4% recorded in the second quarter of 2011 and 2010,
respectively. Earnings per share for the second quarter are
expected in the range of 72 cents to 75 cents, with an expected
growth rate of 13% to 17% from 64 cents earned in the second
quarter of 2011. The current Zacks Consensus Estimate for second
quarter 2012 is 75 cents per share.
Further, in a move to increase its top line, the company is
focusing to double its store count in the United States. The
company in the long run expects to operate nearly 2000 Ross Dress
for Less stores, compared with its earlier projection of 1500
stores. Moreover, Ross Stores expects to operate approximately 500
dd's DISCOUNTS stores in the long run.
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 has the financial strength to continue its course and build
Currently, we have a long-term Neutral recommendation on the
stock. Moreover, Ross Stores holds a Zacks #3 Rank, which
translates into a short-term Hold rating.
KOHLS CORP (KSS): Free Stock Analysis Report
ROSS STORES (ROST): Free Stock Analysis Report
WAL-MART STORES (WMT): Free Stock Analysis
To read this article on Zacks.com click here.