Ross Stores Inc.
), one of the leading off-price retailers of apparels and home
accessories, recently posted earnings of 72 cents per share for
third-quarter 2012, in line with the Zacks Consensus
The quarterly results grew 14% from the prior-year level of 63
cents a share, primarily attributable to the company's ability to
attract bargain hunters who value both quality and price. The
company's efforts to trim down costs and reduce store inventories
also benefitted the results.
Let's Dig Deep
Net sales for the quarter increased 11% to $2.263 billion from
$2.046 billion in the prior-year quarter. This also surpassed the
Zacks Consensus Estimate of $2.261 billion. Comparable store
sales surged 6% during the period.
Gross profit, in dollar terms, increased 10.3% to $613.7
million from $556.2 million in the year-ago quarter. However,
gross profit margin contracted 6 basis points year over year to
27.12% from 27.18% reported in the year-ago quarter, primarily
due to higher cost of goods sold as a percentage of sales.
Leverage on operating expenses and rise in sales led to a
14.2% increase in operating income to $255.7 million from the
prior-year level of $224.0 million. Consequently, operating
margin for the quarter expanded 35 basis points to 11.30%.
Other Financial Aspects
Ross Stores, which faces stiff competition from
Wal-Mart Stores Inc
) ended the quarter with cash and cash equivalents of $623.8
million compared with $552.9 million at the end of the prior-year
During the first nine months of fiscal 2012, Ross generated
$646.3 million of cash from its operational activities. 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
During the first nine months, the company bought back 5.4
million shares for $334 million under its existing $900 million
share repurchase program, which was 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 worth of shares in fiscal
For the fourth quarter of fiscal 2012, the company expects
same-store sales to increase 1% to 2%. Earnings per share, for
the fourth quarter, are expected in the range of $0.99 -
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, 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
Ross Stores has implemented a micro-merchandising tool,
through which it expects to enhance total sales and profitability
by targeting expansion in existing markets. Moreover, Ross
remains focused on new store growth, share buybacks, and has the
financial strength to continue building shareholders' value.
Currently, Ross Stores holds a Zacks #2 Rank, which translates
into a short-term Buy rating. However, we remain slightly
cautious over the stock due to sluggish economic recovery, and
therefore maintain a long-term Neutral recommendation.
KOHLS CORP (KSS): Free Stock Analysis Report
ROSS STORES (ROST): Free Stock Analysis
WAL-MART STORES (WMT): Free Stock Analysis
To read this article on Zacks.com click here.