Ross Stores Inc. (ROST) Thursday said it first quarter profit increased from the prior year, helped by strong sales and higher operating margin, with a 3% increase in comparable store sales. Earnings were in line with estimates, while revenues surpassed Street view. The apparel and home accessories retailer has also raised its earnings forecast for second quarter and second half of 2009, sending its shares more than 6% on the Nasdaq.
Net earnings for the first quarter jumped 15.0% to $91.39 million from $79.49 million in the same quarter a year ago. On a per share basis, earnings were up 20% at $0.72, from $0.60 in the year-earlier quarter.
Quarterly results included a real estate settlement that increased earnings per share by about $0.02 during the quarter.
On average, thirteen analysts' polled by Thomson Reuters expected earnings of $0.72 per share for the quarter. Analysts' estimate typically excludes one-time items.
Ross Stores' sales for the quarter increased 9% to $1.69 billion from $1.56 billion in the year-earlier quarter, surpassing Street estimates of $1.66 billion. Comparable store sales rose 3% on top of a 3% gain in the prior year.
Michael Balmuth, Vice Chairman, President and Chief Executive Officer said, "Our business benefited mainly from our ability to offer customers fresh and exciting name brand bargains, as we continue to take advantage of the substantial amount of close-out opportunities in the marketplace. The best performing merchandise categories during the period were Dresses and Shoes, while the strongest region was the Mid-Atlantic."
In the sequentially preceding fourth quarter, Ross Stores reported an increase in net income at $97.4 million or $0.76 per share on a 5% increase in sales to $1.73 billion from the same quarter a year ago.
Amongst others in the industry, off-price retailer TJX Companies Inc. on Tuesday reported a higher first quarter profit at $209.2 million or $0.49 per share on a 1% increase in sales at $4.35 billion, with comparable store sales growth of 2% over last year.
Another peer, Kohl's Corp. (KSS), a moderate-price retailer, reported a decline in first quarter profit at $137 million or $0.45 per share, despite a 0.4% increase in quarterly sales to $3.64 billion from the year-earlier quarter. Comparable store sales declined 4.2%.
Department store chain J.C. Penney Co., Inc. (JCP) on Friday reported a 79% drop in first quarter profit of $25 million or $0.11 per share, hurt by sales that dropped 5.9% to $3.88 billion from the year-earlier quarter. Comparable store sales for the period were down 7.5%.
Operating margin of Ross Stores for the quarter grew about 75 basis points to 8.9%, primarily driven by a 90 basis point improvement in gross margin. This gain, however, was partially offset by a 15 basis point rise in selling, general and administrative costs from the year-earlier quarter.
For the second quarter, Ross Stores now expects same store sales to be flat to down 1%, on top of a strong 6% gain in the prior year. Earlier, the company expected a mid single digit percentage decline in second quarter comparable store sales.
The company is also raising same store sales forecast for the second half of the current year from relatively flat to up 2% to 3%, compared to a 1% decline in year-ago period.
Based on the new sales targets, Ross Stores said it expects second quarter earnings in the range of $0.60 to $0.63 per share, up from $0.54 per share recorded in the prior year period. The Street currently expects earnings of $0.54 per share for the quarter.
For fiscal 2010, the company now expects earnings in a range of $2.62 to $2.72 per share, up from the prior guidance range of $2.25 to $2.45 per share and reported EPS of $2.33 in fiscal 2008. Analysts' currently anticipates earnings of $2.54 per share for the year.
On April 3, 2009, brokerage RBC Capital Mkts rated shares of Ross Stores as 'Sector Perform,' with a mean target range of $41.00.
ROST is currently trading at $38.13, up $2.32 or 6.53%, on a volume of 1.29 million shares. In the last 52-week period, the stock traded in the range of $21.70 to $41.56, on a three-month average volume of 2.99 million shares.
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