Ross Stores Stock Jumps on Earnings Beat, Raised Guidance

Shares of Ross Stores (ROST) surged over 8% in early trading Friday as the off-price apparel and home goods retailer posted better-than-anticipated results and raised its guidance as it cut costs.

Ross Stores reported first-quarter earnings per share (EPS) of $1.46, up from $1.09 a year ago. Revenue gained 8% from the year-ago quarter to $4.86 billion. Both exceeded forecasts. Same-store sales rose 3%.

Cost-Cutting Measures Boost Profit

CEO Barbara Rentler said that while the retailer had hoped to do better, the performance was in line with its expectations “despite macroeconomic headwinds that continued to pressure our customers’ discretionary spending.” She added the improvement in profit stemmed primarily from reduced costs. as the company slashed expenses by $1 billion from the fourth quarter.

Operating margin jumped 205 basis points (bps) to 12.2%, which Rentler attributed mainly to “lower distribution, incentive, and freight costs that were partially offset by the planned decline in merchandise margin.” 

Managing Inventory and Expenses ‘Tightly’

Rentler said that continued uncertainty in the macroeconomic and geopolitical environments, including inflationary pressures, “continue to squeeze our low-to-moderate income customers’ purchasing power.” Rentler said because of that, the company would keep managing inventory and expenses “tightly” to maximize sales and earnings growth the rest of the year. 

She said that based on first-quarter results and forward guidance, Ross Stores boosted its full-year EPS outlook to a range of $5.79 to $5.98, up from the previous estimate of $5.64 to $5.89.

Ross Stores shares were up 8.3% at $142.74 as of about 10:20 a.m. ET Friday and have gained about 3% since the start of the year.