ROST - Ross Stores stock slips on soft guidance

Ross Stores ( NASDAQ: ROST ) stock slid in after hours trading on Tuesday as conservative 2023 guidance overshadowed a Q4 earnings beat.

For the fourth quarter, the company beat on top and bottom line expectations. Comparable store sales rose 1%, surprising analysts that had expected a 1% decline. Additionally, a 10.7% operating margin in the quarter outpaced the 10.4% consensus estimate while merchandise inventories fell about $239M year over year to $2.02B.

“During a very competitive holiday season, fourth quarter sales and earnings exceeded our guidance due to customers’ positive response to our improved assortments and stronger value offerings,” CEO Barbara Rentler said. “Fourth quarter operating margin was 10.7% compared to 9.8% in 2021. This improvement was mainly driven by lower freight and incentive costs that were partially offset by unfavorable timing of packaway-related expenses.”

However, Rentler remained cautious on the forecasts for the year ahead. Management expects between $4.65 and $4.95, below the $5.08 consensus. The first quarter is expected to see EPS between $0.99 and $1.05, below the $1.18 consensus forecast. Comparable sales for the full year are expected to remain flat for both the first quarter and full year as compared to 2022.

“As we enter 2023, the macroeconomic and geopolitical environments remain highly uncertain,” Rentler explained. “As a result, we believe it is prudent to remain conservative when planning our business.”

Shares of the Dublin, California-based off-price retailer fell 1.9% in after hours trading on Tuesday.

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