ROST - Ross Stores stock slips on soft sales light guidance

Ross Stores ( NASDAQ: ROST ) stock slid in Thursday’s extended session after the retailer offered a softer than expected full year earnings forecast.

For the second quarter, the California-based department store chain posted a mixed report. While the retailer exceeded EPS estimates handily and pushed operating margins above expectations, net sales marked a 4.6% decline to come up short of estimates. Meanwhile, comparable sales fell 7%, greater than the 6.1% drop expected by analysts.

“We are disappointed with our sales results, which were impacted by the mounting inflationary pressures our customers faced as well as an increasingly promotional retail environment,” CEO Barbara Rentier said. “Earnings came in above our guidance range primarily due to lower incentive costs resulting from the below plan topline performance.”

She added that margin pressures were largely caused by markdowns that attempted to provoke better sales performance. Despite the markdowns, sales numbers came in below expectations and inventory ballooned from $1.75B in July 2021 to $2.72B in July 2022. Rentier cautioned that sales are not likely to improve swiftly either.

“Given our first half results, as well as the increasingly challenging and unpredictable macroeconomic landscape and today’s more promotional retail environment, we believe it is prudent to adopt a more conservative outlook for the balance of the year,” she commented.

Third quarter same store sales are now expected to decline 7% to 9%, while EPS are expected to come in between $0.72 to $0.83. The latter figure lags the analyst estimate that was set at $1.07. EPS for the full year are anticipated to range from $3.84 to $4.12 versus a $4.58 analyst expectation.

“We are facing a very difficult and uncertain macroeconomic environment that we expect will continue to strain our customers’ discretionary spending,” Rentier concluded.

Shares fell 1.36% shortly after the print.

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