Macroeconomic Risks - The company is facing significant risks from macroeconomic factors, including elevated inflation and potential supply chain disruptions, which could adversely affect sales and profitability[60]. - Changes in U.S. trade or tax policy regarding apparel and home-related merchandise could increase costs and reduce profitability, as a large portion of goods is sourced from overseas[63]. - Consumer spending levels are influenced by various external factors, including inflation and unemployment rates, which could affect demand for the company's merchandise[62]. - The company must navigate risks associated with importing merchandise, including tariffs and geopolitical conflicts, which could disrupt supply chains and increase costs[74]. Competitive Landscape - The competitive landscape in the retail industry is intensifying, with increased competition from both traditional and online retailers, which may negatively impact sales and margins[64]. - The company needs to secure favorable store locations based on consumer demographics to achieve planned growth, which may be challenging due to competition[72]. - Expansion into new geographic markets carries risks, including higher costs and the need for increased marketing investments to build brand awareness[73]. Operational Challenges - Labor shortages and increased turnover rates may impact the company's ability to execute its retail strategies effectively, potentially affecting operating results[69]. - Effective inventory management is crucial, as excess inventory or markdowns on slow-moving items could lead to decreased profit margins[78]. - Disruptions in the supply chain or logistics could impair the company's ability to meet customer demand, resulting in lost sales or increased costs[86]. - The company has a concentration of store locations in California, Texas, and Florida, which together account for almost 50% of its stores, making it vulnerable to regional disasters[91]. Technology and Cybersecurity - The company is making technology investments to improve information systems, but excessive technological change could disrupt operations and impact competitive positioning[84]. - The company is exposed to cybersecurity threats, including data breaches and ransomware attacks, which could disrupt operations and lead to significant legal exposure[80]. Financial Position - The company relies on strong cash flows from operations to support growth plans, capital expenditures, and shareholder returns, making liquidity essential[89]. - A hypothetical 100 basis point change in market interest rates would not materially impact the company's financial position or results[181]. - The company has no outstanding forward contracts as of February 1, 2025, to hedge against foreign currency fluctuations[178]. - The company has six series of unsecured Senior Notes with fixed interest rates, insulating it from market interest rate changes[179]. Compliance and Vendor Risks - Legal and regulatory compliance issues could result in increased costs and damage to the company's reputation, affecting sales[92]. - The company faces risks related to vendor compliance with safety and quality standards, which could lead to product recalls and increased costs[93].

Group 1 - The article discusses Ross Stores (NASDAQ: ROST) and expresses a cautious outlook on its valuation, which may limit the stock's upside potential [1] - The 4Q24 results for Ross Stores appeared satisfactory, but the overall sentiment remains cautious due to valuation concerns [1] Group 2 - The author emphasizes a diverse investment approach, incorporating fundamental, technical, and momentum investing strategies to enhance the investment process [1]

Core Viewpoint - The article discusses the reliability of brokerage recommendations, particularly focusing on Ross Stores (ROST), and highlights the potential misalignment of interests between brokerage firms and retail investors [1][4][9]. Brokerage Recommendation Summary - Ross Stores has an average brokerage recommendation (ABR) of 1.70, indicating a consensus between Strong Buy and Buy, based on 23 brokerage firms' recommendations [2]. - Out of the 23 recommendations, 15 are classified as Strong Buy, accounting for 65.2% of the total recommendations [2]. Zacks Rank vs. ABR - The Zacks Rank, a proprietary stock rating tool, categorizes stocks from 1 (Strong Buy) to 5 (Strong Sell) and is based on earnings estimate revisions, making it a more effective indicator of near-term stock performance compared to ABR [7][10]. - Unlike ABR, which is based solely on brokerage recommendations and may not be up-to-date, Zacks Rank reflects timely changes in earnings estimates, providing a more accurate indication of future price movements [8][11]. Earnings Estimate Trends for Ross Stores - The Zacks Consensus Estimate for Ross Stores has decreased by 4% over the past month to $6.43, indicating growing pessimism among analysts regarding the company's earnings prospects [12]. - This decline in earnings estimates has contributed to a Zacks Rank of 4 (Sell) for Ross Stores, suggesting caution despite the favorable ABR [13].

Core Viewpoint - Telsey Advisory analyst Dana Telsey has reiterated a Market Perform rating on Ross Stores Inc (ROST) and lowered the price forecast from $175.00 to $150.00, reflecting concerns over the company's future performance and outlook [1]. Financial Performance - ROST reported fourth-quarter EPS of $1.79, slightly lower than last year's $1.82 but above the consensus estimate and guidance of $1.57 – $1.64, with the earnings beat driven by a $0.14 one-time gain from the sale of a packaway facility [1]. - Sales decreased by 1.8% to $5.912 billion, slightly missing consensus expectations [1]. Margins and Growth - Comparable store sales grew by 3%, outperforming the 2.6% consensus, while gross margin contracted to 26.5%, below estimates; however, better cost control led to an operating margin of 12.4%, beating expectations [2]. - The initial FY25 outlook for total sales growth is projected at 1% – 5%, which falls short of expectations [2]. Future Guidance - FY25 EPS is estimated to be between $5.95 – $6.55, lower than the $6.32 reported in FY24 and below the consensus of $6.67 [3]. - The first-quarter FY25 guidance is also below expectations, with sales projected to decline by 1% to increase by 3%, compared to a prior consensus of a 6% rise; comparable store sales are expected to fall between -3% and 0%, below the consensus of 2.4% [3]. Market Conditions - The company experienced growth in traffic and basket size; however, sales slowed toward the end of the fourth quarter and continued to decelerate into the first quarter due to unseasonable weather and an uncertain macro environment [4]. - The company faces pressure from shifts affecting its core lower-income customers, leading to conservative outlooks for the first quarter and FY25 [4]. Revised Projections - The analyst has lowered the FY25 sales growth outlook to 4.6% YoY growth to $22.09 billion, down from a previous estimate of 5.7% growth to $22.33 billion; the EPS estimate for FY25 has been adjusted down to $6.54 from $6.70 [5]. - ROST shares are trading higher by 1.38% at $137.84 as of the last check [5].

Core Insights - Ross Stores, Inc. reported mixed results for Q4 fiscal 2024, with earnings surpassing estimates but sales missing expectations [1][3][4] - The company experienced a year-over-year increase in net sales, but earnings declined compared to the previous year [1][3] Financial Performance - Earnings per share (EPS) for Q4 was $1.79, exceeding the Zacks Consensus Estimate of $1.65, but down 1.6% from $1.82 in Q4 fiscal 2023 [3] - Total sales reached $5.91 billion, a 3% increase year-over-year, but fell short of the Zacks Consensus Estimate of $5.95 billion [4] - Comparable store sales (comps) grew by 3%, surpassing the expected increase of 2.4% [4] Cost and Profitability - Cost of goods sold (COGS) was $4.3 billion, up 0.7% year-over-year, representing 73.5% of sales, an increase of 80 basis points from the previous year [5] - Gross profit decreased by 4.7% year-over-year to $1.569 billion, with gross margin contracting 80 basis points to 26.5% [6] - Operating income rose 1.8% year-over-year to $731 million, with an operating margin of 12.4%, remaining flat year-over-year [7] Shareholder Returns - The company ended fiscal 2024 with cash and cash equivalents of $4.7 billion and long-term debt of $1.5 billion [10] - Ross Stores repurchased 1.7 million shares for $262 million in Q4, totaling 7.3 million shares for $1.05 billion in fiscal 2024 [11] - A 10% increase in the quarterly cash dividend to 40.5 cents per share was approved, payable on March 31, 2025 [12] Future Outlook - Sales trends softened in early 2025 due to unseasonable weather and macroeconomic volatility, leading to a cautious business forecast [13] - For Q1 fiscal 2025, the company anticipates comps to decline between 3% and flat, with EPS expected to be in the range of $1.33 to $1.47 [14] - For the fiscal year ending January 31, 2026, EPS is projected to be between $5.95 and $6.55 [15]

Financial Data and Key Metrics Changes - For Q4 2024, earnings per share were $1.79 compared to $1.82 for Q4 2023, with net income at $587 million versus $610 million last year [10] - Total sales for Q4 2024 were $5.9 billion, with a comparable store sales gain of 3% on top of a 7% gain in the same period last year [10] - For fiscal 2024, earnings per share increased to $6.32 from $5.56 in fiscal 2023, with net income rising to $2.1 billion compared to $1.9 billion last year [11] - Total sales for fiscal 2024 increased to $21.1 billion, up from $20.4 billion in the prior year [11] Business Line Data and Key Metrics Changes - Cosmetics and children's merchandise were the best-performing areas during the holiday season, while DD's discounts posted healthy sales gains [14] - The operating margin for Q4 was 12.4%, flat compared to last year, with a 105 basis point benefit from the sale of a packaway facility [13][20] - Merchandise margin declined by 85 basis points due to an increased mix of quality branded assortments [21] Market Data and Key Metrics Changes - The Pacific Northwest and Texas were the strongest regions for sales performance, while California and Florida were in line with the chain average [52] - Consolidated inventories were up 12%, mainly due to higher planned packaway levels, with packaway representing 41% of total inventories compared to 40% last year [15] Company Strategy and Development Direction - The company plans to open approximately 90 new locations in fiscal 2025, including about 80 Ross and 10 DD's, while closing or relocating about 10 to 15 older stores [29] - The management believes the brand and merchandising strategies for both Ross and DD's are sound and will continue to be pursued without significant changes [40][41] - The company aims to enhance its store environment and marketing efforts, with a focus on prudent investment and potential ROI [72] Management's Comments on Operating Environment and Future Outlook - Management noted that sales trends began softening later in January and into February due to unseasonable weather and macroeconomic volatility [23] - The company expects comparable store sales for Q1 2025 to be down 3% to flat, with earnings per share projected between $1.33 and $1.47 [24] - Management remains optimistic about the potential for closeout merchandise opportunities due to the current retail environment [34] Other Important Information - The company repurchased 1.7 million shares for $262 million in Q4 2024, totaling 7.3 million shares for $1.05 billion in fiscal 2024 [16] - A 10% increase in the quarterly cash dividend to $0.405 per share was approved, payable on March 31, 2025 [17] Q&A Session Summary Question: Can you elaborate on your top strategic priorities? - The CEO indicated that the brand strategy for Ross and customer strategy for DD's are sound and will continue to be pursued, with a focus on learning the off-price model [40] Question: Can you discuss regional performance in Q4? - The Pacific Northwest and Texas were top-performing regions, while California and Florida were in line with the chain [52] Question: How do you view the impact of weather on sales? - Management noted that weather-impacted areas saw declines, but improvements were observed as weather conditions improved [46] Question: What is the outlook for merchandise margins? - Merchandise margins are expected to be relatively neutral for fiscal 2025, with ongoing adjustments based on customer feedback [64] Question: How is the company handling tariffs? - The company is monitoring tariff changes closely and plans to maintain price competitiveness while exploring closeout opportunities [110][111] Question: What is the strategy for store openings? - The company sees growth potential with existing store formats and plans to continue opening new stores in various markets [117] Question: How does the company plan to enhance marketing efforts? - The CEO acknowledged the need for improved marketing and messaging, with plans to invest in these areas over time [134]

Company Performance - Ross Stores reported quarterly earnings of $1.79 per share, exceeding the Zacks Consensus Estimate of $1.65 per share, but down from $1.82 per share a year ago, representing an earnings surprise of 8.48% [1] - The company posted revenues of $5.91 billion for the quarter ended January 2025, missing the Zacks Consensus Estimate by 0.63% and down from $6.02 billion year-over-year [2] - Over the last four quarters, Ross Stores has surpassed consensus EPS estimates four times and topped consensus revenue estimates two times [2] Stock Outlook - Ross Stores shares have declined approximately 9.6% since the beginning of the year, compared to a decline of 0.5% for the S&P 500 [3] - The company's earnings outlook is mixed, with a current Zacks Rank of 3 (Hold), indicating expected performance in line with the market in the near future [6] - The current consensus EPS estimate for the upcoming quarter is $1.52 on revenues of $5.08 billion, and for the current fiscal year, it is $6.63 on revenues of $22.24 billion [7] Industry Context - The Retail - Discount Stores industry, to which Ross Stores belongs, is currently ranked in the top 24% of over 250 Zacks industries, suggesting a favorable outlook compared to lower-ranked industries [8] - Empirical research indicates a strong correlation between near-term stock movements and trends in earnings estimate revisions, which can impact investor sentiment and stock performance [5]

Core Viewpoint - Ross Stores reported strong earnings with an EPS of $1.79, exceeding analyst expectations, but revenue fell short, indicating potential challenges ahead [2][6]. Financial Performance - EPS for Q4 2024 was $1.79, surpassing the estimated $1.66, aided by a one-time sale [2][6]. - Revenue reached $5.9 billion, missing the estimated $5.943 billion and down from $6 billion in the previous year, reflecting a 2% year-over-year decline [3][6]. - Operating margin remained stable at 12.4%, unchanged from the previous year [3][7]. - Net income was reported at $587 million, a decrease of 3.8% from $610 million in Q4 2023 [3]. Company Overview - Ross Stores is a leader in the off-price retail sector, focusing on buying excess inventory and offering significant discounts on well-known brands [4]. - The company expanded its store count from 2,109 to 2,186 locations over the fiscal year [4]. Strategic Initiatives - The company aims to attract cost-conscious shoppers by providing value-driven options and enhancing operational competitiveness [5]. - Ross's merchandise strategy, termed "packaway," ensures timely inventory deployment, contributing to its pricing advantage [5]. Market Dynamics - Comparable store sales increased by 3%, building on a 7% increase from the prior year, although the sales boost was moderated by an extra week in last year's period [7]. - The company faced challenges due to a dip in consumer activity around Thanksgiving, impacting sales momentum [6]. Future Outlook - For fiscal 2025, Ross projects flat to a 3% decline in comparable store sales for the first quarter, reflecting caution regarding macroeconomic conditions [8]. - Management anticipates annual EPS to range from $5.95 to $6.55, a slight contraction from the previous year's $6.32, indicating ongoing competitive pressures [8]. Investor Considerations - Investors should focus on Ross's proactive purchasing strategy, which is guided by demographic targeting and geographic positioning in urban areas [9]. - The company is navigating competitive tensions from various retail formats, particularly e-commerce, and localized factors affecting shopper behavior [9].

Group 1 - Ross Stores Inc. shares declined after hours due to forecasts of weaker same-store sales for the year, attributed to recent slowing trends and adverse weather conditions [1] - The company anticipates same-store sales to range from a decline of 1% to an increase of 2%, which is below FactSet's expectation of a 3% gain [2] - Earnings per share are projected to be between $5.95 and $6.55, compared to FactSet's forecast of $6.67 [2]

Earnings Performance - Earnings per share for Q4 2024 were $1.79, down from $1.82 in Q4 2023, with net income of $587 million compared to $610 million last year[5] - Fiscal 2024 earnings per share increased to $6.32, up from $5.56 in fiscal 2023, with net earnings rising to $2.1 billion on sales of $21.1 billion[6] - For Q1 2025, comparable store sales are forecasted to decline by 3% to flat, with projected earnings per share between $1.33 and $1.47[10] - Fiscal 2025 earnings per share are projected to be between $5.95 and $6.55, compared to $6.32 for fiscal 2024[10] Sales and Revenue - Comparable store sales for Q4 2024 grew by 3%, following a robust 7% gain in the same period last year[5] - Ross Stores operates 1,831 locations in 43 states and 355 dd's DISCOUNTS stores, with fiscal 2024 revenues of $21.1 billion[14] Cash and Dividends - A 10% increase in the quarterly cash dividend to $0.405 per share was announced, payable on March 31, 2025[9] - The company ended fiscal 2024 with $4.7 billion in cash after funding growth and capital needs[9] - Dividends paid increased to $488,721, compared to $454,814, marking a rise of 7.5%[20] Assets and Liabilities - Total assets increased to $14,905,332, up from $14,300,109, representing a growth of 4.2% year-over-year[18] - Current liabilities rose to $4,661,825, up 11.4% from $4,185,796 year-over-year[18] - Long-term debt decreased to $1,515,080 from $2,211,017, a reduction of 31.5%[18] - Total current assets grew to $7,538,696, an increase of 1.9% compared to $7,398,138 last year[18] Cash Flow and Investments - Cash flows from operating activities totaled $2,356,988, a decrease of 6.2% from $2,514,490 in the previous year[20] - Net cash used in investing activities was $637,462, down from $762,812, indicating a decrease of 16.4%[20] - The company ended the period with cash and cash equivalents of $4,730,744, a slight decrease from $4,872,446[20] Inventory and Operating Margin - Merchandise inventory increased to $2,444,513, reflecting a rise of 11.5% from $2,192,220[18] - The fourth quarter operating margin was 12.4%, flat compared to the previous year, with a one-time benefit of approximately $0.14 per share from the sale of a packaway facility[7][8] Share Repurchase - The company repurchased 1.7 million shares for $262 million in Q4 2024, totaling 7.3 million shares repurchased for $1.05 billion in fiscal 2024[8]