Ross Stores(ROST) - 2024 Q4 - Earnings Call Transcript

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]