Ross Stores(ROST) - 2026 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Total sales increased by 3% to $5 billion, with comparable store sales remaining flat compared to the previous year [5] - Earnings per share rose to$ 1.47 from $1.46, while net income decreased to$ 479 million from $488 million year-over-year [5] - Operating margin remained flat at 12.2% year-over-year [5][10] Business Line Data and Key Metrics Changes - The dd's discount brand continued strong momentum with solid sales and operating profits [6] - Cosmetics emerged as the strongest merchandise area during the quarter [5] Market Data and Key Metrics Changes - Geographic trends showed broad-based performance, with the Southeast region performing the best [5] - Total consolidated inventories increased by 8% year-over-year, with average store inventories up by 4% [6] Company Strategy and Development Direction - The company plans to open approximately 90 new stores in 2025, including about 80 Ross and 10 dd's discount locations [7] - The company is focused on maintaining a pricing umbrella below traditional retailers to deliver value to customers, despite expected inflationary pressures [8] - Management expressed a cautious outlook for the second half of the fiscal year due to uncertainties in consumer demand and trade policies [9] Management's Comments on Operating Environment and Future Outlook - Management noted a sequential improvement in comparable sales throughout the quarter, despite a slow start in February [9] - The company withdrew its previously provided annual guidance due to too many unknown variables affecting visibility [9] - Management emphasized the importance of a flexible business model to navigate through uncertain times [15] Other Important Information - The company repurchased 2 million shares of common stock for$ 263 million during the first quarter [11] - The projected earnings per share for the second quarter is in the range of $1.40 to$ 1.55, including a cost impact of $0.11 to$ 0.16 from tariffs [12] Q&A Session Summary Question: Can you elaborate on the cadence of comps and drivers of improvement? - Management noted broad-based improvement across merchandise categories, with April showing strong performance [19] Question: What strategies are in place to mitigate tariffs? - Management discussed working with vendors for better costing, careful price increases, and utilizing closeouts to mitigate tariff impacts [20] Question: How do you expect the gross margin hit from tariffs to evolve? - The second quarter impact includes costs from orders already in transit when tariffs were announced, and management is cautious about predicting the back half of the year [25][26] Question: What are your thoughts on inventory availability and sourcing? - Management believes there will be availability of closeouts, but there may be some receipt risk due to production halts in China [31][32] Question: How is the branded strategy performing? - Management is pleased with the execution of the branded strategy, which is now expected to have no further margin headwinds [52][53] Question: What are your expectations for pricing elasticity? - Management indicated that elasticity will depend on the category and is being strategic about pricing changes [58] Question: How are you planning to shift sourcing away from China? - Management acknowledged the challenges in shifting sourcing quickly but emphasized flexibility in product assortment [64][89]