Ross Stores (ROST) Misses Q4 EPS by 33c, Revenues Miss; Offers 1Q EPS Guidance Below Consensus

Ross Stores (NASDAQ: ROST) reported Q4 EPS of $0.67, $0.33 worse than the analyst estimate of $1.00. Revenue for the quarter came in at $4.25 billion versus the consensus estimate of $4.27 billion.

Barbara Rentler, Chief Executive Officer, commented, “While our fourth quarter sales exceeded our expectations, the upsurge of the virus resulted in lower traffic, especially in California, our largest state, where we were subject to more stringent occupancy and operating hour restrictions.”

Ms. Rentler continued, “Fourth quarter operating margin of 9.5% declined versus last year as an increase in merchandise margin was more than offset by the deleveraging effect on expenses from lower sales, and higher supply chain and COVID-related operating costs.”

GUIDANCE:

Ross Stores sees Q1 2021 EPS of $0.74-$0.86, versus the consensus of $0.89.

Our guidance and results throughout fiscal 2021 will be reported versus fiscal 2019. We believe the significant impact from the extended closure of our operations in the spring of 2020, and the ongoing headwinds caused by COVID-19 throughout last year, make this a more relevant basis for comparison.

Ms. Rentler commented, “As we enter 2021, there remains limited visibility regarding the pandemic and the pace and magnitude of an economic recovery. Given these factors, we are providing specific guidance for only the first quarter and a general outlook for the year.”

Ms. Rentler continued, “Comparable store sales for the 13 weeks ending May 1, 2021 are projected to be down 1% to down 5% compared to the 13 weeks ended May 4, 2019. Earnings per share for the 2021 first quarter are forecast to be $0.74 to $0.86, reflecting the deleveraging effect from the projected decline in same store sales, increased supply chain costs, higher wages, and ongoing COVID-related expenses.”

Ms. Rentler added, “With the continued roll out of vaccines, potential additional government stimulus, and likely pent-up consumer demand, we expect comparable store sales to strengthen as we move through the year. However, earnings will continue to be affected by the aforementioned cost pressures throughout the year and thus profitability will be well below recent historical high levels.”

Ms. Rentler further noted, “With regard to our expansion plans, we remain very optimistic about our longer-term growth opportunities. That said, we planned a more moderate pace of store openings this year, especially in the spring. For fiscal 2021, we expect to add about 60 new locations, consisting of approximately 40 Ross Dress for Less and 20 dd’s DISCOUNTS.”

Ms. Rentler concluded, “Going forward, we are very confident that our talented management team, seasoned associates, and robust financial foundation will enable us to navigate through these uncertain times. In addition, we believe our longer-term prospects remain bright. We operate in an attractive sector of retail that will be facing much less brick and mortar competition given the significant number of retail closures and bankruptcies. As a result, we believe we remain well-positioned to gain market share over time, especially given consumers’ heightened focus on value and convenience.”

For earnings history and earnings-related data on Ross Stores (ROST) click here.

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