01—Abstract
Summary
Summary of the 10-Q filed September 6, 2023. Cited figures are marked; the original filing is the authoritative source.
Ross Stores, Inc. reported a solid second quarter for fiscal year 2023, demonstrating robust sales growth and improved profitability.
Net sales increased by 7.7% to $4.93 billiona, driven by a strong 5% comparable store sales increase and continued store expansion. Diluted earnings per share rose to $1.32, up from $1.11 in the prior year period, reflecting the company's ability to navigate inflationary pressures and deliver value to its core customer base. The company also highlighted improvements in its cost structure, with cost of goods sold as a percentage of sales decreasing due to lower freight costs and a higher merchandise margin.
While selling, general, and administrative expenses increased, largely due to higher incentive compensation and store wages, the overall profitability improvement, coupled with substantial cash flow from operations, positions Ross Stores favorably for the remainder of the fiscal year. The company continues to execute its growth strategy through new store openings and share repurchases, signaling confidence in its ongoing business model.
02—Key points
Key Highlights
- Net sales increased by 7.7% to $4.93 billion for the three months ended July 29, 2023, compared to $4.58 billion in the prior year period.
- Comparable store sales increased by 5% in the second quarter of fiscal 2023.
- Diluted earnings per share (EPS) grew to $1.32, an increase from $1.11 in the comparable prior year period.
- Cost of goods sold as a percentage of sales decreased by 1.85% (185 basis points) due to improved merchandise margin and lower freight costs.
- Net cash provided by operating activities for the six months ended July 29, 2023, was $1.12 billion, a significant improvement from a net cash used of $0.06 billion in the prior year period.
- The company opened 27 new stores in the second quarter and remains on track to open approximately 100 new locations in fiscal 2023.
- The company repurchased approximately $464.9 million of common stock during the six months ended July 29, 2023, as part of its ongoing share repurchase program.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-QQ2 FY2024filed September 6, 2023Financial Statements
Q2 FY2024 against Q2 FY2023
| Line item | Q2 FY2024Q2 FY2023 | Change |
|---|---|---|
| Revenue | $4.93B$4.58B | +7.7% |
| Cost of Revenue | $3.57B$3.40B | +5.0% |
| Gross Profit | $1.37B$1.18B | +15.4% |
| SG&A Expenses | $807.90M$667.06M | +21.1% |
| Operating Expenses | $4.34B$4.08B | +6.4% |
| Net Income | $446.32M$384.52M | +16.1% |
| EPS (Basic) | $1.33$1.11 | +19.8% |
| EPS (Diluted) | $1.32$1.11 | +18.9% |
| Shares Outstanding (Basic) | 336.23M344.88M | −2.5% |
| Shares Outstanding (Diluted) | 337.93M346.11M | −2.4% |
05—Questions
Frequently Asked Questions
What drove the sales growth in the second quarter?
Sales growth was primarily driven by a 5% increase in comparable store sales and the net opening of 81 new stores between the two periods. This indicates strong performance in existing stores and continued expansion efforts.
How did the company manage its costs in the quarter?
The company improved its cost of goods sold as a percentage of sales due to a 200 basis point increase in merchandise margin, largely attributed to lower ocean freight costs, and a decrease in domestic freight costs. While SG&A expenses rose, the overall improvement in merchandise margin and freight costs contributed positively to profitability.
What is the outlook for store expansion?
Ross Stores opened 27 new stores in the second quarter and plans to open approximately 100 new locations in fiscal year 2023. This expansion is a key part of their strategy to increase market penetration and reach more customers.
How is the company returning capital to shareholders?
The company continued its commitment to returning capital through dividends and share repurchases. For the first six months of fiscal 2023, they paid dividends totaling $228.8 million and repurchased $464.9 million of common stock, demonstrating confidence in their financial position and commitment to shareholder value.
06—Continue