01—Abstract
Summary
Summary of the 8-K filed May 23, 2024. Cited figures are marked; the original filing is the authoritative source.
Ross Stores reported first-quarter fiscal 2024 results (13 weeks ended May 4, 2024) that beat its own expectations on earnings.
Diluted EPS rose 34% to $1.46a from $1.09, and net earnings climbed to $488 million from $371 million. Sales grew 8% to $4.86 billion, with comparable store sales up 3%. Management said sales were in line with guidance, while the earnings beat came mainly from lower expenses than planned.
Operating margin expanded 205 basis points to 12.2%, driven by lower distribution, incentive, and freight costs, which offset a planned decline in merchandise margin. Management guided second-quarter comparable store sales to an increase of 2% to 3% and EPS to $1.43 to $1.49b, versus $1.32 a year earlier. Full-year fiscal 2024 comparable store sales guidance was unchanged at 2% to 3%, but EPS guidance was raised to $5.79 to $5.98, from $5.56 in fiscal 2023, which included roughly $0.20 from a 53rd week.
CEO Barbara Rentler said inflation continues to pressure low- and moderate-income customers, and the company plans to keep inventory and expenses tightly managed. Capital returns remain a focus. The company repurchased 1.9 million shares for $262 millionc in the quarter under a new two-year, $2.1 billion authorization approved in March 2024, and it remains on track to buy back $1.05 billion of stock in fiscal 2024.
Cash and equivalents were $4.65 billiond at quarter end, while total debt was about $2.46 billion, including $949 million classified as current. Merchandise inventory rose about 10% year over year to $2.46 billion, which investors may want to monitor against the softer discretionary demand the company describes.
02—Key points
Key Highlights
- Diluted EPS of $1.46 vs. $1.09 a year ago (+34%); net earnings of $488M vs. $371M, with management saying the beat came from lower expenses versus plan
- Sales rose 8% to $4.86B; comparable store sales grew 3%, in line with guidance but below management's stated hopes
- Operating margin expanded 205 bps to 12.2%, driven by lower distribution, incentive, and freight costs, partly offset by a planned merchandise margin decline
- Q2 FY2024 guidance: comparable store sales +2% to +3% and EPS of $1.43 to $1.49 (vs. $1.32 prior year)
- FY2024 EPS guidance raised to $5.79 to $5.98 (from $5.56 in FY2023, which included about $0.20 from the 53rd week); comparable sales guidance unchanged at +2% to +3%
- Returned capital through $262M in Q1 buybacks under a new $2.1B two-year authorization; $1.05B of repurchases still planned for FY2024
- Store count grew to 2,127 from 2,034, and merchandise inventory rose about 10% year over year to $2.46B
03—Questions
Frequently Asked Questions
Did Ross Stores beat its earnings expectations this quarter?
Yes. Management said first-quarter EPS was better than expected, mainly because expenses came in below plan. Sales, however, were only in line with guidance, and comparable store sales rose 3%. The beat therefore came more from cost control than from top-line strength.
What is the company expecting for the rest of fiscal 2024?
For the second quarter, Ross expects comparable store sales to rise 2% to 3% and EPS of $1.43 to $1.49. For the full year, comparable sales guidance is unchanged at 2% to 3%, and EPS guidance was raised to $5.79 to $5.98. The EPS comparison base includes a benefit of about $0.20 from a 53rd week in fiscal 2023.
How much is Ross returning to shareholders?
In Q1 the company repurchased 1.9 million shares for $262 million under a new two-year, $2.1 billion authorization approved by the board in March 2024. It remains on track to buy back $1.05 billion of stock in fiscal 2024. The filing also shows $123 million in dividends paid during the quarter.
What are the main risks highlighted by management?
Management cited persistent inflation and a squeeze on low- and moderate-income customers' purchasing power, along with macroeconomic and geopolitical uncertainty. The forward-looking statements also flag supply chain and tariff exposure, inventory management, competition, cybersecurity, and dependence on consumer discretionary spending.
Is the balance sheet strong enough to support these plans?
Cash and equivalents were $4.65 billion at quarter end. Total debt was about $2.46 billion, of which $949 million is current, so near-term repayment will draw on that cash. Operating cash flow was $369 million, which covered capital expenditures of $136 million, buybacks, and dividends, though the company also drew down cash over the quarter.
04—Continue