01—Abstract
Summary
Summary of the 8-K filed November 21, 2024. Cited figures are marked; the original filing is the authoritative source.
Ross Stores reported third-quarter fiscal 2024 results (13 weeks ended November 2, 2024) with EPS of $1.48a, up 11% from $1.33, and net income of $489 million versus $447 million.
Sales rose 3% to $5.1 billionb, but comparable store sales grew only 1%, and management said the quarter fell short of its own sales plan. Management attributed the shortfall to pressure on low-to-moderate income shoppers from high necessity costs, merchandising execution issues, and weather from Hurricanes Helene and Milton plus unseasonably warm temperatures. Profitability was stronger than sales: operating margin expanded to 11.9% from 11.2%, driven by lower incentive, freight, and distribution costs, which more than offset a planned decline in merchandise margin.
The company lowered the fourth-quarter and full-year profit outlook in relative terms and reaffirmed its sales expectations. Fourth-quarter comparable store sales are still projected to rise 2% to 3%, but planned EPS of $1.57 to $1.64c compares with $1.82 last year, a figure that included a roughly $0.20 benefit from a 53rd week. Full-year fiscal 2024 EPS is now expected at $6.10 to $6.17, versus $5.56 in fiscal 2023.
Management also noted a roughly $0.03d fourth-quarter headwind from the timing of packaway expenses that benefited the third quarter. Capital returns remain active.
Ross repurchased 1.8 million shares for $262 million in the quarter and is on track for $1.05 billion of buybacks in fiscal 2024 under its two-year $2.1 billion program. At quarter end the company held $4.35 billion in cash against $2.2 billion of total debt, including $699 million classified as current, and it operated 2,192 stores across its Ross Dress for Less and dd's DISCOUNTS banners.
02—Key points
Key Highlights
- Q3 EPS of $1.48 rose 11% year over year (diluted), with net income up 9% to $489 million.
- Q3 sales grew 3% to $5.1 billion, but comparable store sales increased only 1%, below management's plan.
- Operating margin expanded 70 basis points to 11.9% (from 11.2%), led by lower incentive, freight, and distribution costs.
- Fourth-quarter EPS guidance of $1.57 to $1.64 is below last year's $1.82, which included a roughly $0.20 53rd-week benefit; fourth-quarter comparable sales are still projected at 2% to 3%.
- Full-year fiscal 2024 EPS guidance is now $6.10 to $6.17, versus $5.56 in fiscal 2023.
- Share repurchases totaled $262 million (1.8 million shares) in Q3, with $1.05 billion planned for fiscal 2024 under a $2.1 billion two-year program.
- Inventory rose 9% year over year to $2.86 billion, while cash fell to $4.35 billion, reflecting buybacks, dividends, and a $250 million debt repayment.
03—Questions
Frequently Asked Questions
Why did Ross miss its sales plan in the third quarter?
Management cited persistently high costs on necessities pressuring low-to-moderate income customers' discretionary spending, merchandising initiatives that were not executed as well as planned, and weather effects including Hurricanes Helene and Milton and unseasonably warm temperatures. Comparable store sales rose only 1%.
Why did earnings beat expectations despite weaker sales?
Management said earnings exceeded its expectations because lower incentive compensation, freight, and distribution costs more than offset a planned decline in merchandise margin. Operating margin rose to 11.9% from 11.2%.
How does the fourth-quarter guidance compare with last year, and why does it look weaker?
Planned Q4 EPS of $1.57 to $1.64 compares with $1.82 last year. Last year's quarter had 14 weeks and benefited about $0.20 per share from the 53rd week, so the comparison is distorted. Guidance also includes about a $0.03 headwind from packaway expense timing that benefited Q3. Excluding the 53rd-week effect, the implied outlook is roughly flat to modestly higher.
What does the updated full-year outlook mean for investors?
Full-year fiscal 2024 EPS is now expected at $6.10 to $6.17, compared with $5.56 in fiscal 2023, an increase of roughly 10% to 11%. The range reflects year-to-date results plus the fourth-quarter forecast, and the company continues to project fourth-quarter comparable sales growth of 2% to 3%.
How is Ross returning capital to shareholders and managing its balance sheet?
Ross repurchased $262 million of stock in Q3 and plans $1.05 billion of buybacks in fiscal 2024 under a two-year $2.1 billion authorization. Nine-month dividends paid were $367 million, and the company repaid $250 million of long-term debt. Cash and equivalents were $4.35 billion at quarter end, and $699 million of debt is classified as current.
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