Dublin, Calif. – Ross Stores Inc. beat expectations on both the top and bottom lines in the second quarter, and it is digging in on the strategy that is expanding its market share.
“We will stay laser-focused on providing our shoppers the most quality branded bargains available in the marketplace,” said CEO Barbara Rentler.
She noted that the home business isn’t as branded as the apparel business. Across all product categories, the company is expanding its vendor pool and tweaking the brand balance.
“I think we’re still learning on the brand strategy – what the right mix and the right brands are by [category of] business,” she told investors during yesterday’s Q2 review call. “We’re going to build on those learnings based on the customer.”
At the company’s dd’s Discounts chain, business has improved, Rentler said. The sharply priced off-price chain (the dd’s stands for “deeply discounted”) had struggled to find its footing late last year as it expanded outside of its core markets in Texas, Florida and California.
“We continue to adjust assortments in new markets in order to address diverse consumers,” she added.
Total company sales during the second quarter, ended Aug. 3, rose 7% to $5.3 billion. Comps were up 4%, driven by a combination of higher basket and order size. Net earnings jumped 18% to $527 million. Operating margin increased 115 basis points to 12.5% compared to the prior year period.
“Our improved profitability relative to last year benefited from higher sales, and lower distribution and incentive costs that were partially offset, as expected, by lower merchandise margins,” said Rentler.
Looking ahead, Ross offered a cautious forecast for the remainder of the year. It pointed to continued pressure on its low-to-moderate income customer base as well as tougher year-over-year financial comparisons. It now fiscal year expects earnings per share to be in the range of $6.00 to $6.13 versus $5.56 last year.