The company’s shares rose nearly 6% in extended trading as the company’s strategy of lowering prices on brand-name clothing and shoes helped increase store visits and customer spending per transaction.
“The company is benefiting from improvements to its product line, which it now offers with a wider range of brands and at different price points,” said Sky Canaves, senior analyst at Emarketer.
However, CEO Barbara Rentler said Ross Stores was “cautious” in its sales forecast, citing inflationary pressures on low- to middle-income customers.
Operating margins increased 115 basis points to 12.5% in the quarter, driven by higher sales of branded goods and lower transportation and labor costs.
However, higher discounts led to a decline in the trading margin by 80 basis points. The company expects margin pressure to increase further in the second half of the year.
The company has “achieved increased productivity through automation and employee retention and will look for additional ways to save operating costs to offset the impact of discounts on gross margins,” Canaves said.
According to LSEG data, the company posted revenue of $5.29 billion, above analysts’ average estimate of $5.25 billion.
Earnings per share were $1.59, compared to expectations of $1.50.
Annual earnings per share are expected to be between $6.00 and $6.13, above the previous forecast of $5.79 to $5.98.
The company maintained its forecast for comparable sales growth of 2 to 3 percent in the second half of the year.
Sign up Here.
Reporting by Savyata Mishra in Bengaluru; Editing by Arun Koyyur
Our standards: The Thomson Reuters Trust Principles.
