Ross Stores, Inc. (NASDAQ:ROST) stock traded higher in Friday’s premarket session after the off-price retailer beat Wall Street estimates on both the top and bottom lines for the second quarter.
Earnings Beat Estimates
Ross Stores reported second-quarter revenue of about $6.27 billion, beating the $6.18 billion estimate. Earnings came in at $2.66 per share, topping the $1.94 estimate.
Sales rose 13% year over year to $6.3 billion, while comparable-store sales increased 10%, driven by stronger customer traffic.
The quarter marked Ross Stores’ second consecutive period of double-digit sales growth, with July delivering the strongest performance. New and returning customers, more frequent visits and higher spending from existing shoppers helped drive growth.
Sales gains were broad-based across merchandise categories and geographic regions. Home and cosmetics led the merchandise categories, while the Midwest was the strongest region. dd’s Discounts also posted solid growth across categories and regions.
Gross margin expanded 625 basis points, including a 405-basis-point benefit from tariff refunds. Lower distribution costs also helped margins, while higher fuel prices increased freight expenses.
Merchandise margin improved 110 basis points. Distribution costs declined 100 basis points, helped by the timing of packaway expenses, productivity gains and easier year-over-year comparisons.
Occupancy costs improved by 25 basis points. Higher fuel costs created a 10-basis-point freight headwind, while buying costs hurt margins by 5 basis points.
Operating margin expanded 610 basis points, including the 405-basis-point benefit from tariff refunds. Excluding the refunds, operating margin improved 205 basis points from a year earlier.
Inventory increased 18% as Ross Stores stocked up to support sales growth, improve merchandise margins and capitalize on closeout buying opportunities.
The company repurchased about 1.4 million shares for $319 million during the quarter.
Management Commentary
During the earnings call, CEO Jim Conroy said the retailer has been gaining ground on its off-price rivals.
Conroy noted that Ross has grown faster than each of its two major competitors over the past four quarters, saying that “mathematically we’ve captured more share.”
He added that the company remains confident it can continue gaining market share as its merchandising, marketing and store initiatives drive stronger customer traffic and engagement.
Ross Stores Raises 2026 Earnings Outlook
Ross Stores raised its full-year earnings guidance to $8.61 to $8.77 per share from its previous range of $7.50 to $7.74. The new outlook is above the $7.79 analyst estimate.
The company expects third-quarter earnings of $1.75 to $1.83 per share and fourth-quarter earnings of $2.17 to $2.26 per share. Both ranges are above current analyst expectations.
Ross Stores expects third-quarter sales to increase 9% to 11%. It forecasts an operating margin of 11.7% to 12%, compared with 11.6% a year earlier.
The retailer plans to open 51 stores during the third quarter, including 41 Ross locations and 10 dd’s Discounts stores.
For the fourth quarter, Ross Stores expects comparable-store sales to increase 4% to 5%, despite facing a 9% growth comparison from the prior-year period.
The company also raised its 2026 store-opening target to 115 locations from 110. It plans five to 10 relocations and closures.
Ross Stores said it remains on track to repurchase $1.275 billion of stock in 2026 under its $2.55 billion two-year authorization.
ROST Price Action: Ross Stores shares were up 8.11% at $247.56 during premarket trading on Friday. The stock is approaching its 52-week high of $257.00, according to Benzinga Pro data.
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