Ross Stores Hits New High

On May 25, shares of Ross Stores (ROST) fell 7% after the deep-discount retailer reported earnings. I thought the earnings were just fine, but traders apparently disagreed.

This is from the CWS Market Review of June 1:

Ross Stores (ROST) reported fiscal Q1 adjusted earnings of $1.11 per share. Earlier, the company had projected earnings of $1.03 to $1.07 per share. They made 82 cents per share for last year’s Q1.

There were a few accounting items to adjust for. Ross said they were helped in Q1 by 17 cents per share due to tax reform plus two cents per share thanks to “the favorable timing of packaway-related expenses that we expect to reverse in subsequent quarters.”

Q1 sales rose 9% to $3.6 billion, and comparable-stores sales were up 3%. Ross had been expecting 1% to 2%. I knew that forecast was too low. The company said it was hurt by poor weather during the quarter. I’m usually pretty skeptical of weather as an excuse. Ross’s operating margin fell to 15.1%. That’s still pretty good.

For fiscal Q2, Ross expects earnings of 95 to 99 cents per share. They see same-store sales growth of 1% to 2%. That’s pretty low. The good news is that Ross raised its full-year guidance. The old range was $3.86 to $4.03 per share, and the new range is $3.92 to $4.05 per share.

Pretty good, but still, shares of Ross dropped in one day from $82.96 to $77.34. Here we are one month later and ROST touched $87.22 this morning.

This is why we focus on high-quality names. They may get knocked around, but quality shines through.

Posted by on June 27th, 2018 at 11:55 am


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