Commenting on the company’s future expansion plans, Michael Balmuth, vice chairman/ceo, said, “Our current research and proven ability to cluster stores closer together indicate that we can more fully saturate existing and new markets.”
Besides increasing the target number of stores for Ross Dress for Less, Balmuth said plans now call for dd’s Discounts to become a chain of about 500 stores.
“Combined, we therefore have the ability over time to more than double the size of our company domestically,” he added.
Indeed the company’s off-price stores have continued to outperform their peers and the first quarter was no exception.
For the quarter ended April 28, Ross Stores posted net income of $208.6 million, or 93 cents a share, up from $173 million, or stock-split adjusted 74 cents per share, in the same quarter 2011.
‘Favorable Weather’ Helped Above-Plan Performance
Total net revenue climbed 14% to $2.36 billion. Comparable store sales were up 9% on top of a 3% increase a year ago.
Ross Stores earnings were in line with analysts’ average estimate, but its sales exceeded their forecast for $2.34 billion.
“We are pleased with our much better-than-expected financial results in the first quarter,” Balmuth said. “Our robust sales and earnings were driven mainly by our ongoing ability to deliver a wide array of fresh and exciting name brand bargains to today’s value-focused consumers. In addition, we believe that favorable weather across many of our markets also contributed to our above-plan performance.”
Balmuth said the company’s operating margin grew 14.4% due to lower expenses and costs. “Cost of goods sold as a percent of sales improved by 15 basis points from the prior year, as higher merchandise gross margin and leverage on occupancy were partially offset by increases in distribution, freight and buying costs,” he added.
Looking ahead to the second quarter, Ross Stores forecast comparable store sales to rise 3% to 4% and earnings of 72 to 75 cents a share. Analysts’ average estimate expects earnings of 76 cents a share.
For fiscal 2012, Ross Stores raised its guidance to a range of $3.26 to $3.37 a share from the prior range of $3.12 to $3.27. However, analysts’ consensus expects $3.38 a share.
During its first quarter, Ross Stores repurchased 2 million share of common stock for about $111 million. Balmuth said the company is on track to buy back $450 million in common stock to complete a two-year $900 million repurchase plan approved last year.