For the quarter ended Nov. 2, the off-price retailer posted net income of $171.6 million, or 80 cents a share, compared with net income of $159.5 million, or 72 cents a share, in the prior-year period. That was in line with analysts’ estimates.
Net income increased 6% to $2,398 billion, just missing analysts’ estimate for $2.439 billion. Comparable store sales increased 2% on top of the 6% growth registered in the prior-year period.
Best performing merchandise categories were juniors and missy sportswear. By region, Florida was the most productive.
Cautious for Q4
Gross profit increased 6.2% to $651.9 million from the year-ago quarter, while gross margin improved 10 basis points to 27.2%. The year-over-year expansion in gross margin was primarily due to a 10 basis points improvement in cost of goods sold, as a percentage of revenue, along with increase in sales.
Operating margin was 11.3%, basically flat compared to last year. Operating margin mainly gained from higher merchandise gross margin, offset by lower shortage benefit. Additionally, an improvement in cost of goods sold as a percentage of sales during the quarter was offset by increased selling, general and administrative expenses as a percentage of sales.
Ross is “up against our own challenging multi-year comparisons and an upcoming holiday season that we believe will be the most intensely competitive and promotional selling period in recent years,” CEO Michael Balmuth said. “As a result, while we hope to do better, we believe it is prudent to adopt a more cautious outlook for the fourth quarter.”
Looking ahead, Ross was conservative in its outlook given the highly competitive and promotional holiday season. For fourth quarter, Ross forecast earnings between 97 cents to $1.01, below consensus estimate for $1.09 a share. Comparable store sales are expected to rise 1% to 2% versus a 5% increase in 2012.
For fiscal 2013, the company projects earnings in the range of $3.83 to $3.87. Analysts’ estimate expects $3.94 a share.