Ross Stores

Ross Stores Q2 Profit Jumps, Sales Strong

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Ross StoresPleasanton, CA—A double-digit sales increase that offset increased costs and expenses gave Ross Stores a 23% increase in its second quarter income.

For the quarter ended July 28, Ross Stores reported Thursday a profit of $182 million, or 81 cents a share, versus $148.3 million, or 64 cents a share, a year ago.

Total sales 12% to $2.34 billion, just edging past the hair $2.33 billion that analysts expected. Comparable store sales increased 7%, also topping estimates.

Gross margin widened slightly to 27.8% from 27%. Costs and expenses rose 11% to $2.04 billion.

“We are pleased with our better-than-expected results for the second quarter and first six months of 2012,” said Michael Balmuth, vice chairman/ceo. “Our strong sales and earnings growth for both periods continues to be driven by our ability to deliver compelling name brand bargains to today’s value-focused consumers while strictly controlling both inventories and expenses.”

Standard & Poor’s Raises Rating

Ross again raised its full year outlook to $3.36 to $3.44 a share in earnings, from its previous guidance of between $3.26 to $3.27. For its third quarter, the retailer said it expects earnings of 63 cents to 66 cents a share, but below analysts’ expectation of 70 cents a share. Comparable store sales are expected to grow between 3% to 4%.

In June Standard & Poor’s Ratings Services raised its outlook on Ross to positive from stable, saying it expects the off-price retailer to maintain its positive sales momentum.

Balmuth also noted, “We continued to enhance stockholder returns through our stock repurchase and dividend programs in the second quarter. During the first six months of fiscal 2012, we repurchased 3.7 million shares of common stock for an aggregate price of $224 million. We remain on track to buy back a total of $450 million in common stock during fiscal 2012 to complete the two-year $900 million program authorized in early 2011.”

In other news last week, Ross said it approved a new management succession plan, under which CEO Michael Balmuth will transition to the role of executive chairman in 2014.

Balmuth, 62, will continue as chief executive until June 1, 2014. At the same time, the company said it expects to elect a new chief executive from its pool of senior executives. Additionally, current chairman Norman Ferber will become chairman emeritus in June 2014, and his current consulting responsibilities won’t change.