Strict Inventory Control Gives Ross Stores Strong Q1

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ross dress for less springPleasonton, CA–Ross Stores has booked what analyst say was a strong performance in the first quarter as strict inventory and expense control offset the negative impact from unfavorable weather and a challenging retail environment.

The off-price retailer recorded net earnings of $243.9 million in the three months to May 3, up 4% from $234.6 million in the prior year. Results were in-line with Stifel analyst estimates and at the high end of management guidance.

‘Ongoing Resilience’

Operating margin for the quarter was better than forecast, declining 25 basis points to 14.6%.

First quarter sales increased 6% to $2.681 billion, up from $2.54 billion in the prior year quarter. Comparable store sales rose 1%.

CEO Michael Balmuth, said: “First quarter earnings per share performed at the high end of our guidance as strict inventory and expense controls offset the impact from unfavorable weather and a more challenging retail environment. Sales trends improved in April with more seasonal spring weather that coincided with the later Easter shopping period.”

For its second-quarter, the company has established EPS guidance of $1.05 to $1.09, in-line with analyst consensus of $1.08.

Analyst Richard Jaffe noted: “Unseasonably cool weather, which held back consumers’ desires for warm weather merchandise created a challenging retail environment. However, management was able to flow inventories strategically, feeding regions and categories where trends were stronger and maintaining lean inventories where business was softer. This limited the negative impact to gross margin. We believe this highlights the ongoing resilience and competitive strength of the off-price business model.”

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