Ross Stores beats Q4 estimates; cautious about 2016

Ross Stores reported strong results for its fourth quarter. But similar to many other retailers, the off-price retailer sounded a cautious note with regards to sales and earnings for its new fiscal year.



Ross on Tuesday reported earnings per share for the fourth quarter ended January 30, 2016 of $.66, up 10% from the prior year, on net earnings that rose 6% to a better-than-expected $264 million.



Sales for the quarter grew 7% to $3.251 billion, also beating analysts’ expectations. Same-store sales rose 4% versus a 6% gain last year.



"We are pleased with our sales and earnings results for the fourth quarter, which exceeded our expectations despite the highly promotional holiday selling environment and our most challenging sales comparisons from the prior year,” said Barbara Rentler, CEO, Ross Stores, which operates 1,274 Ross Dress for Less Stores and 172 dd's Discounts stores.



Fourth quarter operating margin was 12.7% compared to 13.1% in the prior year, as higher merchandise margin and tight expense control were offset by the timing of packaway-related costs.



“For the 2015 fiscal year however, operating margin rose 10 basis points to a record 13.6%,” Rentler said.



For the full fiscal year, earnings per share rose 14% to $2.51 on top of strong multi-year increases, while net earnings increased 10% to $1.021 billion. Sales grew 8% to $11.9 billion, with comparable store sales up 4%.



For the 52-week fiscal year ending January 28, 2017, Ross is projecting same store sales to grow 1% to 2% and earnings per share of $2.59 to $2.71, up 3% to 8% from $2.51 in fiscal 2015 but missing views for $2.75.



For the first quarter ending April 30, 2016, comparable store sales are forecast to be up 1% to 2% with earnings per share projected to be flat to up 4% to $.69 to $.72.



“As we enter 2016, we continue to face our own challenging multi-year comparisons in an increasingly uncertain and volatile macro-economic and retail environment, Rentler said. “As a result, while we hope to do better, we believe it is prudent to maintain a somewhat cautious outlook when forecasting sales and earnings for the coming year."



In other news, Ross’ board recently approved an increase in the quarterly cash dividend to $.135 per share, up 15% on top of an 18% increase last year.



"The continued growth of our shareholder payouts reflects our ongoing confidence in the company's ability to generate significant amounts of cash after funding our growth and the other capital needs of our business,” Rentler said. “We have repurchased stock as planned every year since 1993 and raised our cash dividend annually since its inception in 1994.”