Ross StoresROST

Key highlights

• Full year outlook raised: Management increased the full year earnings projection to a range of $7.50 to $7.74 per share, which represents growth of 13% to 17% over last year. This raise reflects a strong start to the year and an expectation that sales will remain healthy through the second half of the fiscal year.
• Traffic driving sales growth: Comparable store sales, which measure the performance of stores open at least one year, jumped 17% this quarter compared to a flat result last year. The company said this growth was primarily driven by more customers visiting its stores to shop for its spring clothing and home goods collections.
• Profit margins widening: The operating margin, the portion of sales left after paying for business costs, rose to 13.4% from 12.2% a year ago. This exceeded the company's own plan of 11.8% to 12.1% because the much higher sales volume helped cover fixed expenses more efficiently.
• Steady store expansion: The company ended the quarter with 2,282 total locations, up from 2,205 stores at the same time last year. Adding 77 net new stores over the past twelve months shows the brand is successfully finding new neighborhoods to enter while maintaining its 21% total sales growth.
• Returning cash to owners: Ross bought back 1.5 million shares for $319 million this quarter as part of its plan to return $1.275 billion to shareholders this year. Reducing the number of shares helps increase the value of each remaining share for long-term investors.

Our take: A very strong quarter that shows the business is firing on all cylinders. The massive 17% jump in same store sales is the standout figure, proving that Ross is winning over customers even as other retailers struggle. This performance reinforces our belief that the company is a dominant leader in discount retail.