Shares of Ross Stores Inc. (ROST – Free Report) rose 3.4% in the after-hours trading session on Nov 17, after the company reported robust third-quarter fiscal 2016 results. Both the top and bottom-line beat our estimates as well as the company’s projections. Moreover, earnings and sales improved year over year. The strong results stemmed from impressive dd’s DISCOUNT performance as well as growth in the ladies’ apparel business as customers favorably responded to its improved merchandise.
The company’s third-quarter fiscal 2016 earnings of 62 cents per share were substantially ahead of its guidance of 52–55 cents and the Zacks Consensus Estimate of 56 cents. Additionally, earnings were 17% higher than 53 cents earned in the year-ago quarter.
ROSS STORES Price, Consensus and EPS Surprise
ROSS STORES Price, Consensus and EPS Surprise | ROST
Total sales increased 10.9% to $3,086.7 million, backed by positive response from value-focused customers for the company’s extensive collection of brand bargains. Sales growth in the quarter broke the higher extremity of the company’s forecast of 4–5% growth. Further, sales surpassed the Zacks Consensus Estimate of $2,958 million.
Ross Stores’ comparable-store sales (comps) grew 7% compared with 3% in the prior-year quarter. The increase in the reported quarter was driven by a rise in both the size of average basket and traffic.
Operating margin expanded 55 basis points (bps) year over year to 12.6% driven by higher merchandise margins in the quarter. Further, operating margin was slightly above the company’s guidance of 11.6–11.8%.
Store Update
During the fiscal third quarter, the company completed its store opening target for fiscal 2016 with the addition of 25 new Ross and nine dd’s DISCOUNTS stores. As of Oct 29, 2016, Ross Stores operated 1,342 Ross Dress for Less stores across 36 states, the District of Columbia and Guam as well as 193 dd’s DISCOUNTS outlets across 15 states.
The company anticipates closing fiscal 2016 with 1,338 Ross and 192 dd’s DISCOUNTS, marking an increase of 84 stores in the year.
Financials
Ross Stores ended the reported quarter with cash and cash equivalents of $878.8 million, long-term debt of $396.4 million and total shareholders’ equity of $2,649.5 million.
During the fiscal third quarter, the company bought back 2.8 million shares for about $179 million, bringing the year-to-date repurchases to about 9.1 million shares for $530 million. With this, the company remains on track to buy back about $700 million worth of shares in fiscal 2016. This will mark the completion of the company’s two-year $1.4 billion share repurchase authorization that was approved in Feb 2015.
Guidance
