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Here's How Ross Stores (ROST) is Placed Ahead of Q1 Earnings

Ross Stores, Inc. ROST is scheduled to release its first-quarter fiscal 2024 results on May 23. The off-price apparel and home accessories retailer is likely to have witnessed revenue and earnings growth in the to-be-reported quarter.

The Zacks Consensus Estimate for fiscal first-quarter revenues is pegged at $4.8 billion, indicating growth of 7.4% from the figure reported in the year-ago quarter. For fiscal first-quarter earnings, the consensus mark of $1.34 per share suggests growth of 22.9% from the year-ago quarter's reported number. The consensus mark for earnings has been unchanged in the past 30 days.

In the last reported quarter, Ross Stores delivered an earnings surprise of 11.7%. In the trailing four quarters, it delivered an earnings beat of 9.1%, on average.

Ross Stores, Inc. Price and EPS Surprise

 

Ross Stores, Inc. Price and EPS Surprise
Ross Stores, Inc. Price and EPS Surprise

Ross Stores, Inc. price-eps-surprise | Ross Stores, Inc. Quote

Key Factors to Note

Ross Stores has been benefiting from robust customer demand and recovery from supply-chain headwinds in the retail industry. Sales in the fiscal first quarter are likely to have benefited from broad-based growth across merchandise categories and regions. Gains at the core business, driven by consumers' continued focus on value and the company’s ability to deliver value bargains to customers, bode well.

Positive customer response for its merchandise across both banners has been boosting the comps performance. Our model predicts comparable store sales to increase 2.6% year over year in the fiscal first quarter, driven by strength across its namesake and dd's DISCOUNTS business formats.

On its last reported quarter’s earnings call, Ross Stores was optimistic about its first-quarter fiscal 2024 performance, backed by the ongoing sales momentum. The company predicted comps to rise 2-3% year over year for first-quarter fiscal 2024, whereas total sales are forecast to increase 6-8% year over year.

Additionally, the company’s results are expected to reflect the continued benefits of higher merchandise margin, lower distribution expenses, domestic freight and occupancy expenses due to the easing of supply-chain headwinds. This is likely to have boosted its margins and the bottom line in the to-be-reported quarter.

We estimate the operating margin to expand 110 bps to 11.2% in the to-be-reported quarter. On a dollar basis, operating profit is expected to increase 18.2% year over year in the fiscal first quarter.

On its last reported quarter’s earnings call, the company expected an operating margin of 11.1-11.4% for the fiscal first quarter, reflecting lower incentives and freight costs, partially offset by lower merchandise margins and higher wages.

The company envisions the bottom line to be $1.29-$1.35 per share for the fiscal first quarter, up from $1.09 reported in the first quarter of fiscal 2023.

Ross Stores has been consistent with the execution of its store expansion plans, which are likely to have aided the top line. The company's store-expansion efforts have been focused on continually increasing penetration in existing and new markets. The first-quarter fiscal 2024 performance is anticipated to have gained from ROST’s return to normal store opening targets. Gains from new stores are expected to get reflected in ROST’s sales for the fiscal first quarter.

However, the company has been cautious about the current macroeconomic and geopolitical uncertainties as well as persistent inflation, which has been affecting consumer spending on housing, food and gasoline. This is expected to have resulted in higher costs in first-quarter fiscal 2024, weighing on the company’s performance.

Ross Stores has been witnessing higher costs due to the ongoing headwinds related to the ongoing macroeconomic volatility, rising inflation and geopolitical uncertainty. The company has been witnessing rising incentive costs, which are likely to have led to increased SG&A expenses in first-quarter fiscal 2024.

Our model predicts the cost of goods sold to increase 5.2% year over year in the fiscal first quarter. We expect SG&A expenses to rise 7.9% year over year in the fiscal first quarter, with a 20-bps increase in the SG&A rate.

Zacks Model

Our proven model does not conclusively predict an earnings beat for Ross Stores this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that is not the case here. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.

Ross Stores has an Earnings ESP of +4.36% and a Zacks Rank #4 (Sell).

Stocks With Favorable Combination

Here are some companies you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat:

Abercrombie & Fitch ANF currently has an Earnings ESP of +5.10% and a Zacks Rank #2. The company is likely to register growth in the top and bottom lines when it reports first-quarter fiscal 2024 numbers. The consensus mark for ANF’s quarterly earnings has moved up 2.7% to $1.54 per share in the past 30 days. The consensus estimate suggests 294.9% growth from the year-ago quarter’s reported number.

You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Abercrombie’s quarterly revenues is pegged at $940 million, which suggests growth of 12.4% from the figure reported in the prior-year quarter.

The TJX Companies TJX currently has an Earnings ESP of +3.52% and a Zacks Rank #2. The company is likely to register growth in the top and bottom lines when it reports first-quarter fiscal 2024 results. The consensus mark for TJX’s quarterly revenues is pegged at $12.5 billion, which suggests a 5.8% rise from the figure reported in the prior-year quarter.

The consensus mark for TJX’s quarterly earnings has moved down by a penny in the past seven days to 86 cents per share. The consensus estimate suggests growth of 13.2% from the year-ago quarter’s actual.

Dollar Tree DLTR currently has an Earnings ESP of +2.36% and a Zacks Rank of 3. The company is likely to register top-line growth when it reports first-quarter fiscal 2024 results. The consensus mark for DLTR’s quarterly revenues is pegged at $7.6 billion, which suggests growth of 4.3% from the figure reported in the prior-year quarter.

The Zacks Consensus Estimate for DLTR’s earnings has moved up by a penny to $1.45 per share in the past seven days. However, the consensus estimate indicates a 1.4% decline from the year-ago quarter’s reported figure.

Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.

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