In This Article:
Ross Stores Inc. bested Wall Street’s fourth-quarter expectations, but is taking a cautious approach to first-quarter guidance due to “softer business” as consumers pull back on spending.
“We have seen softer business as we transitioned out of the fourth quarter and into the first quarter,” Jim Conroy, in his first conference call as CEO since December, told investors on Tuesday. “While there are always opportunities for us to improve our execution, we believe the softness we are currently seeing is primarily due to macro pressures impacting consumer confidence, resulting in a pull back in discretionary spending.”
More from Sourcing Journal
Conroy said the recent challenges could be transitory in nature, and noted that a “volatile external environment” is likely to result in “more opportunities” for closeout merchandise. That in turn could set up the retailer to deliver even “greater value on branded goods in future quarters,” he said.
Over the holiday selling season, he said cosmetics and children’s were the best-performing merchandise categories adding that “virtually all businesses” were also “pretty strong.” Geographically, the Pacific Northwest and Texas were the strongest regions.
The CEO said inventories were up 2 percent in the quarter, with packaways representing 41 percent of total inventories. the company added 75 new Ross Dress For Less stores and 14 DD’s Discounts during the year. It also closed 12 locations. The retailer ended the year with 2,186 doors, including 1,831 Ross stores and 355 DD’s locations.
He told Wall Street that the brand strategy for both Ross and DD’s “seem extremely sound and very much worth continuing to pursue.” But in his initial observations as CEO, an area that could see opportunity for improvement is an enhancement of the store environment and shopping experience.
Chief operating officer Michael Hartshorn noted that the retailer has an “overindex” to the Hispanic customer, adding that as far as U.S. President Donald J. Trump’s immigration policy, it remains a “wait and see” regarding how the macroeconomic environment and immigration policy impacts the retailer’s customer base.
For the three months ended Feb. 1, net income fell 3.8 percent to $586.8 million, or $1.79 a diluted share, from $609.7 million, or $1.82, in the year-ago quarter. Net sales slipped 1.8 percent to $5.91 billion from $6.02 billion. Comparable store sales were up 3 percent on top of a 7 percent increase a year ago.