Ross Stores is latest retailer to disappoint Wall Street, shares fall 16%

Ross Stores Inc. was the latest retailer late Thursday to report disappointing quarterly results and cut its outlook, citing inflation and rising freight and labor costs as culprits.

ross rust,
said it earned $338 million, or 97 cents a share, in the first quarter, compared to $476 million, or $1.34 a share, in the year-ago period.

Revenue fell to $4.3 billion from $4.5 billion a year ago. Same-store sales fell 7%, Ross said.

Analysts polled by FactSet expected the retailer to report earnings of $1 per share on sales of $4.5 billion. Same-store sales fell 2.7% year over year.

The stock fell more than 16% in after-hours trading.

Earlier this week, both Target Corp. TGT,
and Walmart Inc. WMT,
disappointed Wall Street with first-quarter misses.

“We are disappointed with our lower-than-expected first-quarter results,” CEO Barbara Rentler said in a statement.

“After an unexpectedly strong start early in the period, sales underperformed for the remainder of the quarter,” said Rentler.

Ross was aware that fiscal 2022 would be “a difficult year to predict,” Rentler said, particularly the first half year-over-year, which featured government economic reviews and “significant customer pent-up demand” as pandemic-related restrictions eased, the executive said.

“The external environment has also proved extremely challenging as the Russia-Ukraine conflict has exacerbated inflationary pressures on consumers at a rate not seen in 40 years.”

Margins fell nearly 11% in the quarter, reflecting the decline in same-store sales and “continued” headwinds from higher freight and labor costs, which began to rise in the second half of last year, the company said.

Given the lower results and an “increasingly uncertain” macroeconomic and geopolitical environment, Ross is adopting a “more conservative outlook” for the remaining months, Rentler said.

The company expects same-store sales to fall between 4% and 6% for the quarter ended July 20. Earnings per share range from 99 cents to $1.07, for EPS of $1.39 in the second quarter last year.

Ross forecast comparable-store sales to fall between 2% and 4% this year, compared to a 13% increase in fiscal 2021. The retailer forecast fiscal 2022 earnings per share of between $4.34 and $4.58 -dollars, compared to $4.87 a year earlier.

“We have demonstrated in the past that our value-based business model has served us well in both a healthy and a more uncertain external climate, and believe the current challenging conditions will be no different,” said Rentler.

Shares in Ross are down about 19% so far this year, nearly equivalent to a roughly 18% loss for the S&P 500 index SPX.
-0.58%. Ross Stores is latest retailer to disappoint Wall Street, shares fall 16%

Brian Lowry

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