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Can Ross Stores’ Bargain Deals Boost Its Fiscal 1Q16 Sales?

Sharon Bailey

What Do Analysts Expect from Ross Stores’ Fiscal 1Q16 Earnings?

(Continued from Prior Part)

A look at analysts’ expectations

Off-price retailers like TJX Companies (TJX) and Ross Stores (ROST) delivered a strong performance in the fiscal year ending January 30, 2016. These retailers sell their merchandise at a discount of 20%–80% compared to similar merchandise sold in department stores. Off-price retailers have delivered a consistent performance even in uncertain macro conditions as consumers continue to hunt for bargain deals. Analysts expect Ross Stores to deliver sales of $3.1 billion in fiscal 1Q16, which ended April 30, 2016. This reflects a growth rate of 5.8% compared to the first quarter of the previous year. Analysts expect fiscal 2016 sales to grow by 6.3%.

Strong sales record

Ross Stores’ sales came in ahead of analysts’ expectations in all four quarters of fiscal 2015. In fiscal 4Q15, the company’s sales increased by 7.2% on a year-over-year basis. In fiscal 2015, Ross Stores’ sales grew 8.1% to $11.9 billion. The retailer’s sales in fiscal 2015 were driven by the opening of 84 new stores and a 4% increase in same-store sales. The iShares Global Consumer Discretionary ETF (RXI) has 0.2% exposure to Ross Stores.

Ross Stores’ off-price peers TJX Companies and Burlington Stores (BURL) delivered sales growth of 6.4% and 5.8%, respectively, in the fiscal year ending January 30, 2016. Macy’s (M) disappointed its investors with a 3.7% decline in its fiscal 2015 sales. Its dismal performance continued in fiscal 1Q16, in which Macy’s sales declined by 7.4%. Macy’s marked its entry in the off-price retail space with its Macy’s Backstage stores in 2015.

What the company expects

Based on the guidance issued in March 2016, Ross Stores expects its fiscal 1Q16 same-store sales to grow by 1%–2%. Ross Stores’ same-store sales grew by 5% in fiscal 1Q15. The company’s cautious guidance reflects the expected impact of an uncertain retail environment.

For fiscal 2016, Ross Stores expects same-store sales to grow by 1%–2%. Same-store sales increased by 4% in fiscal 2015.

In the next article in this series, we’ll discuss Ross Stores’ stock price movement.

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