The novel coronavirus has cast uncertainty over many retailers that do business in China — including Ross Stores Inc., which posted another quarter of better-than-expected earnings but warned of potential supply chain disruptions in China.
The Dublin, Calif.-based off-price retailer logged earnings per share that climbed 7% to $1.28, versus predictions of $1.25, on profits of $456 million. Revenues also beat estimates, improving 7.45% to $4.4 billion, compared with consensus bets of $4.36 billion. However, Ross CEO Barbara Rentler sounded a note of caution over the spreading outbreak, which has killed 3,100 and infected 92,000 people around the world, as well as led to restricted travel, shuttered stores and production delays in China where the illness originated.
“As we enter 2020, we continue to face our own strong long-term sales and earnings results plus ongoing uncertainty in the macroeconomic, political and retail landscapes,” she said. “Therefore, while we hope to do better, we believe it is prudent to maintain a somewhat cautious outlook when projecting our performance for the coming year.”
For the full year, Ross forecasts same-store sales growth of 1% to 2% and earnings per share of $4.67 to $4.88. The guidance, however, does not reflect “potential unknown impacts” from the coronavirus.
“While we are closely monitoring the situation, there remains a high level of uncertainty over supply chain disruptions in China,” Rentler added. “It is unclear how a further possible spread of the coronavirus could negatively impact U.S. consumer demand.”
As of 4:45 p.m. ET at market close, shares for Ross were down more than 4% to $104.
Despite the outlook, the company’s Q4 performance offered yet more proof of the resiliency of the off-price sector amid a challenging retail climate. It also announced plans to open roughly 100 stores — 75 Ross Dress for less and 25 dd’s Discounts locations — in 2020.
Over the past few years, discount retailers have consistently bucked industry-wide trends amid retail turbulence spurred by digital disruption, among other factors. Experts believe a significant factor in the success and agility of chains like Ross and TJ Maxx has been their ability to offer both cheap prices and a treasure hunt experience that engages shoppers with key brand-name finds.
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