What happened
Shares of Ross Stores (ROST -0.36%) were gaining today as the off-price retailer beat analyst estimates and raised its guidance even as sales and profits declined from the quarter a year ago.
As of 12:29 p.m. ET, the stock was up 10.8%.
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So what
Ross, which has roughly 2,000 stores nationwide, including dd's DISCOUNTS, said comparable sales were down 3% in the quarter as it lapped a 14% comparable sales gain in the quarter a year ago.
Overall revenue slipped 0.2% to $4.57 billion, beating estimates at $4.37 billion, and profitability compressed as well.
Gross margin in the quarter fell due to higher markdowns, and operating margin slipped from 11.4% to 9.8% due to higher inventory expenses and the decline in comparable sales.
On the bottom line, earnings per share declined from $1.09 to $1.00, which beat the analyst consensus at $0.81.
The company also repurchased 2.8 million shares in the quarter for $244 million and said it was on track to return $950 million to shareholders through buybacks this year, reducing its share count by about 2.5%.
Now what
Though the company expected a highly promotional holiday quarter and said inflation would continue to impact customers, it did raise its guidance as it faces easier comparisons and sees momentum coming out of the third quarter.
For the fourth quarter, it expects comparable sales of flat to -2%, and forecast earnings per share of $1.13 to $1.26, which was ahead of the consensus at $1.13, It also raised its full-year earnings-per-share guidance to $4.21 to $4.34 from $3.84 to $4.12, which was above the consensus at $4.01 but below last year's EPS at $4.87.
In a challenging environment for retailers, investors seemed to think that was good enough to push the apparel stock up double digits. If a recession does hit, the discount retailer should also be able to handle a downturn better than its full-price peers.
