Discount retailer Ross Stores
For the first quarter, Ross Stores improved earnings by 14.2% to $67 million, or $0.48 per share. Sales climbed 9.2% to $1.4 billion, but comps were flat after gaining 6% in last year's first quarter. Like so many other retailers, including competitor TJX
Looking ahead to the second quarter, Ross sees earnings per share of $0.35 to $0.37. That's an increase of 9.4% to 15.6% over last year, but still below the $0.38 analysts want to see. For the year, the company still expects to earn between $1.85 and $1.95 per share, which gives it a forward P/E of about 17 to 18.
Although free cash flow at Ross plunged into negative territory, it has been putting its money to good use. The company repurchased 1.5 million shares of common stock in the quarter, and it's on track to repurchase an additional $149 million. Management claims that its balance sheet and cash flow remain strong, but I think they could certainly be better. While cash and short-term investments increased 9.4%, accounts receivable rose 2.5%, and inventory soared 12.4%. This indicates that Ross is having trouble moving merchandise, which backs up its lack of comps growth.
It wasn't a bad quarter overall for Ross Stores, but I don't see an overabundance of good points in its results, either. And at today's prices, I don't think that simply not being bad is good anymore. I think it's only natural for investors to want more from Ross Stores. If it doesn't want its stock price discounted further, it'll have to find new ways to steadily improve its earnings and comps.
For more on the discount retailers, check out:
Got an opinion on the discount retailers? Bring it to CAPS!