When we last visited Ross Stores
For the second quarter, Ross Stores improved earnings by 12.1% to $50.9 million, or $0.37 per share. Sales were 10.4% higher at $1.4 billion, and comps improved 2%. The company reported strength in its dresses and home categories. However, a slowdown begun in July has management less confident about the remainder of the year.
For the full year, the company now expects to earn between $1.80 and $1.90 per share, down from earlier guidance of $1.85 to $1.95 per share. Unless the situation changes drastically, Ross will disappoint analysts, who expect earnings of $1.91 per share for the year. Ross cited problems in the overall economy as the culprit. However, operating in the same economy and trying to attract similar customers, TJX Companies
Based on its updated guidance, Ross trades at a forward P/E of about 14 or 15. That seems reasonable, particularly considering TJX boasts a forward P/E hovering above 23. However, with earnings expected to grow anywhere between 6% and 12% from last year, Ross suddenly looks more expensive.
Ross has performed well for investors over the past year, returning 15% in that time. However, based on recent circumstances and projections, I think investors would be better served searching for discounts elsewhere.
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