Ross Stores, Inc. ROST reported mixed results for the fourth quarter of fiscal 2024, wherein the bottom line surpassed the Zacks Consensus Estimate, while the top line missed the same. Net sales increased from the year-ago period, but earnings dipped year over year. Fourth-quarter sales and earnings were at the upper end of the company’s expectations, driven by strong customer response to its enhanced selection of quality branded bargains in the key holiday season.

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This Zacks Rank #3 (Hold) company’s shares have declined 12.8% in the past three months against the industry's 0.4% growth.

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Insight Into ROST’s Q4 Performance

Ross Stores, the leading off-price apparel retailer, delivered earnings of $1.79 per share, which surpassed the Zacks Consensus Estimate of $1.65. The bottom line declined 1.6% from $1.82 in the fourth quarter of fiscal 2023.

Total sales of $5.91 billion rose 3% year over year, driven by a comparable store sales (comps) growth of 3%. Meanwhile, the company’s sales missed the Zacks Consensus Estimate of $5.95 billion. We expected a comps increase of 2.4% in the fourth quarter of fiscal 2024.

The cost of goods sold (“COGS”) was $4.3 billion, up 0.7% year over year. As a percentage of sales, COGS was 73.5%, marking a year-over-year increase of 80 basis points (bps). Our model predicted COGS to decline 1.9% year over year and decrease 20 bps to 72.5%, as a percentage of sales, in the fiscal fourth quarter.

The gross profit fell 4.7% year over year to $1.569 billion, whereas the gross margin contracted 80 bps to 26.5% from the year-ago quarter. Our model predicted gross profit to decline 1.1% year over year, with a 20 bps gross margin expansion to 27.5% in the fiscal fourth quarter.

The company’s operating income of $731 million increased 1.8% year over year. Operating margin of 12.4% was flat year over year. The company’s gains from the previously mentioned packaway facility sale were offset by planned declines in merchandise margin and unfavorable timing of packaway-related costs. The facility sale contributed 105 bps to the operating margin in the fiscal fourth quarter, while the prior year’s fourth quarter benefited by 80 bps from the 53rd week.

Sneak Peek Into ROST’s Other Financials

Ross Stores ended fiscal 2024 with cash and cash equivalents of $4.7 billion after supporting its business’s growth and capital needs. The company has a long-term debt of $1.5 billion and a total shareholders’ equity of $5.5 billion.

In the fiscal fourth quarter, the company repurchased 1.7 million shares for $262 million under its two-year $2.1-billion authorization announced in March 2024. In fiscal 2024, ROST repurchased 7.3 million shares for $1.05 billion. The company is on track to buy back a total of $1.05 billion worth of shares in fiscal 2025.

The company's board of directors recently approved a 10% increase in its quarterly cash dividend to 40.5 cents per share, payable on March 31, 2025, to stockholders of record as of March 18.

The company’s share buybacks and increased dividends underscore its commitment to returning excess cash to shareholders. As of Feb. 1, 2025, Ross Stores operated 2,186 stores.

What ROST Expects for FY25

Following a strong holiday season, sales trends started to soften later in January and February. The company notes that an unseasonable weather and increased macroeconomic and geopolitical volatility have adversely affected customer traffic. Due to the uncertainty of these external factors, the company has adopted a cautious approach to business forecasting, especially at the start of fiscal 2025.

Looking ahead, the company expects some of the recent challenges to be temporary. As ROST navigates a difficult external environment, it remains committed to identifying growth opportunities and effectively managing factors within control.

For the first quarter of fiscal 2025, Ross Stores anticipates comps between a decline of 3% and flat compared with 3% growth in the prior-year quarter. The company foresees its fiscal first-quarter EPS to be $1.33-$1.47 compared with $1.46 in the prior-year quarter.

Based on Ross Stores' outlook for the fiscal first quarter, it anticipates comps between a decline of 1% and an increase of 2% compared with 3% growth in first-quarter fiscal 2024. The company expects EPS for the 52 weeks ending Jan. 31, 2026, to be $5.95-$6.55 compared with $6.32 in fiscal 2024.

Stocks to Consider

We have highlighted three better-ranked stocks in the broader sector, namely Boot Barn BOOT, Genesco GCO and Costco Wholesale COST.

Boot Barn, which operates as a lifestyle retail chain devoted to western and work-related footwear, apparel and accessories, currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Boot Barn’s current financial-year sales and earnings indicates growth of 14.9% and 21.4%, respectively, from the year-ago reported figures. BOOT delivered an earnings surprise of 7.2% in the trailing four quarters, on average.

Genesco, a Nashville-based specialty retail and branded company, sells footwear and accessories in retail stores, presently flaunts a Zacks Rank of 1.

The Zacks Consensus Estimate for GCO’s current financial-year sales and earnings indicates growth of 1.5% and 67.9%, respectively, from the year-ago reported figures. Genesco delivered a trailing four-quarter earnings surprise of 36.9%, on average.

Costco sells high volumes of foods and general merchandise (including household products and appliances) at discounted prices through membership warehouses. The company currently has a Zacks Rank #2 (Buy).

The Zacks Consensus Estimate for Costco’s current financial-year sales and earnings indicates growth of 7.5% and 11.9%, respectively, from the year-ago reported figure. COST delivered a trailing four-quarter earnings surprise of 2%, on average.

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Costco Wholesale Corporation (COST) : Free Stock Analysis Report

Ross Stores, Inc. (ROST) : Free Stock Analysis Report

Boot Barn Holdings, Inc. (BOOT) : Free Stock Analysis Report

Genesco Inc. (GCO) : Free Stock Analysis Report

This article originally published on Zacks Investment Research (zacks.com).

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