Ross Stores Inc (ROST) Q4 2024 Earnings Call Highlights: Strong Holiday Performance and ...

GuruFocus.com
05 Mar
  • Fourth-Quarter Revenue: $5.9 billion.
  • Fourth-Quarter Earnings Per Share (EPS): $1.79.
  • Fourth-Quarter Net Income: $587 million.
  • Fourth-Quarter Comparable Store Sales: 3% increase.
  • Fiscal Year 2024 Revenue: $21.1 billion.
  • Fiscal Year 2024 Earnings Per Share (EPS): $6.32.
  • Fiscal Year 2024 Net Income: $2.1 billion.
  • Fiscal Year 2024 Comparable Store Sales: 3% increase.
  • Fourth-Quarter Operating Margin: 12.4%.
  • Inventory Increase: Consolidated inventories up 12%, average store inventories up 2%.
  • Store Expansion: 75 new Ross Dress for Less stores and 14 dd's DISCOUNTS added; total 2,186 stores.
  • Share Repurchase: 1.7 million shares repurchased for $262 million in Q4; 7.3 million shares for $1.05 billion in fiscal 2024.
  • Cash Position: $4.7 billion at year-end.
  • Dividend Increase: 10% increase to $0.405 per share.
  • Warning! GuruFocus has detected 1 Warning Sign with ROST.

Release Date: March 04, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

  • Fourth-quarter sales and earnings results were at the high end of expectations, driven by improved assortments and strong execution during the holiday season.
  • Earnings per share for fiscal 2024 increased to $6.32 from $5.56 in the prior year, with net income rising to $2.1 billion.
  • Comparable store sales for fiscal 2024 grew by 3%, building on a 5% gain in fiscal 2023.
  • The company repurchased 7.3 million shares for $1.05 billion in fiscal 2024, reflecting a commitment to returning excess cash to shareholders.
  • Ross Stores Inc (NASDAQ:ROST) plans to open approximately 90 new locations in 2025, indicating continued expansion and growth potential.

Negative Points

  • Earnings per share for the fourth quarter slightly decreased to $1.79 from $1.82 in the previous year.
  • Sales trends began softening in January and February 2025, attributed to unseasonable weather and macroeconomic volatility.
  • Operating margin for the fourth quarter was flat compared to last year, with declines in merchandise margin and unfavorable timing of packaway-related costs.
  • The company expects comparable store sales for the first quarter of 2025 to be down 3% to flat, indicating cautious expectations.
  • Ross Stores Inc (NASDAQ:ROST) faces potential headwinds from domestic freight costs and macroeconomic uncertainties impacting consumer confidence.

Q & A Highlights

Q: Can you elaborate on your top strategic priorities and any areas that may require structural change to amplify market share? A: James Conroy, CEO, stated that the brand strategies for Ross and dd's are sound and will continue to be pursued. He emphasized learning the off-price model and making evolutionary changes rather than abrupt ones. Conroy highlighted opportunities to enhance the store environment and marketing efforts, particularly in amplifying the brand's presence in the marketplace.

Q: How did regional performance vary in Q4, and what regions drove the slowdown in February? A: Michael Hartshorn, COO, noted that the Pacific Northwest and Texas were top-performing regions, while California and Florida were in line with the chain. He mentioned that the slowdown in February was partly due to weather impacts and macroeconomic factors affecting consumer confidence.

Q: What is the outlook for merchandise margins in 2025, and are there changes in the buying environment post-holiday? A: Adam Orvos, CFO, indicated that merchandise margins are expected to be relatively neutral for 2025, following an investment year in 2024. The company is seeing more close-out opportunities due to softness in mainstream retail, which could enhance buying margins and add excitement to stores.

Q: Are there plans to increase investment in store environments and marketing expenses? A: James Conroy, CEO, acknowledged the potential need for investment in these areas but emphasized a cost-neutral approach or proving ROI on additional spending. The company has been upgrading its store fleet and may enhance its marketing program over time.

Q: How is dd's DISCOUNTS performing, and what drives confidence in its future growth? A: Michael Hartshorn, COO, reported that dd's DISCOUNTS posted healthy sales gains above Ross for Q4 and 2024. The chain's fashion and value offerings are resonating well with customers, and the company plans to rebuild its pipeline for expanded growth, particularly in newer markets.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.

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