Ross Stores Inc. (ROST), one of the leading off-price retailers of apparels and home accessories in the United States, is scheduled to report its fourth-quarter and fiscal year 2010 financial results before the opening bell on March 17, 2011. The Zacks Consensus expectations for EPS and revenues for the quarter are currently $1.37 per share and $2,130.0 million, respectively. For fiscal 2010, the Zacks Consensus expectations for EPS and revenues are $4.61 and $7,845.0 million, respectively.
Third-Quarter 2010, Summary
Ross Stores’ quarterly earnings of $1.02 a share jumped 21.4% from 84 cents in the prior-year quarter, but were in line with the Zacks Consensus Estimate. The increase was primarily attributable to healthy sales and improved margins.
Ross Stores’ net sales recorded a growth of 7.5% to $1,874.3 million from $1,744.1 million in the prior-year quarter. The comparable store sales grew 3% during the quarter compared with 8% in the prior-year quarter.
Management Guidance
The company expects earnings to range between $1.15 and $1.20 per share in fourth-quarter 2010. While for full fiscal 2010, Ross Stores is anticipating earnings in the range of $4.41 to $4.46 per share, up 25% to 26% from the prior fiscal earnings of $3.54. Comparable store sale for the quarter is expected to be in the range of flat to negative 1% compared with an increase of 10% in the prior-year period.
Fourth-Quarter 2011 Zacks Consensus
The analyst covered by Zacks expects Ross Stores to post fourth-quarter 2010 earnings of $1.37 a share. The current Zacks Consensus Estimate reflects a growth of 18.1% from the prior-year quarter’s earnings and ranges between $1.33 and $1.37 a share.
The current Zacks Consensus Estimate has remained stagnant over the last 30 days, as none of the sixteen analysts following the stock have changed their estimates.
With respect to earnings surprises, Ross Stores has been in line with the Zacks Consensus Estimate three times and also topped once over the last four quarters and ranges from 0.00% to 1.75%. The average remained at 1.75%.
Our View
Ross Stores and its subsidiaries operate two chains of off-price retail apparel and home accessories stores in the United States. These stores offer branded apparel, shoes, and accessories for the entire family, as well as gift items, linens, and other home-related merchandise. The company also provides small furniture and furniture accents, educational toys and games, luggage, gourmet food and cookware, watches, sporting goods, and fine jewelry.
Ross Stores has implemented a micro-merchandising tool in 2010, through which the company expects to enhance its total sales and profitability by targeting expansion in its existing markets. Moreover, Ross remains committed to new store growth, buying back stock, and paying an attractive dividend even as many other retailers make dramatic cutbacks, and has the financial strength to continue its course and build shareholders’ value.
However, the company faces intense competition from other well-established players in the industry, such as Kohl’s Corporation (KSS) and Wal-Mart Stores Inc. (WMT) which may dent its margins.
Currently, Ross Stores maintains a Zacks #3 Rank, which translates into a short-term ‘Hold’ rating. Moreover, we retain a long-term ‘Neutral’ recommendation on the stock.
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