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Ross Stores (ROST) Tops Q4 Earnings & Sales, Guides FY17
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Ross Stores Inc. (ROST - Free Report) reported robust fourth-quarter fiscal 2016 results, wherein both the top line and the bottom line beat our expectations as well as the company’s projections. Moreover, earnings and sales improved year over year. The strong results stemmed from impressive dd’s DISCOUNT performance as customers favorably responded to improved merchandise, along with gains in the shoes and men's categories.
While the market did not react much to the company’s fourth-quarter results, we note that shares of Ross Stores have substantially outperformed the broader industry in the past one year. The stock has gained 17.1% in the last one year, while the Zacks categorized Retail–Discount & Variety industry grew 5.6%.
The company’s fourth-quarter fiscal 2016 earnings of 77 cents per share were ahead of its guidance of 72–75 cents and the Zacks Consensus Estimate of 75 cents. Additionally, earnings were 17% higher than 66 cents earned in the year-ago quarter.
Total sales increased 8% to $3,510.2 million, driven by positive response from value-focused customers for the company’s extensive collection of brand bargains. Sales growth in the quarter broke the higher extremity of the its forecast of 4–5% growth. Further, sales surpassed the Zacks Consensus Estimate of $3,454.6 million. Results also gained from improvement in dd’s DISCOUNTS performance. During the quarter, sales were strongest in the Midwest and Southeast regions.
Ross Stores’ comparable-store sales (comps) grew 4% on top of a 4% rise in the prior-year quarter. The increase in the reported quarter was driven by a rise in both the size of average basket and traffic.
Operating margin expanded 90 basis points (bps) year over year to 13.6% on the back of higher-than-expected sales as well as lower packaway-related costs compared with the year-ago quarter. Further, operating margin was slightly above the company’s guidance of 13.2–13.4%.
Store Update
In fiscal 2017, the company expects to open about 90 stores, including 70 Ross and 20 dd’s DISCOUNTS outlets. Of these, the company plans to open 23 new Ross and five dd’s DISCOUNTS stores in first-quarter fiscal 2017. Additionally, it expects to close nearly 10 older stores in the fiscal.
Financials
Ross Stores ended fiscal 2016 with cash and cash equivalents of $1,111.6 million, long-term debt of $396.5 million and total shareholders’ equity of $2,748 million.
During the fiscal fourth quarter, the company bought back 2.6 million shares for about $170 million, bringing the fiscal year repurchases to about 11.6 million shares for $700 million. In January this year, the company also completed its two-year $1.4 billion share repurchase authorization that was approved in Feb 2015.
Concurrent with the earnings release, the company authorized a new share buyback program and raised its quarterly dividend, in sync with its commitment to enhance shareholder value. It authorized a new $1.75 billion share repurchase program that will extend over the next two fiscal years. The board also approved a 19% increase to quarterly dividend rate to 16 cents per share. This raised dividend is payable on Mar 31, to shareholders with record as on Mar 10.
Guidance
Going forward, Ross Stores expects to face challenges related to strong year-over-year earnings and sales comparisons amid macroeconomic uncertainty and a volatile retail landscape. While it expects to perform well, it has provided a cautious outlook for fiscal 2017.
For fiscal 2017, the company anticipates earnings per share in the range of $3.02–$3.15, reflecting earnings per share growth of about 7–11% year over year from the fiscal 2016 earnings of $2.83. This guidance includes about 8 cents of earnings contribution from an additional 53rd week in fiscal 2017. The company estimates comps growth of 1–2% for the 52 weeks ended Jan 27, 2018, compared with 4% increase in the 52 weeks of fiscal 2016.
Other assumptions for the fiscal include total sales growth 6–7%. Operating margin is anticipated within the range of 13.9–14.1%, assuming merchandise margins to remain relatively flat. Interest expense is expected at $13 million, while the tax rate is projected at 37–38%. Capital expenditures for the fiscal are estimated to be nearly $400 million.
The company anticipates first-quarter fiscal 2017 comps to increase in the range of 1–2%. Earnings for the fiscal first quarter are expected in the range of 76–79 cents per share compared with 73 cents earned in first-quarter fiscal 2016.
Other assumptions for the fiscal first quarter include total sales growth 4–5%. Operating margin is anticipated within the range of 14.7–14.9% compared with 15.4% in the prior-year quarter. Interest expense is expected at $3.5 million, while the tax rate is projected at 36–37%.
Ross Stores currently carries a Zacks Rank #2 (Buy). Other favorably placed stocks in the discount-retail space include Burlington Stores Inc. (BURL - Free Report) and Big Lots Inc. , both carrying a Zacks Rank #2. Another stock worth considering in the retail space is Zumiez Inc. (ZUMZ - Free Report) , which also carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Burlington Stores has gained nearly 7.8% in the past six months. Moreover, it has a long-term earnings growth rate of 19.9%.
Big Lots, with a long-term earnings growth rate of 13.5%, has increased nearly 23.4% in the past one year.
Zumiez has jumped 25.2% in the last six months. The stock has a long-term earnings growth rate of 15%.
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Ross Stores (ROST) Tops Q4 Earnings & Sales, Guides FY17
Ross Stores Inc. (ROST - Free Report) reported robust fourth-quarter fiscal 2016 results, wherein both the top line and the bottom line beat our expectations as well as the company’s projections. Moreover, earnings and sales improved year over year. The strong results stemmed from impressive dd’s DISCOUNT performance as customers favorably responded to improved merchandise, along with gains in the shoes and men's categories.
While the market did not react much to the company’s fourth-quarter results, we note that shares of Ross Stores have substantially outperformed the broader industry in the past one year. The stock has gained 17.1% in the last one year, while the Zacks categorized Retail–Discount & Variety industry grew 5.6%.
The company’s fourth-quarter fiscal 2016 earnings of 77 cents per share were ahead of its guidance of 72–75 cents and the Zacks Consensus Estimate of 75 cents. Additionally, earnings were 17% higher than 66 cents earned in the year-ago quarter.
Total sales increased 8% to $3,510.2 million, driven by positive response from value-focused customers for the company’s extensive collection of brand bargains. Sales growth in the quarter broke the higher extremity of the its forecast of 4–5% growth. Further, sales surpassed the Zacks Consensus Estimate of $3,454.6 million. Results also gained from improvement in dd’s DISCOUNTS performance. During the quarter, sales were strongest in the Midwest and Southeast regions.
Ross Stores’ comparable-store sales (comps) grew 4% on top of a 4% rise in the prior-year quarter. The increase in the reported quarter was driven by a rise in both the size of average basket and traffic.
Operating margin expanded 90 basis points (bps) year over year to 13.6% on the back of higher-than-expected sales as well as lower packaway-related costs compared with the year-ago quarter. Further, operating margin was slightly above the company’s guidance of 13.2–13.4%.
Store Update
In fiscal 2017, the company expects to open about 90 stores, including 70 Ross and 20 dd’s DISCOUNTS outlets. Of these, the company plans to open 23 new Ross and five dd’s DISCOUNTS stores in first-quarter fiscal 2017. Additionally, it expects to close nearly 10 older stores in the fiscal.
Financials
Ross Stores ended fiscal 2016 with cash and cash equivalents of $1,111.6 million, long-term debt of $396.5 million and total shareholders’ equity of $2,748 million.
During the fiscal fourth quarter, the company bought back 2.6 million shares for about $170 million, bringing the fiscal year repurchases to about 11.6 million shares for $700 million. In January this year, the company also completed its two-year $1.4 billion share repurchase authorization that was approved in Feb 2015.
Concurrent with the earnings release, the company authorized a new share buyback program and raised its quarterly dividend, in sync with its commitment to enhance shareholder value. It authorized a new $1.75 billion share repurchase program that will extend over the next two fiscal years. The board also approved a 19% increase to quarterly dividend rate to 16 cents per share. This raised dividend is payable on Mar 31, to shareholders with record as on Mar 10.
Guidance
Going forward, Ross Stores expects to face challenges related to strong year-over-year earnings and sales comparisons amid macroeconomic uncertainty and a volatile retail landscape. While it expects to perform well, it has provided a cautious outlook for fiscal 2017.
For fiscal 2017, the company anticipates earnings per share in the range of $3.02–$3.15, reflecting earnings per share growth of about 7–11% year over year from the fiscal 2016 earnings of $2.83. This guidance includes about 8 cents of earnings contribution from an additional 53rd week in fiscal 2017. The company estimates comps growth of 1–2% for the 52 weeks ended Jan 27, 2018, compared with 4% increase in the 52 weeks of fiscal 2016.
Other assumptions for the fiscal include total sales growth 6–7%. Operating margin is anticipated within the range of 13.9–14.1%, assuming merchandise margins to remain relatively flat. Interest expense is expected at $13 million, while the tax rate is projected at 37–38%. Capital expenditures for the fiscal are estimated to be nearly $400 million.
The company anticipates first-quarter fiscal 2017 comps to increase in the range of 1–2%. Earnings for the fiscal first quarter are expected in the range of 76–79 cents per share compared with 73 cents earned in first-quarter fiscal 2016.
Other assumptions for the fiscal first quarter include total sales growth 4–5%. Operating margin is anticipated within the range of 14.7–14.9% compared with 15.4% in the prior-year quarter. Interest expense is expected at $3.5 million, while the tax rate is projected at 36–37%.
Ross Stores, Inc. Price and EPS Surprise
Ross Stores, Inc. Price and EPS Surprise | Ross Stores, Inc. Quote
Zacks Rank
Ross Stores currently carries a Zacks Rank #2 (Buy). Other favorably placed stocks in the discount-retail space include Burlington Stores Inc. (BURL - Free Report) and Big Lots Inc. , both carrying a Zacks Rank #2. Another stock worth considering in the retail space is Zumiez Inc. (ZUMZ - Free Report) , which also carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Burlington Stores has gained nearly 7.8% in the past six months. Moreover, it has a long-term earnings growth rate of 19.9%.
Big Lots, with a long-term earnings growth rate of 13.5%, has increased nearly 23.4% in the past one year.
Zumiez has jumped 25.2% in the last six months. The stock has a long-term earnings growth rate of 15%.
Everything You Need to Know About Snapchat BEFORE It Goes Public
You may be curious about the buzz surrounding Snap Inc.'s IPO on March 2. With the company expected to be valued around $22 billion, it is expected to be the largest IPO since 2014. But should you snap up this tech stock on Day 1?
In the 2017 IPO Watch List, you'll get an inside look at Snap's exciting prospects and potential challenges. You'll also learn about 4 other exciting tech companies with jaw-dropping growth. Each could go public in the coming months.
Imagine being in the first wave of investors to jump on a company with almost unlimited growth potential? This Special Report gives you the latest scoop. Download this IPO Watch List today for free >>