Ross Stores Inc. (ROST) reported earnings of $1.28 per share for second-quarter 2011, in line with the Zacks Consensus Estimate. Earnings grew 20.0% from the prior-year figure of $1.07 primarily due to the company's aptitude in providing attractive brand name bargains to customers who value both quality and price.
Financial Details
Net sales for the quarter increased 9.0% to $2,089.0 million from $1,911.8 million in the prior-year quarter, beating the Zacks Consensus Estimate of $2,075.0 million. This robust increase in net sales was primarily because of initiatives taken by the company to keep merchandise fresh by reducing the stock in stores. Comparable store sales increased 5% compared with a 4% growth in the prior-year period.
Operating margin for the quarter expanded 55 basis points to 11.7%. The improvement in operating margin was primarily attributable to a 30 basis point reduction in selling, general and administrative expenses.
Ross Stores ended the quarter with cash and cash equivalents of $512.7 million compared with $772.7 million in the prior-year period. During the first six months of fiscal 2011, Ross generated $161.7 million of operating cash flows. This will enable the company to make capital investments, pay dividends and repurchase shares. At the end of the quarter, the company had a long-term debt of $150.0 million and shareholders' equity of $1,425.9 million.
Dividend and Share Repurchase
The company's board of directors declared a quarterly cash dividend of 22 cents a share. Also, during the first six months of fiscal 2011, Ross repurchased 3.1 million common shares for $230.0 million under its previous $900.0 million share repurchase program.
Under its $900.0 million share repurchase program, valid through fiscal 2012, the company intends to repurchase $450 million worth of shares by 2011 end.
Guidance
For the third quarter of fiscal 2011, the company expects to earn in the range of $1.00 to $1.04 per share on the back of same store sales growth of 1% to 2%. For the fourth quarter of fiscal 2011, the company expects to generate earnings in the range of $1.53 to $1.59 per share with same-store sales rising 2% to 3%.
For fiscal 2011, the company now expects earnings in the range of $5.29 to $5.39 per share, which represents a growth of 14% to 16% over the prior year. The company had earlier expected to earn in the range of $5.16 to $5.31 per share in fiscal 2011
Ross is the leading off-price retailer of apparels and home accessories in the United States and faces intense competition from other well-established players in the industry, such as Kohl's Corporation (KSS) and Wal-Mart Stores Inc. (WMT).
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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