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23-05-2025
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Q1 2025 Ross Stores Inc Earnings Call
James Conroy; Chief Executive Officer; Ross Stores Inc Adam Orvos; Chief Financial Officer, Executive Vice President; Ross Stores Inc Michael Hartshorn; Group President, Chief Operating Officer, Director; Ross Stores Inc Matthew Boss; Analyst; JPMorgan Lorraine Hutchinson; Analyst; BofA Global Research Mark Altschwager; Senior Research Analyst, Senior Research Analyst, Fashion & Wellness; Robert W. Baird & Co Inc Tracy Kogan; Analyst; Citi Michael Binetti; Analyst; EVERCORE ISI Alex Straton; Analyst; Morgan Stanley Charles Grom; Analyst; Gordon Haskett Brooke Roach; Analyst; Goldman Sachs Juliana Duque; Analyst; Wells Fargo Securities, LLC Simeon Siegel; Analyst; BMO Capital Markets Dana Telsey; Analyst; Telsey Advisory Group Aneesha Sherman; Analyst; BERNSTEIN Marni Shapiro; Analyst; The Retail Tracker Laura Champine; Analyst; Loop Capital Markets Corey Tarlowe; Analyst; Jefferies Jessica Taylor; Analyst; Deutsche Bank Angus Kelleher; Analyst; Barclays Operator Good afternoon and welcome to the Ross Stores' first-quarter 2025 earnings release conference call. The call will begin the prepared comments by management followed by a question-and-answer session. (Operator Instructions) Before we get started, on behalf of Ross Stores, I would like to note that the comments made on this call will contain forward-looking statements regarding expectations about future growth and financial results, including sales and earnings forecasts, new store openings, and other matters that are based on the company's current forecast of aspects of its future business. These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from historical performance or current expectations. Risk factors are included in today's press release and the company's fiscal 2024 Form 10-K and fiscal 2025 Form 8-Ks on file with the SEC. And now I'd like to turn the call over to Jim Conroy, Chief Executive Officer. James Conroy Good afternoon. Joining me on our call today are Michael Hartshorn, Group President and Chief Operating Officer; Adam Orvos, Executive Vice President and Chief Financial Officer; and Connie Kao, Group Vice President, Investor Relations. I would like to start the call by thanking all of our associates throughout the entire organization who have worked tirelessly over the last few months to help us navigate through a volatile and uncertain external environment. I sincerely appreciate the team's continued dedication and hard work. Now let's turn to our first quarter results. As noted in today's press release, total sales grew 3% to $5 billion with comparable store sales flat versus last year. Earnings per share were $1.47 compared to $1.46 last year, while net income for the period was $479 million versus $488 million for the same period in 2024. Despite the slower start to the spring selling season in February, our monthly sales performance improved sharply month after month for the balance of the quarter. For the period, sales and earnings performed at the high end of our expectations, while operating margin of 12.2% was flat year over year. Cosmetics was the strongest merchandise area during the quarter, while geographic trends were broad-based with the Southeast performing the best. Our dd's DISCOUNT brand continued its strong momentum from 2024 with another quarter of solid sales and operating profits as the chain's value and fashion offerings again resonated with shoppers. At quarter end, total consolidated inventories were up 8% versus last year mainly due to opportunistic buys during the period. Average store inventories were up 4%, in line with our plan, and packaway merchandise represented 41% of total inventory similar to last year. We believe our inventory is well-positioned as we enter the second quarter. Turning to store growth. We opened 16 new Ross and 3 dd's DISCOUNT locations in the first quarter. We continue to plan for approximately 90 new stores this year, comprised of about 80 Ross and 10 dd's. As usual, these numbers do not reflect our plans to close or relocate about 10 to 15 older stores. Before I turn the call over to Adam to provide further details on our financial performance and guidance, I wanted to briefly discuss tariffs and the potential impact they will have on our business. While we directly import only a small portion of our merchandise, more than half of the total merchandise that we sell originates in China. If tariffs remained at elevated levels, we will be working to find the right combination of pricing versus merchandise margin compression. We believe we have a number of levers available to minimize the overall impact, but it is possible that we will see short-term pressure on our profitability. That said, our focus has been and will continue to be to provide our customers high-quality branded merchandise at a great value. From a pricing standpoint, we expect modest but broad-based inflationary pressure across the retail industry and we will remain focused on maintaining a substantial pricing umbrella below traditional retailers in order to deliver the bargains our customers have come to expect from us. Overall, trade policy remains unpredictable, and we will continue to make the necessary adjustments to best position the company to navigate through this uncertain environment. We are pleased with the momentum of the business given the sequential improvement in comp sales in the quarter. In addition, we believe our inventory is well-positioned to maximize the availability of closeouts and we have multiple strategies in place to gain market share while minimizing the margin impact from the tariffs. With that said, in our view, there are simply too many unknown variables that are limiting our visibility into the second half of the fiscal year, and we believe it is prudent to withdraw our previously provided annual guidance at this time. Ross Stores and the off-price sector in general have historically benefited from significant disruptions to the supply chain with more opportunistic buys available to us, and we believe it will be no different this time. I will now turn the call over to Adam to provide further details on our first-quarter results and additional color on our second-quarter outlook. Adam Orvos Thank you, Jim. As previously mentioned, our comparable store sales were flat for the quarter. First quarter operating margin of 12.2% was similar to last year. Cost of goods sold was relatively unchanged from a year ago. Merchandise margin declined 45 basis points mainly due to higher ocean freight costs and the initial impact of tariffs. A portion of this tariff impact was caused by purchase orders for goods that were on the water when tariffs were increased. Occupancy and distribution costs rose by 20 basis points and 5 basis points, respectively. Buying costs declined by 50 basis points from lower incentives and domestic freight leverage by 20 basis points. SG&A for the period was flat year over year as the benefit from lower incentive compensation was offset by sales deleverage. During the first quarter, we repurchased 2 million shares of common stock for an aggregate cost of $263 million under the company's 2-year $2.1 billion authorization approved by our Board of Directors in March of 2024. We remain on track to buy back a total of $1.05 billion in stock during 2025 and complete the program as planned. Now let's discuss our outlook. For the 13 weeks ending August 2, 2025, comparable store sales are projected to be flat to up 3%. Earnings per share for the second quarter are now projected to be in the range of $1.40 to $1.55 and includes a cost impact of $0.11 to $0.16 from the announced tariffs. Our guidance assumptions for the second quarter of 2025 include the following. Total sales are forecast to increase 2% to 6% versus the prior year. If same-store sales perform in line with our forecast, operating margin for the second quarter is projected to be in the 10.7% to 11.4% range, which includes a 90 to 120 basis point negative impact from announced tariffs, mostly in merchandise margin. This estimate is based on the current level of tariffs, but we recognize there could be a wide range of outcomes given the uncertainty with varying trade policy announcements. Excluding the tariff impact, we would expect merchandise margin to be similar to the prior year. We are also forecasting higher distribution costs as we opened our eighth distribution center earlier this month. Partially offsetting these higher costs are lower incentives. We expect to open 31 stores in the second quarter, including 28 Ross and 3 dd's locations. We expect net interest income to be approximately $29 million. The tax rate is projected to be 24% to 25%, and diluted shares outstanding are expected to be approximately $325 million. Now I'll turn the call back to Jim for closing comments. James Conroy Thank you, Adam. To sum up, after a slow start in February, we saw broad-based improvement throughout the quarter and we're able to meet the high end of our guidance in both sales and earnings. As mentioned earlier, despite the underlying health of the business, we have limited visibility on how customer demand may evolve over the balance of the year given prolonged inflation, deteriorating consumer sentiment, and still elevated and potentially fluctuating tariff levels. That said, we have a seasoned executive team, a flexible off-price business model, and a strong financial foundation that should enable us to navigate through these uncertain times. I do want to specifically commend the entire buying and planning organization for managing through the tumultuous external environment, driving top line sales growth and working tirelessly to minimize the impact of tariffs on the performance of the business. At this point, we would like to open up the call and respond to any questions you may have. John? Operator Thank you. We will now be conducting the question-and-answer session. (Operator Instructions) Matthew Boss, JPMorgan. Matthew Boss Great thanks and thanks for all the color. So maybe, Jim, could you elaborate on the cadence of comps or drivers of the sharp improvement that you cited as the first quarter progressed, maybe what you've seen in May relative to the flat-to-3% comp outlook? And for Michael, I guess, is there a way to walk us through strategies that you have in place to mitigate tariffs in the back half of the year? Or just maybe any range of scenarios to consider if tariffs were to remain at today's level for the remainder of the year? James Conroy Sure. I'll take the first part, Matt. The sequential improvement was really broad-based across the merchandise hierarchy. And as we look at the April business, most departments were performing pretty nicely. As you know, we don't give current quarter performance trends, but we did guide to a flat to a plus 3%. So that should give you some sense of how we feel about the health of the business. Michael, do you want to take the tariffs question? Michael Hartshorn Sure. Matt, it's Michael Hartshorn. There's three very obvious ways to mitigate the cost. The first of which is to work with our vendors and get better cost in which we've done at this point, even in the second quarter. There is, you can pass along the price, but we want to be very careful with price increases. We don't want to be the first one to raise prices, and we want to make sure that we keep our value or pricing umbrella versus mainstream retail. And that's a substantial value gap to make sure we're delivering the values that customers come to expect. We also have the same toolkits other off-pricers have, and that includes taking advantage of closeouts already in the country. We did that in the second quarter. We also have our packaway. Again, much of that arrived prior to the tariffs. So those are unburdened by tariffs, and we'll use those as well. And in some cases, we'll be able to shift the country of origin. Matthew Boss Great, best of luck. James Conroy Thanks, Matt. Operator Lorraine Hutchinson, Bank of America. Lorraine Hutchinson Thank you. Good afternoon. The 2Q gross margin hit from tariffs, that 90 to 120, it seems that that would include tariffs at peak rates. Should we expect the impact to come down as we move through the year to current rates? And is that solely related to direct imports? Or were you already seeing brands pass-through costs for the second quarter product? Michael Hartshorn The second quarter impact really includes two primarily costs. One -- the first of which is it did include costs -- or orders that were already in place when the tariffs were announced. So that includes both the original 30% and also the 145%. The other thing we've done in our supply chain is we paused ticketing until we understood what the tariff impact was. So that also includes additional ticketing efforts in the DC until we understand what the ongoing tariff will be across the board. In terms of the back half, as Jim described in the commentary, there are too many variables to reliably predict the back half, and that includes both the consumer behavior on the revenue side and also retail sourcing market dynamics. I mentioned in Q2 that we did take the hit for goods already in transit. We use closeouts to take advantage of and we also used our own packaway. Those goods, again, were unburdened by tariffs. So that's a long-winded way of saying, we'll have to wait and see how the macro economy and retail environment involves and what the outlook looks for inflation. Lorraine Hutchinson Thank you. Operator Mark Altschwager, Baird. Mark Altschwager Good afternoon. Thank you for that question. Maybe just first a quick follow-up on the comment you just made there. I think you said one of the factors impacting the visibility in the back half relates to maybe less certainty on the product flows. I guess, do I have that right? Maybe unpack how you're thinking about inventory availability. Anything you're seeing right now that is leading to maybe some concern about what the back half might look like? And then separately, Jim, when you joined, you spoke to some opportunities with marketing, with store environment enhancements. I know those are longer-term initiatives as it is, but just curious how this disruption here with macro trade policy has affected kind of your near-term playbook there. James Conroy Sure. On the first part, we certainly think there is availability of closeouts out there. If you think about what happened when the 145% passed, a lot of goods were sort of frozen in time in China. And when that 145% then came back down to 30% about a month later, all those goods are released. So that does provide an influx of closeouts. Not all of them are going to be seasonally appropriate, but there's a bit of a sort of pig and the python there, where that product will be coming through. That said, the other thing that happened when the tariffs were passed at 145% is a lot of production in China came to a halt. So there's a bit potentially of a gap right behind that. We believe we're extremely well-positioned to manage through that as we look at our receipt plans and our receipt flows over the next few months. We think we can get through that with no problem. So overall, in the short term, I think there'll be availability of closeouts. If there is a little bit of receipt risk, we think we've managed through that. And then once we get beyond this near term, given just this disruption in the economy and in mainstream retail, we believe that Ross Stores and the whole off-price sector will be benefactors to it. In terms of some of the things we had laid out on the last call and our -- any change in direction based on current environment, in the last call, we sort of laid out an early vision for some of the things that we think can improve the overall brand experience of Ross and the store experience to complement the great merchandise that the merchants bring and deliver to the stores. I also explained at that point that this is part of a transformational and evolutionary change and not sort of a revolutionary or significant step-function change. And so based on that, I see very little reason to drastically change our focus on our longer-term vision of trying to bring merchandising, marketing, and stores in concert to really contemporize the brand and drive more store traffic. We'll be doing that in an expense-neutral way. We don't plan to overly invest, certainly, this year given environment, but nor do we want to put all of those plans on pause. Mark Altschwager Thank you. James Conroy Of course. Operator Paul Lejuez, Citigroup. Tracy Kogan Hi. It's Tracy Kogan filling in for Paul. I just had one quick follow-up and then another question. So we should think about the $0.11 to $0.16 in 2Q as including some mitigations. I think you said you were able to negotiate some costs with vendors. So I just wanted to check on that. And then, secondly, I wondered if you are seeing -- if you think you're seeing a trade-down customer and if that maybe contributed to the improvement in the quarter. Thanks. Michael Hartshorn In the second quarter, it does include some mitigation, but it also includes product that was on order in transit when the tariff arrived. So there was no chance for mitigation. On the comp, if we look at comp by income band across the company, we saw the comps are fairly broad-based. So that's our only indicator, and it doesn't suggest a change across income band. Tracy Kogan Great, thank you. Operator Michael Binetti, Evercore ISI. Michael Binetti Hey, guys, thanks for taking our questions here. So I guess I just want to ask, maybe a jump ball, but maybe the different scenarios that you're looking at for 2Q, but that would land us between 0% and a 3% comp, since it certainly sounds like the exit rate was good from 1Q or maybe even just the difference between the wide spread 2% to 6% on total revenues. What are you leaving room for to decelerate if we entered the quarter or pace? And then I guess just backing up, looking at the inventory, I think we get a little lost in the narrative around off-price and the difference between direct sourcing being very small in China and your helpful comments today that it's up to half of the total goods sold. How much of that is the indirect portion that's coming from China? Is semi-permanent in recurring goods that are made up for you versus the ability to quickly move some of that exposure that's been recurring in China for a long time to other geographies? Is that muscle that the sourcing team in Asia has today or is it muscle that you have to build? Maybe you could give us just a few thoughts on that. Michael Hartshorn Michael, I'll start with the guidance range. It was really just out of abundance of caution given the macroeconomic and geopolitical environment. We're cognizant that inflation has been going on a long time, and it's impacting our core customer. And the impact of tariffs, we expect to start hitting the customer in July, June -- late June, July time frame. So we want to see how we exit the quarter. So those are the really the two reasons that we're more cautious with the guidance and we have a bigger range. In terms of the sourcing, as we said in the commentary, about a small portion are directly sourced. And what that means for us, that's the piece that we're responsible for the tariff. There's some portion of our goods, remember, we're in the closeout business. So we're agnostic to where it's sourced. We're looking for value -- branded value to the customer. So when you look at -- even though we take possession when it's already in the country, it was originally sourced from China. The piece that we have -- the direct control over country of origin is the small portion that we directly import mainly in home and shoes. James Conroy And on that other portion, the market available piece, all the off-price players essentially shop from the same market. So we don't think we're going to be uniquely less competitive, at least in any significant way. It's just the market is still pretty heavily reliant on China imports. Michael Binetti Understood. Okay. Thanks for all the clarifying comments. I appreciate it, guys. James Conroy No problem. Operator Alex Straton, Morgan Stanley. Alex Straton Perfect. Thanks so much. I wanted to touch on the branded strategy that you started enacting last year, just where that stands now, if the mix is where you want it to be and if it does still remain a margin drag and how you think about that for the rest of the year. And related to that, I just wanted to dig into women's apparel. I know that's been a focus for you all. So just curious how that particular category is doing for you, if the branded product is helping out there. James Conroy Sure. So we feel very good about the team's execution of the branded strategy. And I think at this point, we can say we're sort of hitting the guidelines or targets that we had hoped to. Those are a little bit fluid. They're not hard and fast rules. But we've gotten the entire assortment repositioned in a way where we are bringing true branded value to the consumer. So we feel great about that. There was a slight tail of an impact in margin in the beginning of this quarter, but now we fully anniversaried it. So I don't -- we don't expect margin headwinds going forward any longer from the brand strategy. And as you pointed out in your question, it was very astute, the branded strategy was really for the entire business. It tended to then take on a more heavy focus on the Ladies business. We generally keep our cards close to our vest in terms of how the business performs by category. That said, in this particular quarter, we were very encouraged that the Ladies business was in line, in fact, slightly better than the chain average. So I think we can -- it's early days, and we perhaps have some business owed to us in the Ladies category over the last few years, but it's now at least trending in line with the rest of the company. Alex Straton Thanks so much. Good luck. James Conroy Thank you. Operator Chuck Grom, Gordon Haskett. Charles Grom Hi, thanks. Good afternoon. Just on the tariff topic. Can you talk about your expectations for elasticity if you have to raise prices as we progress throughout the year, maybe what you've learned in the past, what categories your confidence is the most high? Thank you. James Conroy I don't have a great sort of knowledge base for past years here. I think the elasticity is it's going to depend on the category of business and whether it's discretionary or functional in nature. So when we're looking at pricing, we're being very strategic in terms of sort of what's the end use of that item and how much leeway do we have to change prices. And we're also very cognizant of what's happening across mainstream retail, both their full-price goods and what they're clearing as well as the other players within our sector. So there's a lot of factors that go into it. And the elasticity, I think, will depend not only across categories but even within categories down to the specific item. I would circle back to a comment I made earlier. I think we're all in the same boat here as it relates to elasticity, right? So all retailers that are selling footwear and apparel and home goods are going to face into the same set of questions. And it will be interesting to see how it all plays out. But we do expect broad-based inflationary pressure across all retailers, and that will create some disruptions. And we tend to come out on top and victorious being an off-pricer when that happens. Operator Brooke Roach, Goldman Sachs. Brooke Roach Good afternoon and thank you for taking our question. I was hoping you could talk about your category plans for mitigating tariffs. Are there any opportunities for you to shift assortment either within categories or within subcategories to try and minimize the sourcing impact from China towards other countries? Over time, how much can that be shifted both for your direct sourcing and also for some of your vendor partners? Thank you. James Conroy Sure. So there's a tremendous amount of flexibility. It does, again, kind of depend on the item specifically and the timing. So as we roll into back-to-school, if you need to have certain signature items like backpacks, you need to find a way to get backpacks into the assortment one way or another. As you get further into the fall, you might have the ability to amplify one part of the assortment and downplay another to mix out the margin or to mitigate the tariff a bit. There are certain signature items and signature categories that we want to have in the assortment regardless of the impact to mark up, so we're sort of thinking about it very strategically. All of the vendors, the entire marketplace, is trying to resource goods, right? So for a third-party product, all of our vendor partners are moving quite quickly to resource product but still a several month process. And then similarly for the product that we direct import, on occasion, you can find another country that manufactures a very similar item, and hopefully, at the same quality level. Otherwise, we would sort of void it out. But that also, as we switch to new countries or try to resource goods, there's a time line associated with that at all. So that's a 2026 sort of adjustment, not a 2025 adjustment. Operator Ike Boruchow, Wells Fargo. Juliana Duque Hi. This is Julianne Duque on for Ike. Thank you for taking my question. I just wanted to ask, when we're thinking about the impact that we're seeing by consumer and by income level, what you're seeing there and if there's anything that you could parse out between the traffic and spend trends there as well. Thank you. Michael Hartshorn Sure. As I said earlier on the call, for us, we look at stores on the population around the store and the income levels to try to band performance by income level. And for us, it was fairly broad-based across income levels. As far as comp components for the quarter, comps were flat, as we said. Slightly higher basket was offset by a slight decline in traffic, particularly earlier in the quarter. The higher average basket was driven primarily by a number of old as average unit retails were flat. Operator Simeon Siegel, BMO Capital Markets. Simeon Siegel Thanks. Hey, guys, good afternoon. Understanding that there are moving pieces like incentive comp menus, what's the best way for us to think about what comp you need to leverage overall SG&A at this point, just reflecting on, I think, the flat SG&A on black comp this quarter? And then just general thoughts on various category opportunities and challenges going forward, specifically wondering about Children's. I think this is the first quarter in over a year that you haven't -- you didn't call that out as the area of strength. So anything there would be helpful. Thank you. Michael Hartshorn Excluding, on the first question, obviously, excluding the impact of tariffs, obviously, this can vary from quarter to quarter. In the first quarter, we were able to hold EBIT margins at the flat comp. But generally, over an annual period over a longer term, it's 3% to 4% to be able to lever. James Conroy And in terms of the category detail, I wouldn't read anything into it. We tend to try to provide a small amount of color on the categories that are overperforming. Occasionally, we call out those that are massively underperforming. There's nothing really notable about the kids business to call out. Operator Dana Telsey, Telsey Advisory Group. Dana Telsey Hi, good afternoon, everyone. As you think about the performance this quarter, was there a difference between the stores along the border versus the base? And also, any color on how dd's has done? And then lastly, as you're thinking about the merchandise margin go forward, how do you think about that margin puts and takes and how you're planning inventory? And then I just have a quick follow-up. Thank you. Michael Hartshorn Dana, okay, let me get through all of those. First, let me talk through the geographies and border-store locations. We mentioned in the release that Southeast was the strongest region for us. Our largest markets, California, Florida, and Texas were relatively in line with the chain. Texas, specifically, the border stores were well below the chain average and had a slightly negative impact to the overall chain even with the low number of stores. What we attribute the quarterly performance to was the long delays for cross-border traffic to get in and out of the country. We also saw a negative impact in our northern border stores, but we have very few stores there. So not a large impact to the chain. James Conroy Want to take dd's? Both brands, both Ross and dd's, saw nice sequential improvement throughout the quarter from month-to-month. The acceleration, if I compare the February to April, was actually much stronger in Ross. But admittedly, it started at a lower point. So the dd's business continues to perform well. It was comp-enhancing for us for the quarter. And I think it's a testament to some of the strategies around the weather stores, the young customer, et cetera, that have proven out to be the right strategies and the team is executing very well against them. Adam Orvos And Dana, your question on merch margin going forward and puts and takes, outside of the tariff impact, we'd expect merchant margin to be neutral versus last year in the second quarter. And Jim mentioned earlier, our brand strategy, that's put pressure on merchandise margin over the last, call it, year. We're past that point of pressure. Operator Aneesha Sherman, Bernstein. Aneesha Sherman Thank you so much. I'm curious to hear some context around how you're thinking about pricing. Over the last few years, you've chosen at a couple of times not to pass on cost inflation at price, but rather [took a] hit. And you did this in 2023 with freight costs. You did it again over the last year with the branded strategy and chose to absorb that. Why is your approach different now? I heard what you said around competitors raising prices, but that was also the case in recent years. What's driving a different approach? And do you still think that Ross can maintain the perception of value with your lower-income consumer whilst raising prices? Thank you. Michael Hartshorn Aneesha, on the pricing, I would disaggregate the brand strategy from choosing not to raise prices. We were indeed shifting brands, but we were also maintaining our value proposition versus not only our direct competitors in off-price but also traditional retailers within department and specialty stores. In this case, we expect to see broad-based inflation, not category-specific, with the tariffs. And so we would expect to be able to maintain that value proposition against the whole retail set. Operator Marni Shapiro, Retail Tracker. Marni Shapiro Hey, guys. One just clarification, did you -- how many dd stores did you say opened in the quarter? You sort of kind of quickly, and I missed that. And then if you could talk a little bit about your use of packaways and, specifically, you've been very effective using them for times when you really needed the goods on time. So polos for Father's Day, dresses for Mother's Day or Easter. Were you able to packaway as much as possible, I guess, for back-to-school, back to your backpack analogy, your comment, or Christmas decorations and tchotchkes because all of that stuff is from China. What does that look like? What is the complexion of your packaway look like? James Conroy Sure. On the first part of your question, apologies if that wasn't clear, three dd's were opened in the quarter. In terms of packaway, I don't think the complexion of packaway is -- all that different in past years, but for -- we are really focused on places where, if we thought there was any receipt risk, we could fill it in with products from the wholesale. So I think we're extremely well-positioned to kind of maximize our business and continue to flow goods to the store and while at the same time, work through this tariff situation and minimize the impact as much as we can. And perhaps the last piece in it, circling back to the prior question, what we fully intend to continue to be quality-product branded values in the store. So the pricing piece, I don't think we will lose our reputation at all for being extremely well-branded at great values. Operator Laura Champine, Loop Capital Markets. Laura Champine Hi, thanks for taking my question. I know that we've talked about tariffs ad nauseam, but I'm still not clear on what the strategy is. So if you're a more than 50% of goods from China today, assuming tariffs don't change from here, where would you expect to be at the end of the year? James Conroy So there's multiple things we can do to try to source product from other countries. But at the end of the day, there's a lot of product, particularly over the next six months, that is going to be imported from China for us and for every other retailer and every other off-price company. So there's -- the amount of flexibility that you have as you sit in the middle of the year for the next three to six months is somewhat limited. So I'm not prepared to give you an exact number for what our sourcing by country will look like six months from now. I would tell you that what the merchants are looking at is, how do I deliver product to the store that is part of a compelling assortment at a great value? And in this environment, we expect a lot of that will come from a closeout part of our business, and some of it might come from resourcing merchandise overseas. But they don't start with the country of origin in mind, right? In most cases, we're not the company importing the product. I hope that helps. Operator Corey Tarlowe, Jefferies. Corey Tarlowe Great, thanks. Jim, I was wondering if you could just provide a little bit of color on traffic trends that you saw in the quarter. I think you implied that things got better, but it was down to end up. And then just on AUR, what have been the key drivers there beyond -- is it just bringing in good, better -- the better- and best-type products? James Conroy Sure. So the quarter started off slow. It seems like a lot of retailers started off slow in February. And then the business got better from between February and March, and they got better again between March and April, significantly so at Ross. A portion of that, not all of it, a portion of that was the shift in Easter. In terms of traffic or transactions, if we look at just the April business, we had a pretty solid comp there and it was largely transactions-based, a little bit of help from AUR, but very small increase in AUR. And then we had a bigger basket driven by more units per transaction. So if I were to look at the April business in a vacuum, I would be pretty pleased, right? We had growth across all three elements, transactions, AUR, and UPT, sort of a very healthy way to drive a comp. And our exit performance coming out of the quarter was pretty strong. Corey Tarlowe Okay, great. Operator Krisztina Katai, Deutsche Bank. Jessica Taylor Hi. This is Jessica Taylor on for Krisztina. Thanks for taking our questions. I just wanted to follow up a little bit on the performance by income and the health of the customer. And just to follow up on Juliana's question a little, asked differently. Have you seen any changes in terms of the customer behavior in their spend, how they're approaching their buying from last quarter or the last six months? Thanks. James Conroy I would say, not really. Michael commented a little bit about the income bands, and there's some very slight movements there. But, anticipating this question, we were looking to try to find and support or validate the logical hypothesis, but it just wasn't obvious within the data. In terms of customer behavior, perhaps you could say there's a little bit of a shift towards more functional item versus discretionary items. But it's -- I wouldn't say there's anything that's glaringly different. Operator Adrienne Yih, Barclays. Angus Kelleher Hi. This is Angus Kelleher on for Adrienne. You noted that cosmetics was the strongest merchandise area in Q1. Can you elaborate on what's driving that strength? Was it brand, mix, pricing, or something else? And do you expect this momentum to continue? Then also given the flat comp performance and cautious consumer backdrop, are you seeing any shifts in consumer behavior around basket size or frequency specifically? Thank you. James Conroy So on the cosmetics piece, I would give kudos to the team for some really strong execution and for putting together a great assortment there. But is -- cosmetics is a pretty broad category. But part of what's driving it is some of the better brands there and a little bit of a trend in that space for a particular type of cosmetics. And so we feel good about that. In terms of frequency and basket size, et cetera, there's very small changes. Nothing to call out just yet in terms of consumer behavior in the quarter, certainly in the second half of the quarter, versus if you go back to our fourth quarter, where we had a nicely positive comp they feel relatively similar to us. Operator And there are no further questions at this time. I would like to turn the floor back over to Jim Conroy for any closing remarks. James Conroy Very good. Well, thank you, everyone, for joining us on our call today. We look forward to speaking with you on our next earnings call. Take care. Operator Ladies and gentlemen, that does conclude today's teleconference. We thank you for your participation. You may disconnect your lines at this time. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Yahoo
23-05-2025
- Business
- Yahoo
Ross Stores Inc (ROST) Q1 2025 Earnings Call Highlights: Navigating Growth Amidst Challenges
Total Sales: Increased 3% to $5 billion. Comparable Store Sales: Flat versus last year. Earnings Per Share (EPS): $1.47 compared to $1.46 last year. Net Income: $479 million versus $488 million in the same period of 2024. Operating Margin: 12.2%, flat year over year. Consolidated Inventories: Up 8% versus last year. Average Store Inventories: Up 4%, in line with the plan. New Store Openings: 16 new Ross and 3 dd's DISCOUNT locations in the first quarter. Share Repurchase: 2 million shares repurchased for $263 million. Second Quarter Sales Forecast: Total sales projected to increase 2% to 6% versus the prior year. Second Quarter EPS Forecast: Projected to be in the range of $1.40 to $1.55. Second Quarter Operating Margin Forecast: Projected to be in the 10.7% to 11.4% range. Warning! GuruFocus has detected 6 Warning Signs with STEP. Release Date: May 22, 2025 For the complete transcript of the earnings call, please refer to the full earnings call transcript. Total sales grew 3% to $5 billion, with earnings per share slightly increasing to $1.47 from $1.46 last year. Cosmetics was the strongest merchandise area, and the Southeast region performed the best geographically. The dd's DISCOUNT brand continued its strong momentum with solid sales and operating profits. Ross Stores Inc (NASDAQ:ROST) opened 16 new Ross and 3 dd's DISCOUNT locations in the first quarter, with plans for approximately 90 new stores this year. The company repurchased 2 million shares of common stock for $263 million, remaining on track to buy back a total of $1.05 billion in stock during 2025. Comparable store sales were flat for the quarter, indicating no growth in same-store sales. Merchandise margin declined by 45 basis points due to higher ocean freight costs and the initial impact of tariffs. Operating margin of 12.2% was flat year over year, showing no improvement in profitability. The company faces potential short-term pressure on profitability due to elevated tariff levels on goods originating from China. Ross Stores Inc (NASDAQ:ROST) withdrew its previously provided annual guidance due to too many unknown variables affecting visibility into the second half of the fiscal year. Q: Could you elaborate on the drivers of the sharp improvement in comps as the first quarter progressed and what you've seen in May relative to the flat-to-3% comp outlook? A: James Conroy, CEO: The sequential improvement was broad-based across the merchandise hierarchy. Most departments performed well in April. We guided to a flat to a plus 3% comp, indicating our confidence in the business's health. Q: How are you planning to mitigate tariffs in the back half of the year? A: Michael Hartshorn, COO: We are working with vendors to get better costs, being cautious with price increases to maintain our value proposition, and leveraging closeouts and packaway merchandise that are unburdened by tariffs. We may also shift the country of origin for some products. Q: Should we expect the 2Q gross margin impact from tariffs to decrease as the year progresses? A: Michael Hartshorn, COO: The second quarter impact includes costs from orders already in place when tariffs were announced. There are too many variables to predict the back half reliably, including consumer behavior and retail sourcing dynamics. Q: How are you thinking about inventory availability and any concerns for the back half of the year? A: James Conroy, CEO: There is availability of closeouts due to disruptions in China. While there might be a gap in production, we believe we are well-positioned to manage through it with our receipt plans and flows. Q: What is your strategy for pricing given the current environment, and can Ross maintain its value perception while raising prices? A: Michael Hartshorn, COO: We expect broad-based inflation and aim to maintain our value proposition against the retail set. We are strategic about pricing, considering the end use of items and market conditions. For the complete transcript of the earnings call, please refer to the full earnings call transcript. This article first appeared on GuruFocus. Sign in to access your portfolio
Bloomberg
22-05-2025
- Business
- Bloomberg
Ross Stores Falls After Pulling Guidance Due to Tariff Blindspot
Discount retailer Ross Stores Inc. fell after pulling its full-year profit outlook due to heightened uncertainty caused by tariffs. 'There are simply too many unknown variables that are limiting our visibility into the second half of the fiscal year,' Chief Executive Officer James Conroy said on a call with analysts Thursday. More than half of the chain's inventory originates in China.
Yahoo
11-02-2025
- Politics
- Yahoo
NYC jail watchdog group warns new Rikers high-security unit is ‘keg of dynamite'
The Department of Correction came under fire Tuesday from a city oversight board for quietly creating a new high-security unit on Rikers Island that may violate a law limiting the use of solitary confinement. The new Special Management Unit at the Otis Bantum Correctional Center limits detainees to just seven hours a day outside of their cells, DOC General Counsel James Conroy said during a Board of Correction meeting. However, Local Law 42, the law limiting solitary, requires 14 hours per day of out-of-cell time. The unit, which opened Wednesday, currently has just five occupants, though the capacity is 40. Board members reported they observed a botched roll-out in visits on Sunday and Monday. 'We are very disturbed by the fact that the board was never privy to the plans with respect to this new unit,' said board member Barry Cozier, a retired state judge. 'We observed numerous operational deficiencies.' Board chairperson Dwayne Sampson questioned creating the new unit without laying the proper groundwork. 'It seems like a keg of dynamite ready to explode,' he said. One thing the board did not question is whether the Adams administration had the right to create a unit that violates the solitary-confinement law — an issue now the subject of a bitter legal battle. The City Council sued the administration Dec. 9 to stop Mayor Adams' practice since July of using 'emergency' executive orders to block elements of the law. The case is pending. The board members focused instead on their contention that correction officials appeared not to have set up the unit for a range of basic services, such as recreation, a law library and health clinic visits, and even access to razors. While the detainees are supposed to be let out of their cells at 10 a.m., a captain and a security team are required to be present to do pat-frisk searches and cell searches — a factor that builds in delays, Cozier said. 'They are at the mercy of that,' he added. The roughly 35 correction officers assigned to staff the unit had yet to be fully trained, board vice chairperson Helen Skipper said. 'I find it hard to believe that you opened the housing unit with officers who are not trained properly,' she said. Skipper recounted an incident where the 64-year-old mother and 8-year-old daughter of a detainee in the unit had to wait six hours for a visit on Sunday. She said they were told the visit room had to be completely empty for the visit to take place. 'That's an unreasonable restriction,' she said. Conroy countered that the federal monitor tracking violence and use of force in the jails approved creation of the new unit as 'sound correctional practice,' as did the state Commission on Correction. He said the unit was intended as a midway step between the highest security units for men, dubbed RESH, at the Rose M. Singer Center, and the Rikers general population. He said the unit's officers had already received five training sessions. 'We have an obligation to control violence in the jails,' Conroy said. Meanwhile, the City Council sent a letter Monday to Judge Laura Taylor Swain, who is weighing whether to appoint an outside receiver to manage the city's jails, urging her to make sure the Council's powers to pass binding legislation are preserved. Swain is presiding over Nunez v. the City of New York, a 2011 class action lawsuit about violence and staff use of force in the jails. The letter also calls on the judge to choose a receiver 'aligned' with the legally mandated closure of Rikers by 2027 — though, in practice, the construction of the four new borough jails intended to replace Rikers is already years behind schedule. In addition, three new amicus curiae briefs were filed this week that oppose selection of a receiver with ties to city government. The city proposed last month that sitting Correction Commissioner Lynelle Maginley-Liddie also serve as receiver — an idea immediately rejected by the lawyers representing the plaintiffs. The amicus briefs were filed by a group of influential former city officials, including former First Deputy Mayor Stanley Brezenoff, the New York City Bar Association, and the Vera Institute. 'This Rube Goldberg construction signals that the receiver is subordinate to — not independent of — the Mayor, his government and the political forces that inevitably and always are present in government,' the Brezenoff group wrote, referring to the cartoonist known for drawing fanciful contraptions.
Yahoo
08-02-2025
- Yahoo
Georgia police officer shot 'almost immediately' after responding to call
Feb. 8 (UPI) -- A Georgia police officer was shot and killed while responding to a call near a shopping center in an Atlanta suburb, officials confirmed. The Roswell Police Department had not released the officer's name as of Saturday morning, only confirming the death Friday in a statement on Facebook. "It is with profound sorrow that we share the devastating news of the loss of one of our officers," the department said in the statement. The officer was responding to a call about a suspicious person around 7 p.m. EST Friday in Roswell, Ga. a suburban Atlanta community with a population of 92,000 people in northern Fulton County. Shortly after arriving, the suspect "almost immediately" began shooting at responding officers, Roswell Police Chief James Conroy told reporters Friday night. The injured officer was rushed to a local hospital but did not survive. The suspect was arrested immediately following the incident and later identified as Edward Espinoza. Court records show the 23-year-old is facing charges of murder, aggravated assault against a law enforcement officer and possession of a firearm while committing a felony. "As the officer approached Espinoza for questioning, Espinoza pulled a handgun and fired multiple shots at the officer," the Georgia Bureau of Investigation said in a statement. The GBI is taking the lead in the investigation. "Tonight, Marty, the girls, and I are praying for the loved ones of a Roswell Police Officer who was shot and killed in the line of duty. We join them, his fellow Roswell PD, and all law enforcement in mourning this sudden and heartbreaking loss, and we ask all Georgians to join us in keeping them in your thoughts and prayers," Georgia Gov. Brian Kemp said on X.
