Ross Stores shares tank 25% on Q1 results

  • May 19, 2022

Ross Stores Inc (NASDAQ: ROST) shares tanked nearly 25% in extended trading after the American chain of discount department stores reported disappointing results for its fiscal first quarter.

Ross Stores Q1 financial highlights

Net income came in at $388 million versus the year-ago figure of $476 million.
Per-share earnings of 97 cents were much worse than $1.34 in Q1 of previous year.
Quarterly revenue slipped 5.0% to $4.3 billion on a year-over-year basis.
FactSet consensus was for $1.0 of EPS on $4.53 billion in revenue.
Same-store sales were down 7.0% and operating margin dropped to 10.8%.

CEO Barbara Rentler blamed higher freight and wage costs for the weakness in Q1. In the earnings press release, she said:

We’re disappointed with our lower-than-expected Q1 results. Following a stronger-than-planned start, sales underperformed over the balance of the quarter on ongoing headwinds from higher freight and wage costs.

Future outlook and quarterly cash dividend

For fiscal 2022, Ross Stores forecasts its per-share earnings to fall between $4.34 and $4.58, well below the analysts’ call for $5.0. A day earlier, the California-based company announced a quarterly per-share cash dividend of 31 cents.

The retailer warns of 2.0% to 4.0% hit to same-store sales this year. The chief executive added:

We knew fiscal 2022 would be a difficult year to predict, especially H1 when we were facing last year’s record government stimulus and customer pent-up demand. The external environment also proved extremely challenging as Russia-Ukraine conflict exacerbated inflationary pressures not seen in 40 years.

The stock is now down more than 35% for the year.

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