Ross Stores Inc. followed a common pattern in disclosing its second-quarter results — better-than-expected performance offered with a strong dose of caution.
In the three months ended Aug. 1, the Dublin, Calif.-based off-pricer reported that net income rose 8 percent to $258.6 million, or 63 cents a diluted share, from $240 million or 57 cents, in the prior-year period.
The median analysts’ estimate for earnings was for earnings per share of 62 cents.
Revenues exceeded consensus estimates for $2.94 billion, rising 8.7 percent to $2.96 billion from $2.73 billion in the 2014 quarter. Same-store sales rose 4 percent, above the 2 to 3 percent increase that Ross projected earlier this year.
Gross margin fell back to 40 percent from 40.4 percent.
But in addition to its timid comp projection, Ross set its full-year EPS guidance at between $2.40 and $2.45 a diluted share versus the analysts’ consensus estimate of $2.45. (All per share data is adjusted to reflect Ross’s two-for-one stock split in June.)
“While we hope to do better, we are maintaining a cautious outlook for the second half when we face more challenging sales and earnings comparisons,” said Barbara Rentler, chief executive officer of the company. “In addition, the macroeconomic and retail landscapes remain uncertain.”
She noted that operating margin had declined to 13.8 percent of revenues but this result was slightly better than expected. “The quarter benefited from higher merchandise margin and tight expense control that partially offset a planned increase in distribution costs related to recent infrastructure investments.”
Investors expressed their displeasure with the guidance, since shares down 9.1 percent to $50.25 in the first hour of after-hours trading. They’d closed down 0.8 percent to $55.25 in Thursday’s regular trading session.
In the first half of the year, net income rose 11.9 percent to $540.8 million, or $1.32 a diluted share, while revenues expanded 9.2 percent to $5.91 billion and comps grew 5 percent.