NEW YORK — Ross Stores showed robust first-quarter sales and earnings increases driven by strong sales in Texas and the rest of the Southwest and a decline in distribution costs.

The off-price retailer reported first-quarter net earnings Wednesday that rose 18.2 percent to $59.2 million, or 41 cents a diluted share, from $50.1 million, or 34 cents a share, the prior year. The average analyst estimate for earnings per share for the quarter was 41 cents.

Sales also increased 18.2 percent to $1.3 billion from $1.1 billion during the first quarter last year. Comp-store sales for the period were also up, rising 6 percent over last year.

“Strength across many geographic markets and merchandise categories drove our solid sales gains during the first quarter. The strongest regions during the period were the Southwest and Texas, both of which posted double-digit gains in same-store sales. The best-performing merchandise categories continued to be shoes, juniors and home, which generated double-digit gains and comparable-store sales as well. We also realized better than expected sales gains at dd’s Discounts,” said Michael Balmuth, vice chairman, president and chief executive officer, Ross Stores, in a conference call.

The company improved its supply chain efficiencies and in-store inventory levels through increased distribution productivity and aggressive markdowns in April as a result of the late Easter holiday, according to Balmuth. The company expects to maintain the efficiencies and operate with slightly lower levels of in-store inventory.

“Our improved profitability was driven mainly by a decline in distribution costs as a percent of sales and leverage on other expenses from our solid sales performance, partially offset by higher shrinkage accruals, freight and incentive compensation costs as a percent of revenue,” said Balmuth in a statement.

Based on the results, the company predicted an increase in earnings per share for the year ending February 3, 2007 of 16 to 22 percent over fiscal year 2005.

This story first appeared in the May 19, 2006 issue of WWD. Subscribe Today.