Ross Stores Inc. posted positive second-quarter results on Thursday, though the potential impact of tariffs that will go into place in September loomed over its otherwise generally positive outlook for the rest of the year.
The Dublin, Calif.-based off price brand reported increased sales and net earnings for the three months that ended Aug. 3, 2019. Sales were $4 billion, a six percent rise, while net earnings were $413 million, up from $389 million the previous year.
The company’s executives said their sales forecast for the second half of the year would stay the same. Taking into account the 10 percent tariffs that would potentially be imposed on products from China, they projected its earnings per share in the third quarter to be between 92 cents and 96 cents, and between $1.20 to $1.25 in the fourth quarter. Shares dipped slightly following the results to $105.70, down from $107.40 when the market closed after trading Thursday.
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“We believe that the additional tariffs may result in increased uncertainty in the apparel and footwear market,” chief executive officer Barbara Rentler said in a call with analysts Thursday evening.
Its same-store sales are still projected to grow by 1 to 2 percent for the rest of the year, and it is estimating its total sales to grow by 5 to 6 percent over the third quarter, according to the company. Its earnings per share for the fiscal year 2019 are expected to be between $4.41 to $4.50, according to the company.
Rentler said that Ross Stores plans to take a wait-and-see approach to handling the tariffs, based on how mainstream retailers respond to the higher costs, and how their customers then react to any price increases. But she added that historically, such “disruptions” tended to benefit off-price stores.
“In the near term, I think what we have to do is we have to recognize that we’re not the leader in all of this, we’re the follower,” she said. “We’re not going to be the leader in terms of raising prices, so as the tariff comes on, it’s early for us to know how retailers plan to manage through the cost.”
The executives were otherwise generally reserved in discussing the impact of tariffs, citing “competitive reasons,” for not disclosing the specific percentage of its products that would be affected. But they said that “a good portion” of its apparel and footwear comes from China.
Ross Stores’ top performer in the second quarter was its men’s merchandise department, and its ladies apparel business was still lagging since the last quarter despite some improvement, Rentler said.
“It’s still trailing the chain, but as the year goes on, the business will continue to improve,” Rentler told analysts in the call.
Its dd’s discount stores performed well in sales and operating profits in the second quarter, according to Rentler, who said the company stayed “on schedule” in the second quarter in opening 22 Ross and six dd’s discount locations.
The company still expects to add a total of roughly 100 new locations in 2019, some three quarters of which would be Ross locations, Rentler said.