Ross Stores Profit Declines; Details Weak Outlook - Update

(RTTNews) - Ross Stores Inc. (ROST), Thursday reported a drop in profit for the fourth quarter, as the discount apparel retailer's revenue declined with operating expenses rising amidst a highly competitive holiday-shopping period and severe winter. Nonetheless, earnings for the quarter came in line with Wall Street estimates, although revenues fell short of expectations.

Moving ahead, the retailer detailed a weak outlook for the first quarter and full year.

Pleasanton, California-based Ross Stores' fourth-quarter profit dropped to $218.0 million or $1.02 per share from $236.6 million or $1.07 per share last year. On average, 30 analysts polled by Thomson Reuters expected earnings of $1.02 per share. Analysts' estimates typically exclude special items.

Ross Stores, which owns the Ross Dress for Less and Dd's Discounts chains, said fourth-quarter sales slipped to $2.74 billion from $2.76 billion last year. Twenty-eight analysts expected sales of $2.75 billion for the quarter.

Same-store sales for the 13 weeks ended February 1 rose 2 percent over the 13 weeks ended February 2.

Fourth-quarter operating margin dropped to 12.7 percent from 13.7 percent last year.

Chief Executive Michael Balmuth said the fourth-quarter sales were in line with the company's expectations while profit were "slightly better-than-expected," as helped by above-plan merchandise gross margin.

"Despite a very promotional retail environment throughout the holiday season, customers responded favorably to the compelling bargains we offered on a wide assortment of fresh and exciting name brand fashions and gifts." Balmuth said.

The holiday-shopping season was not a hugely beneficial period for the retailers broadly as heavy discounting and heightened competition were further burdened by severe winter that made shoppers stay at home.

Looking forward to the first-quarter, Ross Stores expects earnings of $1.11 to $1.15 per share and same-store sales to increase 1 to 2 percent. Analysts currently expect first-quarter earnings of $1.20 per share.

For the full year 2014, the company sees earnings of $4.05 to $4.21 per share and same-store sales to grow 1 to 2 percent. Analysts currently expect earnings of $4.34 per share for 2014.

"As we enter 2014, in addition to our own challenging multi-year sales and earnings comparisons, we also continue to face ongoing uncertainty in the macro-economic and retail climates. While we remain well-positioned as an off-price retailer, these likely headwinds have prompted us to stay somewhat cautious in our outlook," Balmuth said.

ROST closed Thursday's trading at $72.31, up $0.62 or 0.86%, on the Nasdaq. The stock, however, dropped $1.11 or 1.54%, in after hours.