Shoes and homeware hot for Ross in Q4 – Sourcing Journal

Ross Stores Inc. said higher basket trends helped it outperform in the fourth quarter, where shoes and homewares prompted shoppers to buy.

In short: “Our fourth quarter sales and earnings results exceeded our guidance due to positive customer response to our enhanced assortments and lower priced offerings,” Barbara Rentler, CEO, told investors in a conference call Tuesday.

Lower freight and incentive costs helped, but pack-and-hold inventory fees offset those improvements, she said.

Footwear, home and gift items performed well. Florida is the strongest region of the low-cost provider, Rentler said.

Sales of housewares “slightly” exceeded the chain average,” and apparel was also doing well. “Part of what really convinced us is that home gifting is the most common and that part of our business is doing well,” Rentler said.

Consolidated inventories are down 11 percent.

“We also believe we are well positioned to take advantage of the numerous buying opportunities in the market,” Rentler said, reaffirming her belief that the “supply bubble” is not going to burst anytime soon.

Inflation is one of the biggest drivers of consumer spending right now. “As a result, today our shoppers are looking for even greater value when they visit our stores,” Rentler said, noting that DD Discounts is having the greatest impact with hard-hit customers.

“In response, retailers are refining our ranges with an increased focus on delivering the most competitive bargains available, while continuing to adjust our product mix based on our customers’ evolving preferences,” she said.

Ross Stores has a game plan in mind.

“We believe the best way to increase sales is by continuing to focus on value for our customers. That really helped us be successful in the fourth quarter,” she said.

Fortunately, there are currently many goods on the market place. “We’re really, really focused on value and offering our customers the best possible value,” she said.

Michael Hartshorn, Ross’ chief operating officer, said the company has automated distribution centers and sees how technology can streamline operations at the store level.

net sales: For the fourth quarter ended January 28, net sales increased 4 percent to $5.21 billion from $5.02 billion as comparable store sales increased 1 percent, along with an increase of 9 percent in the same quarter of the previous year.

Adam Orvos, executive vice president and CFO, told investors that the increase was due to “growth in average basket size as traffic was relatively flat compared to last year.”

He said the company plans to open the doors of 75 Ross Dress for Less and 25 DD’s Discounts this year.

For the full year, net sales decreased 1 percent to nearly $18.7 billion from $18.92 billion.

Merits: Net income for the quarter increased 22 percent to $447.0 million, or $1.31 per diluted share, from $366.8 million, or $1.04, a year ago.

Wall Street expected adjusted diluted earnings per share of $1.24 on sales of $5.17 billion.

For the first quarter ended April 29, 2023, the company is forecasting earnings per share of 99 cents and $1.05, up from 97 cents a year ago, flat on inflationary pressures.

For the full year ending January 27, 2024, comparable store sales are expected to be flat for the 52 weeks, down from a 4 percent decrease in fiscal 2022 and a 13 percent increase in fiscal 2021. Earnings Per share was estimated to range from $4.65 to $4.95 in 2024 versus $4.38 in fiscal 2022. Per share guidance is for the 53 week period ended February 3, 2024 and includes an additional comparison week .

Orvos said the projections factor in higher wages and lower ocean freight costs, noting that transportation costs are still higher than in 2019.

For the year, net income fell 12 percent to $1.51 billion, or $4.38 per diluted share, from $1.72 billion, or $4.87 a year ago.

CEO’s take: “Looking ahead, we have significantly increased our focus on tightly controlling inventory levels and operational costs across the business. We firmly believe these actions will allow us to maximize our potential for revenue and earnings growth in 2023 and beyond,” said Rentler.