Solid sales gains at Ross Stores in Q2

23 Aug '10

4 min read

Ross Stores, Inc. reported earnings per share for the 13 weeks ended July 31, 2010 of $1.07, up from $.82 for the 13 weeks ended August 1, 2009. These results reflect a 30% increase on top of a 52% gain in the second quarter of 2009.

Net earnings for the second quarter of 2010 grew 25% to a record $129.3 million, from $103.4 million in the second quarter of 2009. Sales for the 13 weeks ended July 31, 2010 increased 8% to $1.912 billion, with comparable store sales up 4% on top of a 3% gain in the prior year.

For the six months ended July 31, 2010, earnings per share were $2.24, up from $1.55 for the six months ended August 1, 2009. These results represent 45% growth on top of a 37% increase in earnings per share during the first half of 2009. Net earnings for the six months ended July 31, 2010 grew to a record $271.6 million, up 39% from $194.8 million in the prior year period. Sales for the first six months of 2010 increased 11% to $3.847 billion, with comparable store sales up 7% on top of a 3% gain last year.

Michael Balmuth, Vice Chairman and Chief Executive Officer, commented, "We are pleased with the solid sales gains and healthy earnings increases we delivered in the second quarter and first six months of 2010. Our profit growth for both periods is especially noteworthy, considering it was on top of robust double digit gains in the prior year.

“Our ability to deliver compelling bargains, while operating our business on much lower inventories, remains the primary driver of our strong results. The best performing merchandise categories during the second quarter and year to date periods were Home, Dresses and Shoes. Geographic trends were relatively broadbased, with the strongest performance in Florida."

Mr. Balmuth continued, "Second quarter operating margin grew about 140 basis points to 11.1%, on top of a 260 basis point increase in the prior year period. Our 2010 profitability gains were driven by a 110 basis point increase in gross margin and a 30 basis point decline in selling, general and administrative costs as a percent of sales compared to the second quarter of 2009. Key drivers of our improved profit margins for both the second quarter and year-to-date periods were higher merchandise gross margin, a timing shift in distribution expenses related to packaway levels, lower shortage costs and leverage on other operating expenses."

Mr. Balmuth also noted, "As we ended the first half of the year, our balance sheet and cash flows remained healthy. We continued to return capital to stockholders through our stock repurchase and dividend programs. During the first six months of fiscal 2010, we repurchased 3.6 million shares of common stock for an aggregate purchase price of $193 million. We are on track to repurchase during 2010 approximately $375 million of our current two-year $750 million stock repurchase program."

Looking ahead, Mr. Balmuth said, "Predicting the future in today's uncertain macro-economic and retail climate remains challenging. We also face extremely tough comparisons in the second half of the year, as same store sales grew 9% and earnings per share rose 67% in the prior year period. As a result, we are maintaining a somewhat cautious outlook concerning our sales and earnings targets for the second half of 2010."

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