Ross Stores Inc. late Thursday became the latest retailer to report disappointing quarterly results and dial down on its outlook, pointing at inflation and rising freight and wage costs as the culprits.
Ross ROST, -0.11% said it earned $338 million, or 97 cents a share, in the first quarter, compare with $476 million, or $1.34 a share, in the year-ago period.
Sales dropped to $4.3 billion, from $4.5 billion a year ago. Same-store sales fell 7%, Ross said.
Analysts polled by FactSet expected the retailer to report earnings of $1 a share on sales of $4.5 billion. Same-store sales were seen dropping 2.7% year-on-year.
The stock dropped more than 16% in the after-hours session.
Earlier this week, both Target Corp. TGT, -5.06% and Walmart Inc. WMT, -2.74% disappointed Wall Street with first-quarter misses.
“We are disappointed with our lower-than-expected first-quarter results,” Chief Executive Barbara Rentler said in a statement.
“Following a stronger-than-planned start early in the period, sales underperformed over the balance of the quarter,” Rentler said.
Ross was aware that fiscal 2022 was going to be “a difficult year to predict,” Rentler said, especially the first half as compared with last year, which had government stimulus checks and “significant customer pent-up demand” as pandemic-related restrictions eased, the executive said.
“The external environment has also proven extremely challenging as the Russia-Ukraine conflict has exacerbated inflationary pressures on the consumer not seen in 40 years.”
Margins dropped nearly 11% in the quarter, reflecting the same-store sales decline and “ongoing” headwinds from higher freight and wage costs that began climbing in the second half of last year, the company said.
Given the lower results and an “increasingly uncertain” macroeconomic and geopolitical environment, Ross was adopting a “more conservative outlook” for the remaining months, Rentler said.
The company said it expects same-store sales for the quarter ending July 20 to drop between 4% and 6%. Per-share earnings are seen between 99 cents and $1.07, which would compare with EPS of $1.39 in last year’s second quarter.
Ross forecast comparable-store sales to decline between 2% and 4% in the year, compared with a 13% gain in fiscal 2021. The retailer projected EPS for fiscal 2022 between $4.34 and $4.58, compared with $4.87 in the prior year.
“We have shown in the past that our value-focused business model has served us well in both healthy and more uncertain external climates and believe the current challenging conditions will be no different,” Rentler said.
Shares of Ross have dropped about 19% sso far this year, nearly matching a loss of around 18% for the S&P 500 index SPX, -0.58%.
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