Ross Misses Earnings, Sales Estimates as COVID-19 Resurgence Weakens Foot Traffic at Stores
Ross Stores Inc. missed Wall Street’s estimates for fourth-quarter earnings and sales as the persistent global health crisis weakened foot traffic at its stores.
For the three months ended Jan. 30, the Dublin, Calif.-based chain logged profits of $238 million, or earnings of 67 cents per share, compared with the prior year’s earnings of $1.28 per share. Market watchers had predicted earnings of $1 per share. Revenues dropped to $4.23 billion from the year-ago period’s $4.41 billion, versus analysts expectations of $4.27 billion.
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Ross added that its comps declined 6% amid a resurgence in the COVID-19 outbreak during the peak holiday shopping season.
“While our fourth-quarter sales exceeded our expectations, the upsurge of the virus resulted in lower traffic, especially in California, our largest state, where we were subject to more stringent occupancy and operating hour restrictions,” CEO Barbara Rentler said in a statement.
Still, the retailer plans to reinstate its quarterly cash dividend at a rate of $0.285 per share, payable at the end of the month. “The resumption of our dividend payout in 2021 reflects our strong cash position and confidence in the company’s long-term prospects,” Rentler added.
For the upcoming first quarter, Ross forecasted comps to be down 1% to down 5%, versus the same period in 2019, which the company explained was a “more relevant basis for comparison” due to impact of the coronavirus pandemic in 2020. Earnings per share for Q1 is expected to be between 74 cents and 86 cents, demonstrating the “deleveraging effect from the projected decline in same-store sales, increased supply chain costs, higher wages and ongoing COVID-related expenses.”
In her statement, Rentler expressed cautious optimism for the rest of the year. “With the continued roll out of vaccines, potential additional government stimulus and likely pent-up consumer demand, we expect comparable store sales to strengthen as we move through the year,” she said. “However, earnings will continue to be affected by the aforementioned cost pressures throughout the year and thus profitability will be well below recent historical high levels.”
For the 2021 fiscal year, the chain intends to add about 60 new brick-and-mortar stores — roughly 40 Ross Dress for Less locations and 20 dd’s Discounts units.
“We believe our longer-term prospects remain bright,” Rentler said. “We operate in an attractive sector of retail that will be facing much less brick-and-mortar competition given the significant number of retail closures and bankruptcies. As a result, we believe we remain well-positioned to gain market share over time, especially given consumers’ heightened focus on value and convenience.”
