Tepid outlook
Ross Stores, Inc.(NASDAQ: ROST) posted a profit of $300.6 million or 77 cents a share for Q4FY16, up from $264.2 million or 66 cents a share in the corresponding quarter. Revenues rose 8% to $3.51 billion. Sales grew 8% to $3.5 billion with comparable store sales up 4% Vs 4% gain last year. Operating margins grew 90 basis points to 13.6% up from 12.7% in the corresponding period. The company said the improvement was on account of its above-plan sales along with a favorable comparison of the pack away-related costs.
For the full year, Ross Stores reported a 13% rise in EPS to $2.83 while net earnings increased 10% to $1.1 billion. Sales for the year grew 8% to $12.9 billion with comparable store sales up 4% on top of 4% increase in 2015. Operating margins increased 40 basis points to record 14%.
Ross Stores has announced a stock buyback program for $1.75 billion over the next two fiscal years. During fiscal 2016, a total of 11.6 million shares of common stock were repurchased for an aggregate purchase price of $700 million. During the reported quarter, the company repurchased 2.6 million shares for a total price of $170 million. The company increased quarterly dividend 19% to 16 cents a share.
Weak guidance might hurt the stock sentiment today
Going forward, Ross Stores management said there continues to be uncertainty in the political, macroeconomic and retail climates. Ross Stores is facing challenging sales and earning comparisons. For fiscal 2017, Ross Stores projected per-share earnings of $3.02 to $3.15 and same-store sales growth of 1%-2% as compared with 4% in the year ended January 28, 2017. For Q1CY17, Ross Stores forecasted an EPS of 76 cents to 79 cents and same store growth of 1%-2%.
Ross stock fell over 0.4% in the pre-market session today (as of March 1st, 2017; Source: Google finance). However, the stock has consensus “Strong Buy” rating with consensus target price of $69.5 per share. On the other hand, the stock is trading at relatively higher one-year forward P/E of 24.6x. The brokerage firm, Citi has downgraded the group’s stock to Neutral rating as compared to Buy rating.