By Neil J Kanatt
Aug 20 (Reuters) – Value retailer Ross Stores raised its profit forecasts on Thursday after reporting better-than-expected second-quarter results, signaling that demand for discounted apparel and accessories remains resilient in an uncertain economy.
Shares of the company rose about 7% in extended trading.
Off-price retailers such as Ross Stores continue to attract value-conscious shoppers looking for bargains on branded goods as inflation remains elevated and consumers closely manage discretionary spending.
Shoppers have ramped up their spending across merchandise and regions, particularly in the U.S. Midwest and Ross’ home and cosmetics businesses, CEO Jim Conroy said on a post-earnings call.
Ross has benefited from customers trading down from department stores and specialty apparel chains, while its flexible buying model has enabled it to capitalize on excess inventory in the marketplace.
The company forecast annual earnings per share in the range of $8.61 to $8.77, compared with its previous outlook of $7.50 to $7.74.
It sees comparable store sales increasing 6% to 7% in the third quarter and 4% to 5% in the fourth quarter, compared with analysts’ expectations of a 3.1% and 2.6% rise, respectively. The company had earlier forecast annual same-store sales to rise between 6% and 7%.
Ross’ second-quarter revenue rose about 13% to $6.26 billion, compared with analysts’ estimate of $6.18 billion.
Its adjusted earnings of $2.06 per share beat analysts’ estimates of $1.94 per share.
The retailer also said it received about $253 million in tariff refunds in the second quarter.
Rival TJX on Wednesday reported a slowdown at its TJ Maxx and Marshalls discount apparel chains, but said the issues were “self-inflicted” and within its control, and that sales are improving in the current quarter.
“(Ross Stores’) efforts to sharpen its assortment and upgrade its stores are resonating with shoppers, at the possible expense of its rival (TJX),” eMarketer analyst Rachel Wolff said.
Consumers continue to gravitate toward retailers that can offer them both compelling value and engaging experiences, Wolff added.
(Reporting by Neil J Kanatt in Bengaluru and Danielle Kaye in New York; Editing by Leroy Leo)
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