Ross Stores Inc. (ROST) reported better-than-expected sales and earnings for the second quarter and raised guidance for the remainder of the year, as price-conscious consumers increasingly look for deals at discount retailers.
Ross's earnings per share (EPS) climbed 19% year-over-year to $1.32 as sales grew almost 7% to $4.9 billion. The company boosted its expectations for the second half of 2023, with EPS expected to be in the range of $1.16-$1.21 and $1.58-$1.64 for the third and fourth quarters, respectively. Last year's third-quarter EPS was $1.00 and the company reported EPS of $1.31 in the final three months of 2022.1 Ross shares are up about 6% in intraday trading.
Barbara Rentler, Ross's CEO, attributed the company's outperformance last quarter to “easing inflationary pressures” and “improved value offerings” at more than 2,000 locations across the country. She noted that Ross customers, largely with low-to-moderate incomes, face “persistently higher costs on necessities,” despite a moderation in inflation in recent months.
The cost of essentials is increasing at a slower pace in 2023 compared with last year, but rising prices remain a major concern for consumers. PYMNTS' Consumer Inflation Sentiment Report for July found that 83% of individuals with at least a moderate degree of worry about the economy view rising prices as the most concerning development.
This sentiment has benefited off-price retailers like Ross and TJX Companies Inc. (TJX), the parent of T.J. Maxx, Marshalls, and HomeGoods. TJX also posted sharp gains in profit and revenue for the latest quarter, based on both strong customer traffic and premium inventory gains from higher-end retailers looking to offload excess in recent months.
Inflation-cautious consumers have begun to make fewer discretionary purchases at more expensive stores but continue to seek out deals on high-quality items at off-price retailers. International Council of Shopping Centers CEO Tom McGee said there is “price sensitivity on the part of consumers, but they continue to spend” when they can find discounts and promotions.
Originally published on Investopedia.com
