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Ross Stores Beat Earnings Estimate in Q2

Ross Stores, Inc., operator of Ross Dress for Less and dd’s Discounts stores, and the second largest off-price retail company after TJX Cos., reported earnings performance for the second fiscal quarter that exceeded expectations.

Sales increased 7 percent to $2.7 billion from $2.5 billion in the prior year second quarter. Comparable store sales grew 2 percent, less than the 3 percent growth in the second quarter of 2013. Total transactions on a comparable store basis were flat, but the size of the average transaction increased.

On the quarterly earnings conference call, management reported that juniors was the best performing category in the period, as it has been for the past several years, and that the Midwest and Middle Atlantic were the best performing regions. The home department is also showing signs of improvement and promises to be a strong category in the second half of the year.

Net income jumped 12 percent to $239.6 million, while earnings per share surged 16 percent to $1.14 from $0.98 in the prior year quarter.

Sales for the first six months of 2014 rose 6 percent to $5.4 billion on a comparable store sales gain of 2 percent. Net earnings for the six months ended August 2, 2014 were $483.5 million, up 8 percent from $447.7 million in the first half of 2013. Earnings per share in the half increased 12 percent to $2.30, up from $2.06 for the six months ended August 3, 2013. Both the quarter and the first six months include a one-time benefit to earnings, equivalent to approximately $0.02 per share, from the favorable resolution of an outstanding legal matter.

CEO Barbara Rentler said in a statement, “Our second quarter sales performed at the high-end of our expectations as today’s value-focused consumers continued to respond to our wide assortment of competitive name brand bargains.  Merchandise gross margin was above plan, which coupled with strong expense controls, enabled us to deliver quarterly earnings per share that were above the high end of our guidance.”

The company’s aggressive expansion plan is on schedule. A total of 95 new stores, 75 of which are Ross and 20 DD’s Discounts, will have been opened this year.