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Ross Posts Q4 Beat But Coronavirus Specter Shadows 2020 Guidance

Ross Stores Inc. easily beat Wall Street’s fourth-quarter estimates, but the off-price company is taking a prudently cautious tone on outlook in light of uncertainty over virus-driven supply chain disruptions in China.

In a Nutshell: While the off-pricer outperformed Wall Street’s expectations, the retailer was cautious on outlook due to a number of factors beyond its control.

“We delivered strong sales and earnings growth for both the fourth quarter and fiscal year,” CEO Barbara Rentler said, though uncertainty in the macro-economic, political and retail landscapes are driving the company’s conservative view. The retailer’s full-year and first-quarter forecasts came in at the low end of Wall Street analysts’ projections.

“Our guidance also does not reflect the potential unknown impacts from the evolving coronavirus outbreak,” Rentler noted. “While we are closely monitoring the situation, there remains a high level of uncertainty over supply chain disruptions in China. In addition, it is unclear how a further possible spread of the coronavirus could negatively impact U.S. consumer demand.”

Net Sales: Net sales for the three months ended Feb. 1 rose 7.5 percent to $4.41 billion from $4.11 billion. The company said comparable store sales rose 4 percent on top of a 4 percent gain in the year-ago quarter.

Earnings: Net income rose 3.3 percent to $456.1 million, or $1.28 a diluted share, from $441.7 million, or $1.20, in the same year-ago quarter.

Wall Street was expecting diluted earnings per share at $1.25 on revenues of $4.36 billion.

For the year ending Jan. 30, 2021, the retailer expects same-store sales to grow 1 percent to 2 percent, with EPS expected at between $4.67 to $4.88. For the quarter ending May 2, Ross guided its comp-store forecast to up 1 percent to 2 percent and EPS at between $1.16 to $1.21.

CEO’s Take: “As we enter 2020, we continue to face our own strong long-term sales and earnings results plus ongoing uncertainty in the macro-economic, political and retail landscapes. Therefore, while we hope to do better, we believe it is prudent to maintain a somewhat cautious outlook when projecting our performance for the coming year,” Rentler said.