Q4 2019 Earnings Call
[music].
Good afternoon, and welcome to the Ross stores fourth quarter in fiscal year 2019 earnings release Conference call. The call will begin with prepared comments My management, followed by a question and answer session.
If you'd like to ask a question. During this time press Star then the number one on your telephone keypad, if he would like to withdraw your question press the pound key.
Before we get started on behalf of Ross stores I would like to note that the comments made on this call will contain forward looking statements regarding expectations about future growth and financial results, including sales and earnings forecast new store openings and other matters that are based on the Companys court for forecast of aspects of its future business. These forward looking statements are subject.
Risks uncertainties that could cause actual results to differ materially from historical performance or current expectations risk factors are included in today's press release and the company's fiscal 2018 form 10-K in fiscal 2019 form 10-Q's, and eat keys on file with the FCC.
Now I'd like to turn the call over to Barbara Rentler, Chief Executive Officer.
Good afternoon, joining me on our call today for Michael Hartshorn Group, President and Chief operating Officer drives more Tech group Senior Vice President and Chief Financial Officer, like Tiny South Vice President Investor Relations.
Well begin our call today with a review of our fourth quarter and like 19 performance.
I want to buy our outlook for 2020 afterwards, we'll be happy to respond to any questions you may have.
As noted in todays press and we delivered strong sales and earnings gains for both the fourth quarter fiscal year.
Our ongoing ability to offer compelling bargains to our customer enabled us to keep these results. Despite airberlin silencing multi year comparison, and they usually competitive holiday season.
Earnings per share for the 13 week I do separate first Twentytwenty grew 7% to $1.28 cents on net income of $456 million.
For the 2019 fiscal year earnings per share from 8% to $4 a 60 cents.
I have to $4.26 in 2018.
Net income was $1.7 billion up from 1.6 billion last year.
Now, let's now, let's turn to RBC himself is off.
With a 13 week ended February 1st 2020, total sales were $4.4 billion.
Comparable store sales for the period rose, 4% on top of a 4% gain and last year fourth quarter.
For the fiscal year sales increased 7% to $16 billion with same store sales up 3% on top of a 4% gain last year.
For the fourth quarter, the best performing major merchandise area with children well the midwife was the strongest region.
Deep discounts customers continue to respond positively to with merchandise assortment, leading to another quarter endear upper basking in both sales and operating profit.
As we ended 2019 total consolidated inventories were up 5% over the prior year with Packaway levels at 46% of the total similar to last year.
Average in certain number throughout the year over flat versus 2018.
As noted in today's release Airborne recently approved an increase and the quarterly cash dividend to 28, and a half cent per share up 12% over the prior year.
The increases to our shareholders pair for Twentytwenty reflects our ongoing confidence in the company's ability to generate significant amounts of past after funding our growth and the other capital needs of our business.
We have repurchased stock that's plan every year since 1993 raised our cash dividend annually since its inception 1994.
[laughter] record also reflects our continued commitment to enhancing stockholder value and returns.
Now it's out of smoke that provide further color on our 2019 resolved and details on our 2020 full year at first quarter dogs.
Thank you Barbara.
Barbara mentioned earlier earnings per share for the fourth quarter fiscal 2019 year were $1.28 cents and $4.60 respectively.
These results compare to the fourth quarter 2018 earnings per share $1.20 cents in $4.26 per year.
As a reminder, our results for both the 2019 and 28 came fourth quarters and fiscal years reflect onetime noncash gains of two cents and seven cents per share respectively, primarily related to the favorable resolution of tax matters.
Now I'll discuss further details on our fourth quarter results.
Our fourth quarter comparable store sales gain in the quarter was driven by a combination of higher traffic and an increasing the size of the average basket.
Fourth quarter operating margin was 13.3% compared to 13.2% last year.
Cost of goods sold increased 30 basis points in the quarter, mainly from higher distribution cost of 45 basis points due to unfavorable timing of packaway related expenses and higher wages.
Merchandise margin declined five basis points, reflecting some pressure from terror.
These higher expenses were partially offset by 10 basis points of lower buying call well rate and occupancy levered by five basis points.
S DNA for the quarter Levered by 40 basis points, primarily due to lower incentive bonus and lower other miscellaneous costs.
During the quarter, we repurchased 2.7 million shares of common stock for a total purchase price of $309 million for the full year, we repurchased 12.3 million shares for an aggregate price of $1.275 billion.
Now, let's discuss our outlook for 2020.
As noted in our press release, our guidance does not reflect the potential unknown impacts from the evolving Corona virus outbreak.
Well, we're closely monitoring the situation there remains a high level evidence of uncertainty over supply chain disruptions in China.
In addition, it is unclear how we further possible spread of the Corona bars could negatively impact the U.S. consumer demand.
For the 52 weeks ending January Thirtyth 2021, we are forecasting earnings per share to be $4.67 to $4, an 88 cents, which includes ongoing pressure from tariff.
The operating statement assumptions for fiscal Twentytwenty include default.
Total sales are projected to grow 4% to 5%.
Comparable store sales are expected to increase 1% to 2% on top of multiple years of strong gains.
We plan to add about 100 stores this year, consisting of approximately 75, Ross and 25 DDS discounts when patients.
As usual these numbers do not reflect our plans to close or relocate about 10 older stores.
We projected operating margin for 2020 will be in the range of 13.0, a 13.2% compared to 13.4% in 2019.
The forecasted decline reflects our plans for merchandise gross margin pressure from ongoing tariff and some de leveraging other expenses if same store sales only increased 1% to 2%.
Net interest income was estimated to be about $8 million.
Our tax rate is projected to be approximately 24%.
We expect average diluted shares outstanding to be about 351 million.
Capital expenditures for 2020 are projected to be approximately $730 million, which includes investments for our next distribution center.
And depreciation and amortization expense inclusive of stock based amortization is forecasted to be about $490 million.
Let's now move to our first quarter guidance.
We are forecasting comparable store sales to be up 1% to 2%.
Earnings per share are projected to be one dollar and 16 cents to $1.21 cents versus $1.15 cents for the first quarter ended may 4th 2019.
Other assumptions that support our first quarter guidance include the following.
Total sales or plan to increase 4% to 5%.
We expect to open 21, Roth and seven DDS discounts locations during the period.
First quarter operating margin is projected to be 13.6% to 13.8% versus last year's 14.1%.
This were the forecast reflects our expectation for some pressure on merchandise gross margin from the previously mentioned there along with de leveraging on occupancy and other expenses on a comparable sales increase of 1% to 2%.
Net interest income is estimated to be about $2 million.
Our tax rate is expected to be approximately 23%.
And finally weighted average diluted shares outstanding are projected to be around 355 million.
Now I'll turn the call back to Barber for closing comments.
Thank you Travis.
Again, we delivered solid sales and earnings gains for both the fourth quarter fiscal year.
Looking ahead, while we hope to do better we continue to take a prudent approach to forecasting our business for 2020.
Although we remain favorably positioned as a box price me tell we're facing our rone strong long term sales and earnings yourself, a very competitive retail landscape.
No impact from the Corona outbreak and an uncertain macroeconomic and political environment.
Longer term, though we remain confident in our ability to achieve ongoing profitable market share gain I consistently offering customers outstanding value rather stores.
As long as we remain focused on the capital execution of our strategy. We believe you can continue to lists of liver solid sales and earnings from overtime.
It's probably we'd like to open up the call and respond to any questions you might have.
[noise] at this time I would like to remind everyone in order to ask your question Press Star then the number one the on your telephone keypad in order to allow everyone time for questions. We ask that you. Please limit yourselves to one question each.
Your first question comes from Matthew Boss from JP Morgan.
Great Thanks, and congrats on a nice quarter.
Thanks, I guess I guess, maybe larger picture so other than same store sales at 1% to 2% and the associated revenue flow through are there any material differences in your 2020 bottom line guidance versus historically three to four comps equating to double digit earnings growth.
Matt its Michael Hartshorn, as we have over a number of years and as we said in his remarks, there's a number of reasons the run the business with a cautious I, including our own sales and earnings comparisons.
The competitive retail landscape and certainly the uncertain macro and political environment. The bottom line, though is if we can put ourselves in a position to chase the business, we heighten our ability to opt in to optimize both sales and earnings results over the long term. Our long term algorithm has not changed which is a combination of comp.
Store growth, a new store growth or EBIT margin.
Expansion at the high end of a three to four and our share buyback program did she is a double digit Uh huh.
Double digit EPS goes.
Perfect.
The only other thing I'd call. It is just as a reminder, we did have a two cents per share.
And if it in the fourth quarter of 2019 that we're lapping.
It was a onetime grade.
And then maybe Barbara just a follow up how would you describe to you the larger picture product availability in the marketplace today, maybe versus a year ago and have you seen any changes as it relates to current supply chain disruption so far to date related to a 12 of the larger picture.
Yeah, the changes that are happening.
Sure.
Versus a year ago. They still currently you know a lot of supplying the market assay was last year as it relates to the whole China supply chain. You know, there's still remains a high level of uncertainty with the disruption from China. So it's really kind of hard to predict where that is going to go.
But at this particular moment in time, there have been you're happy with it. So you know whether later on this an influx of goods or not I, just think it's too hard to predict at this point in time.
Thanks for the color good luck.
Your next question comes from Lorraine Hutchinson from Bank of America.
[laughter].
Thanks, Good afternoon.
Just wanted to ask a question about the tariff pressure you're seeing.
Pressure coming all from direct imports are you taking on some pricing pressure from some of your vendors and.
Are there any plans to try to raise price to offset these pressures.
Sure Lorraine on the on the tariffs the largest impact is foreign goods that we are directly import for us. It that's areas like home the home area has the 25% tariff how they played out last year was.
Very similar to how we guided in the way we guided into 2020 is mainly the front half of the year as we lap the 25% tariff.
For tranche, three and the seven and have persons tariff on a tranche for a.
For us on pricing our focus is to maintain a value proposition.
Through a pricing umbrella relative to full price department stores, and specialty stores and to be honest, we have not seen a material change in pricing.
Thank you.
Your next question comes from Mark Altschwager with Baird.
Good afternoon. Thanks for taking my question I was hoping you could dig in.
A little bit more on the merchandise margin performance in the fourth quarter, how that compared to your internal plans and expectations and then in in terms of you have your margin outlook for 2020, I specifically on the merge margin front I know you just gave us some added color on how the tariffs are going to play out but are there other factors embedded in that outlook I know you'd mentioned the thinking.
Repetitive environment, just curious how you're looking at that relative to what you've been experiencing in recent quarters. Thank you.
I'll answer in terms of our outlook for 2020, a with the terrorists. Our guidance includes a slight decline in merchandise margins for the year, but again, that's all driven by the tariff impact mainly in the front half the yet in terms of Q4 for merchandise margins it was down a little bit.
A year over year, and again that did reflect some pressure from tariffs, but it was a little bit there than we expected.
Thank you.
Your next question comes from Paul Trussell from Deutsche Bank.
Oh good afternoon. Thanks for taking my questions I'm I know you mentioned that Tom I believe children's was the best performing category. Just curious if you can give a little bit more color on the rest of the areas in particular.
Your ladies business and how you feel.
About the trajectory of that business today going into the New York.
Our overall performance was pretty broad base I know, we we called out children's but the over performance, it's broad based across all the areas.
Lady performed above plan.
We feel pretty good about apart offering and you know we believe that we have the right initiatives underway to drive sales growth and Lady.
In Q1 and for the year. So we feel like we're moving forward in there.
[noise]. Thank if youre not your next question comes from Kate Fitzsimmons from RBC capital markets.
Yes, hi, Thank you very much for taking my question I I guess youre looking to 2021, but thinking about some of these non merchandise items in Cogs between a distribution in freight if it can you give us any guidance in terms, how we should think about that you know distribution. It seems like it was that a drag here again in for Q after being in.
<unk> a drag in third quarter. So you know how should we look at that looking out to 2020 between the first half in the back half and again I'm free you know had been or pressure point more recently, but teams it turned to leverage item in the fourth quarter. So just how should we think about that into 2020. Thank you.
Yeah sure in terms of a D.C. costs again as I mentioned, the higher D.C. costs in the quarter were driven primarily by unfavorable packaway related timing, but to a lesser extent as I mentioned by ongoing wage pressure in terms of the outlook for that again, we have built into our forecast or into our guidance some continuing pressure in the DC.
Permanently from ongoing statutory wage increases.
And again as I said, that's built into the guidance in terms of freight you know overall joined here freight played out kind of as we expected it would during the year I think at the beginning we talked about that we'd expect higher cost at the start of the year those costs would abate towards the back half of the years, which is how it played out to a slight tailwind.
In terms of freight as a reminder, sort of the majority of our shipments are completed under contract.
Not a regularly exposed to the spot market are those contracts typically renewed towards the middle of the years. So we feel pretty good about the outlook and believe it should be relatively stable.
Perspective at least for the first part here.
Your next question comes from Kimberly Greenberger from Morgan Stanley.
Great. Thank you a nice way to finish the year My question Barbara for you, reflecting back on the first quarter last year with the 2% comp after the quarter I know that they did I think you were hoping to do better at least that's what you had articulated at the time and there were some execution issue.
Choose that you were addressing I'm wondering looking out to the first quarter 2020 guidance for 1% to 2% comp I'm. It doesn't look like contemplated in that estimate is any expectation of recovery relative to where a softer comp comparison in Q1, but I.
I'm wondering if you can just reflect on what happened last year. It seemed like the issues. We're certainly corrected throughout the year and do you think there's an opportunity perhaps in Q1 to do better. Thanks.
So you're correct last year in Q1 to comp our ladies business was very difficult and actually quite frankly Q1 for us over the last two three years has been a difficult it's difficult quarter for US you know as you know ladies.
Is a big piece of the business you had more weather issues you have tactics that there's a lot of noise in the first quarter. So we feel it's prudent to plan first quarter with one or 2% and chase our way back into the business. The difference for a year ago versus today is that to your point as the year progress that like he.
Slightly improved each quarter as we went along and you know again in the fourth quarter the business performed slightly above our expectations and so.
As we go forward.
You know, leading Lady perhaps will not be that dragged that was on the first quarter, but in the first quarter last year that was that was really on me driver.
So to answer your question Kimberly [laughter].
Yes, [laughter]. So would you say, you're you're sort of planning Q1 cautiously just because there have been so many moving pieces in Q1 for the last few years, but it just has it all necessarily panned out to be a more robust quarter, but.
Stepping back do you think there might be an opportunity or I guess I you sort of said it earlier. Your goal is to beat the to performance that you've laid out and you think it's best to sort of plan conservatively Chase is that the best way to think about it.
Exactly that you really you really want you know it's been difficult two or three years, we want to put our position itself in a position to chase or way back keeps the goods, turning and take us into Q2 and a healthy position.
Kimberly I I'd okay.
Across retail if you look at sequential performance in Q1 versus the rest of the year performance has been down from a comp perspective, and it's it's unclear whether that's weather driven or as Byron mentioned tax refund timing, but there are a number of factors that retail has been soft in Q1, including us.
Easily so it makes the most sense for us to be cautious and chase I went back into the business inside sales outperform.
Very clear and helpful. Thanks, Michael Thanks Barbara.
Your next question comes from Alex 12 is from Goldman Sachs.
Hi, there this is brokerage on for Alex. Thank so much for taking our question.
We just had a quick question regarding some of the category comments that you've shared earlier gifting was a key part of the holiday strategy. This year can you share how that performed during the quarter and then can you share a little bit of commentary regarding the performance of apparel versus home.
Sure I'm in terms of gifting, we were pleased with our gifting performance throughout the store. It was one of our initiatives for the fourth quarter and the customer definitely responded to two.
So we feel very good about gifting and as we go forward in 2020, we would continue to expand on honor gifting assortment.
And in terms of your question on apparel versus non apparel that they perform relatively similarly or in the quarter.
Your next question comes from Adrian <unk> from Barclays.
Good afternoon, and let me add my congratulations first child holiday I guess my first question is Barbara if you think back to the Sars and I know, it's completely different time trade sourcing et cetera, do you recall any you know any impact on inventory that might be if something to think.
About as we go through the current a virus.
And then Michael can you talk about your average hourly rate assumptions on wage for fiscal 20. Thank you very much.
Oh, well in terms of Sars, which was a lot of years ago, not even sure job I happened to [laughter], Yeah look I think the way to think about inventory in managing inventory, whether it's you know.
18 years ago Board today, it's the same thing when when there's a lot of volatility in the outside World do you want to manage your plan and you want to manage your inventory as tightly as possible you'd want to keep yourself flexible and nimble and have liquidity and I think you know, although I might not have lived through the stores experienced myself.
At that point in time, it's the same metrics that that you would in an off price model that you would use to manage and control your business.
Sure as you're kind of going through you know.
The issue with him.
In parents, though.
In terms of wages.
As as you probably know we raised the minimum wage it in 2018 to $11 an hour. There are many stage, some which were heavily concentrated whether it was the D C or stores like California, California is that a $13 average minimum wage will be marching to the 15.
Over the next couple of years, but there's other municipalities that are built into our guidance in term of in terms of market rates. You know, we continue to make adjustments to compete for talent and in many of our markets. So what we have built it into our guidance is market based adjustments, where we know will lead.
The increase plus the statutory increases yeah, that's what that's what's built into the existing guy.
Thank you.
That's a lot.
Your next question comes from Michael Binetti from Credit Suisse.
Hey, guys Congrats on nice holiday, let me.
To start with just a quick modeling question I think in the and the revenue build at this time last year you started guiding year same wants to comps translating to five to six on revenue growth if I'm not mistaken. This year translates to four to five did you say there is there anything to call out on the on the Noncomp component there that we should know about this causes the difference.
No I don't think there's anything different obviously, we're opening about 100 stores, which is similar to last year. So you're you're on a larger base I think that's the only difference year over year.
Okay.
And then on.
I guess on.
Mike We offered comments if you can get to three to four comp you still have line of sight to double digit type bps growth algorithm that Weve. You know you spoken for many years, but you know now where pass things like the self inflicted 11 dollar wage inflation and seems like we're back to the kind of you no longer range, we see it coming tied minimum wage.
Increases.
Pad.
Before but you're still speaking to wage inflation this year or there are there other good guys that we add back to the to the way we think about your margins on a multiyear basis that should offset you know if you're gonna have things like wage inflation higher on a go forward basis than you had when you were you know when you started giving that kind of an algorithm in the past.
Sure well I start with 2019, we ended the year when it with a three caught comp and if you take out the onetime tax adjustments were very close to the double digit growth and would have been double digits with a four comps of in line with with or algorithm as we think about it going.
Forward certainly we've guided the year this year at one to two if we see you know, we'll see what what flow through happens on that but it's up to us to figure out how to be more efficient in the business as we see those wages come through a lot of the wage increases have been statutory increases.
That we have some foresight on and we'll work to.
Fine cost throughout the business to be more efficient or as we go forward.
Okay I just ask one last one at a higher level seems seems to me kind of meaningful you know products.
Coming out of China delays, you know given how fast you were inventories turn it just seems like.
Off price could be in a position where availability of inventory in the short term could be impacted it didn't sound like you said anything today that you're seeing that today, how much visibility do you think you have to that if there is an issue and then I guess just theoretically.
Why would off price.
Well positioned if you know given what we know about how fast the inventory turns are and that there you know there were factories close for a good amount of time here recently.
First let me say that you know we're seeing a very active marketplace. You know there's lot of competition in the market. There are absolutely who lives in the market and there's a lot of competition for those goods and you're right. You know, it's early and it's unclear if you know.
What the impact could be on the supply thing because I'm sure you know, it's hard to get clarity around what that looks like.
Well, it's sometimes doesn't have people are bringing good and we also have packaway that we will use in this timeframe to to support our sales trends.
And you know at some point.
You're supposed to be down at some point.
It will catch up and so our strategy to keep ourselves you know flexible and nimble and and into position to take advantage of good.
When they come in.
And so that's kind of how we have ourselves set up but you had spent a lot of activity in the marketplace, Yeah fine fine good.
Immediately.
Thanks, a lot that's like us.
At this time I'd like to remind everyone in order to allow everyone time for questions. We ask that you. Please limit yourselves to one question. Each your next question comes from Ike Boruchow from Wells Fargo.
Hey, let me out my congrats on the other nice quarter. Good ended the year.
Just to dig into the gross margin a little bit I know this is a bit nitpicky, but you called out tariff pressure to impact your Q3 as well as your Q4 I believe your merch margin was was up 20 basis points in Q3 and down a little in Q4 is is that just a function of more tariff inventory flowing through or or is there something else on the merchandise.
Second line in the fourth quarter relative to the third quarter that it was worth mill, that's worth a worth calling out.
Yeah, I think as the year one on the impact from Terror got larger right. So.
Secular the tariffs that were put into place.
In September.
I had a larger impact and the tariffs the ones like even earlier in the year as the year went on those started to actually horizon flow through so that's why the impact Lou.
As we went through the year.
And so Travis does that mean, we should assume it until we lap. This a this fourth quarter that we should assume potential slightly negative merch margins for the year. That's is that what's embedded in your guidance.
Our guidance is merch margins down a bit for next year and is more heavily weighted towards the front half of your than the back half of here.
I I give you think about the timing of when the increases went in so trying to three went in in the June timeframe from 15 to 25 and tranche for went in place in September so even though they went in place they start hitting a little bit later. So those are the two kind of key points that will will anniversary.
As we move into 2020.
Your next question comes from Marni Shapiro from retail tracker.
Hey, guys congratulations on a great into the air [laughter], We just talk a little bit about real estate you guys have been pretty consistent opening up the same oh close the same number stores every year.
Can you just talk about how many stores you renovate any given year will you close about the same tenish stores. This year as you usually do and have there been any changes to the size of the stores or the kind of leases that you're getting given how many retailers have exited the space, particularly in in the Standalone play.
He says.
Learning on the on the real estate front nothing has changed dramatically for US we expect open about a 100 stores.
The closures or in a one to two handfuls of stores that will consider closing every year, but our view on a real estate market has hasn't changed there's there's good availability and we'll look at every site that's.
Fits our specific a specific requirements, obviously with store closures that gives us a sites plenty of sites to choose from in terms of the overall real estate market, we're not seeing a the cost front has been fairly stable.
But our plan 100 stores a year, we're very comfortable with from both a store operations are opening stores and also getting the right sites for us.
And on your question of existing terms, we do touch or refresh the number of stores every year.
For our capital spending for 2020, we'll probably spend about 20% of that total on existing stores between refreshes remodels and things like that so we.
We do works is to keep the stores or current for customers.
Your next question comes from Lora Champagne from the capital.
Thanks for taking my question is you discussed the risks and try to plan for the risks around Corona virus or you're more worried about a slow down in consumer traffic or are you concerned about supply chain issues that you might not be able to offset with pack away and.
To that end have you seen any shift in traffic trends over the last week or two is the headlines have gotten worse.
Yeah, I Oh, I think there's there's a couple of different aspects. Obviously, we're concerned about or associates safety were concerned about supply we're concerned about what.
Would happen with consumer demand if it's spread further throughout the U.S. I think it's too early to Oh wait one or the other other than we're we're obviously I'm watching it very closely and making decisions daily based on how it's evolving.
Your next question comes from Bob Triple from Guggenheim.
Hi, I'm just a couple quick questions on them on the quarterly cadence was there any very racial variation in the monthly November December January that you would call out and just wondering you on a geographic base you caught the mid west, but you know if you could maybe comment on California, or any other big markets and how they performed that would be great. Thanks.
[music].
Yeah sure generally we don't provide specific trends within a quarter, but I would say that are strongest performance was during the December holiday selling period.
In terms of geographic performance as you mentioned that the Midwest was our strongest region other strong regions, where the mid Atlantic in the southeast.
Texas also performed one of the larger were just performed a bit above the chain, California was was roughly in line with the chain.
Sure next question comes from Jamie Merryman from Bernstein.
Thanks, very much I'm just to pick up on your comments earlier by bread Dallas, you know your ability to use packaway if it's fun.
Supply chains do you become more tight can you talk philosophically about how you would think about that now and sort of what level of packaway you'd be comfortable with.
And then just given the sort of range of categories and brands I guess would you expect that you could share project cry different category to the extent that you know one area becomes more constrained from a supply chain perspective. Thanks.
Oh sure.
Let's start with suffer from Bostco back the top in terms of shifting money through category. If we had the appropriate inventory and we could deliver the appropriate assortment and we needed to shift from one businesses together, we absolutely correct because that that's what are what are my was about <unk>.
Packaway level, our packaway level I think that's a T. Michael was about 50% right, that's about 50% and certainly happy ability to increase that increase our capacity and rpcs, if we needed to.
So packaway based on would really be driven on the merchants coming back and saying what the deals or what the product is and is it really worthy of pack and get away and is a good value because the the danger and all this is that you know well Martin across markets as well by good yeah for sake of buying goods. So you really have to have thoughts around that.
And what that looks like.
In terms of you know categories and brands and things that that you know going Packaway every much depends on what we see and the value you can offer to the customer. So packaway is not consistent through every single business in the company is based off of opportunities with Americans back in the market They think cap rate.
Value that the customer will appreciate and you know satisfy her name.
Your next question comes from John Kernan from Cowen.
Hey, good afternoon, Thanks for taking my question.
Just on the Packaway point, there wasn't a fairly sizable impact on the gross margin I think on timing of Packaway expenses is there anything for us to think about that in 2020.
And anything you on that it in the first quarter in terms of how that would flow through now that packaways pick back up a year over year end sequentially as a percentage of the inventory.
For 2021st of all Packaway is one of the hardest things for us to predict in the business is really based on market dynamics, but typically for the full year, there's really a nominal impact <unk>, where we see the timing differences are usually quarter to quarter timing differences and not for the full year.
Your next question comes from Mike Baker from Nomura.
Hi, Thanks, I just wanted to clarify or did you say a at one point were talk about somebody issues that are impacting overall retail and I thought you said, they're never factors that has been soft in retail, including you guys. So are you, saying that you're one quarter. Your first quarter has been softer than you would otherwise expect.
Because of things like tax refunds and the weather.
Hi, Mike No I, what I was really referring to is if you look at comp growth throughout retail in the first quarter versus the rest of the year.
The first quarter has been softer than the rest of the year across retail and that's been true year over year for a number of years.
So that's what we're referring to.
Your next question comes from Simeon Siegel from BMO capital.
Thanks, Good afternoon.
Sorry, if I missed it but did you say what you're expecting for expense dollar growth next year and then can you just remind us the difference in sales per store Ross for Cds. Thanks.
Sure on a sales per store, we wouldn't we wouldn't breakout D separately, we're in a a $9 million range per store Chris.
And can you clarify your first question.
One moment, please if I missed it.
Hello.
Yes.
I didn't I didn't I didn't I was that for clarification first question sorry, the just yesterday the expected any dollar growth for next year, if you're given that.
We haven't provided the specifics.
In terms of that you know below operating margin.
Great. Thanks Best of luck for the year Sir.
[music].
Your next question comes from Dana Telsey from Telsey Advisory group.
Good afternoon, everyone. As you think about the buckets the gross margin in the enhancements that you're looking to make in different categories like women's apparel. We do you see the opportunity for merchandise margin going forward and with that what do you what do you any updates on shrink. Thank you.
On the on the shrink from Dana No no real updates, we take our physical inventory in the third quarter and what we saw last year was a continued improvement over many years of improvement. So at this point, we wouldn't provide any other updates.
Versus what we saw in September last year.
And in terms of merge margin as we've said for.
Oh, well know we continue to believe that the biggest opportunity for further improvements in merchandise margins above planned sale.
And that was our last question at this time I will turn the call back over to Barbara Rentler for closing remarks.
Thank you for joining us today for your interest of Ross stores have a great day.
Ladies and gentlemen, this concludes today's conference call. Thank you for participating you may now disconnect.
[music].