Q4 2024 Ross Stores Inc Earnings Call
Speaker Change: Good afternoon and welcome to the Ross Stores fourth quarter and fiscal 2024 earnings release conference call. The call will be given to paired comments by management followed by a question and answer session. If anyone should require operator assistance, please press star zero on your telephone keypad.
Speaker Change: 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.
Speaker Change: Newstore openings and other matters that are based on the company's current forecast of aspects of its teacher business.
Speaker Change: These forward-looking statements are subject to risks and uncertainties that can cause actual results to differ materially from historical performance or current expectations
Speaker Change: Risk factors are included in today's press release, and the company's Fiscal 2023 warm 10K and Fiscal 2024, Martin 10Qs and 8Ks on file with the SEC.
Speaker Change: And now I'd like to turn this call over to Connie Kow, Group Vice President of Investor Relations.
Speaker Change: Thank you, Connie, and good afternoon. Also joining me on our call today are Michael Hartshorn, Group President and Chief Operating Officer.
and Adam Orvos, executive vice president and chief financial officer.
Speaker Change: I'm grateful she will continue to serve as a strategic advisor and I look forward to building on the foundation that she has created in the company's long history of success.
Now let's turn to the fourth quarter results.
Speaker Change: As noted in today's press release, fourth quarter sales and earnings results were at the high end of our expectations.
Speaker Change: Sales were driven by our customers' positive responses to the improved assortments of quality branded bargains, coupled with strong execution by the store and supply chain teams during the critical holiday selling season.
Speaker Change: Earnings per share for the 13 weeks ended February 1st, 2025, were $1.79, compared with $1.82 per share for the 14 weeks ended February 3rd, 2024.
Speaker Change: Net income for the period was $587 million versus $610 million last year [inaudible]
Speaker Change: For the 2024 fiscal year, earnings per share were $6.32, up from $5.56 for the 53 weeks and in February , 3rd, 2024.
Speaker Change: Net income for fiscal 2024 rose to $2.1 billion, compared to $1.9 billion last year.
Speaker Change: Total sales for the year increased to $21.1 billion, up from $20.4 billion in the prior year period.
Speaker Change: Comparable Store Sales for the 52 Weeks and February 1st, 2025, Group 3% versus a 5% gain in fiscal 2023.
Speaker Change: Both the fourth quarter and full-year results include a one-time benefit to earnings equivalent to approximately 14 cents per share related to the sale of a pack-away facility.
Speaker Change: Additionally, as a reminder, prior year sales and earnings results for the 2023-4th quarter and fiscal year included approximately 308 million in sales and a 20 cent earnings per share benefit from the 50 third week.
Speaker Change: Fourth-quarter operating margin of 12.4% was flat to last year, as the gain from the sale of the Pacoay facility was offset by planned declines in merchandise margin and unfavorable timing of the Pacoay-related cost.
Speaker Change: The style of the facility contributed about 105 basis points to this year's fourth quarter operating margin, while the 53rd week benefited the prior year's period by about 80 basis points.
Speaker Change: Let's turn now to additional details on our 4th quarter results.
Speaker Change: For the holiday-selling season, cosmetic and children were the best performing merchandise areas, while geographically the Pacific Northwest and Texas were the strongest regions.
Speaker Change: Similar to the prior quarter, Dede's discounts posted healthy sales gains as the chain's value and fashion offerings resonated with shoppers.
Speaker Change: At the end of the year, consolidated inventories were up 12% mainly due to higher plan to pack away levels. On an average store basis, inventories were up 2%.
Regarding our Store expansion program.
Speaker Change: We added 75 new, raw stress for Latt Stores and 14 Dede's discounts during the year.
Speaker Change: Inclusive of 12 closures, we ended the year with 2,186 stores, including 1,831 Ross Dress for Last, and 355 BD Discounts locations.
Speaker Change: As noted in today's release, during the recently completed fourth quarter, 1.7 million shares were repurchased for a total price of $262 million.
Speaker Change: or Fiscal 2024, a total of 7.3 million shares of common stock, where we purchase for an aggregate, purchase price of 1.05 billion.
Speaker Change: These purchases were made pursuant to the two-year $2.1 billion program announced in March 2024. We expect to complete the $1.05 billion remaining under this authorization in fiscal 2025.
Speaker Change: Our board also recently approved a 10% increase in our quarterly cash dividend to 40.5 cents per share to be payable on March 31st, 2025 to stockholders of record as of March 18th, 2025.
Speaker Change: We ended the year with $4.7 billion of cash after funding the growth and capital needs of our business. As a result, our ongoing share-by-back and increased dividend programs reflect our longstanding commitment to return excess cash to our shareholders.
Adam: Now Adam will provide further details on our fourth quarter results and additional color on our outlook for fiscal 2025.
Adam: Thank you Jim. As previously mentioned, comparable store sales rose 3% for the quarter, generated by both higher traffic and average size of the basket.
Adam: Fourth quarter operating margin of 12.4% was flat to last year and included a 105 basis point benefit from the facility sale.
Adam: Cost of goods sold, delivered by 80 basis points in the quarter. Merchandise margin declined by 85 basis points, as planned, due to the increased mix of quality branded assortments.
Adam: Hockeyman C. D. Leverage by 45 basis points as we anniversary the extra week last year.
Adam: Domestic freight leveraged by 30 basis points while buying improved by 20 basis points mainly due to lower incentives.
Adam: S-DNA for the period, leveraged by 80 basis points, primarily due to the facility sale.
Adam: Now let's discuss our outlook for fiscal 2025, starting with the first quarter.
Adam: While we were pleased with our 2024 results, including the holiday selling period, sales trends began softening later in January and in December .
Adam: We believe that the combination of unseasonable weather and heightened volatility in the macroeconomic and geopolitical environment has negatively impacted customer traffic.
Adam: As a result, we expect comparable store sales for the 13 weeks ending May 3rd, 2025 to be down 3% to flat in earnings per share of $1.33 to $1.47 versus $1.46 last year.
Adam: The operating statement assumptions that support our first quarter guides include the following.
Adam: Total sales are planned to be down 1% to up 3% versus last year's first quarter.
Adam: It's same-store sales perform in line with our plan, operating margin for the first quarter is expected to be in the range of 11.4 to 12.1% compared to 12.2% last year.
Adam: The expected decrease mainly reflects our forecast for sales delivery and unfavorable timing of pack-away related costs. Merchandise margin is also expected to be down slightly in the first quarter.
Adam: We plan to add 19 new stores consisting of 16 Ross and 3DD's discounts during the period.
Adam: Net interest income is estimated to be $35 million. Our tax rate is expected to be approximately 24 to 25% and weighted average diluted shares outstanding are forecast to be about $328 million.
For more information, visit www.FEMA.gov
Turning to our Full Year Guidance Assumptions for 2025.
Adam: Based on these assumptions, fiscal 2025 earnings per share are projected to be $5.95 to $6.55 compared to $6.32 for fiscal 2024.
Adam: As previously mentioned, last year's results included a per share benefit of 14 cents from the facility sale.
Adam: Total sales are planned to be up 1 to up 5% for the year.
Adam: If same-store sales perform in line with our plan, operating margin for the full year is expected to be in the range of 11.5 to 12.2% compared to 12.2% in 2024, which benefited by 30 basis points from the facility sales.
Adam: Excluding this one-time gain, our operating margin forecast reflects sales delivery and higher distribution costs as well as lower incentive compensation expenses as we anniversary higher incentive costs in 2024.
Adam: In addition, we expect merchandise margin to be relatively neutral for fiscal 2025.
Adam: For 2025, we expect to open approximately 90 new locations, comprised of about 80 Ross and 10 D-D's.
Adam: These openings do not include our plans to close or relocate about 10 to 15 older stores.
Adam: Net Interest Income is estimated to be $127 million, depreciation and amortization expense, inclusive of stock-based amortization, are forecasted to be about $690 million for the year.
Adam: The tax rate is projected to be about 24 to 25 percent.
Adam: and weighted average diluted chairs outstanding are expected to be around 325 million.
Jim: Now I'll turn the call back to Jim for closing comments.
Thank you, Adam.
Jim: As Adam mentioned, we have seen softer business as we transitioned out of the fourth quarter and into the first quarter [inaudible]
Jim: While there are always opportunities for us to improve our execution, we believe the softness we are currently seeing is primarily due to macro pressures impacting consumer confidence, resulting in a pullback in discretionary spending.
Jim: Turning to the broader business as I reflect on my observations over the past few months, I believe that the brand and merchandising strategies that we have in place for both Ross and D.V.'s are the right ones, and I do not foresee making significant changes to those strategies in the near future.
Jim: In addition, we have a flexible business model that positions us well to navigate through the current uncertainty and we will continue to focus on the strong execution of our key initiatives.
For more information, visit www.FEMA.gov
Jim: In closing, I would like to thank the more than 100,000 associates throughout the company for their hard work and dedication and for delivering such solid fourth quarter and annual results in 2024.
Jim: At this point, we would like to open the call and respond to any questions that you may have.
Jim: Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate that your line is in the queue. You may press star two to remove yourself from the queue.
Jim: For Participant Easing Speaker Equipment, it may be necessary to pick up your handset before pressing the star keys
Jim: We ask that you please limit yourself to one question and one follow up. Thank you.
One moment please, will we pull up for questions? Yes, we will.
Speaker Change: And the first question comes from the line of Matthew Boss with JP Morgan. Please proceed with your question.
Great thanks and welcome back, Jim.
Thank you [inaudible]
So, um...
Speaker Change: Relative to Opportunity, if you see to amplify market share in the near to intermediate term and just on that near term gym and I know how much you like to get into the detail. Now, let's go.
Speaker Change: Could you speak to trends maybe that you've seen in parts of the country with less weather impact or initiatives in place to drive comp improvement as the year progresses? [inaudible]
Sure, on the first piece, [inaudible]
Speaker Change: for Ross, and a sort of analogous customer strategy for DDs. [inaudible]
Speaker Change: and while I've only had about three months to sort of evaluate it, they've all seen extremely sound and very much worth continuing to pursue.
Speaker Change: So my focus early on really is to learn the off-price model, get immersed in the business.
Speaker Change: and as I think about ongoing changes, they'll be more sort of evolutionary in nature and nothing sort of abrupt or hard left turn or hard right turn.
For more information, visit www.FEMA.gov
Speaker Change: That said, when I evaluate the company, I think from merchandising standpoint, it's, you know, second to none, world class merchandising team.
Speaker Change: The Stores organization is extremely efficient and operationally very sound. We probably have some opportunity to enhance our store environment and shopping experience.
Speaker Change: Put the brain on a pedestal a bit more and to amplify our messaging in the marketplace at some degree.
Speaker Change: In terms of the more color commentary across the country and different parts of the business.
Speaker Change: For the quarter, we had just really nice broad-based strength both geographically and across merchandise categories. Some categories were stand out winners, called out children's and cosmetics.
Speaker Change: but virtually all businesses and nearly all geographies were also pretty strong. [inaudible]
Speaker Change: I think that probably covers both of your questions, Matt, but I miss anything.
Speaker Change: Just maybe on the quarter to date, anything in areas of the country where the weather has been more conducive and just to give maybe some confidence on what you're seeing that's more transitory relative to potentially anything that's changed.
Speaker Change: Yeah, certainly the weather impacted areas saw more of a decline in business.
Speaker Change: Part of that, we believe, is consumer confidence. Part of that, we believe, is whether induced, both of which we think will be sort of a transitory shock to this system.
Speaker Change: That created a bit of a pause for the consumer and we have seen them already start to re-engage so as you can imagine we embedded in our guidance is the business that's behind us and what we expect to see for the balance of the quarter.
Great color. Best of luck, welcome back. Thank you.
Speaker Change: And the next question comes from the line of Paul Lejuez with City Group. Please proceed with your question.
Terry, thanks, James, welcome. Welcome.
Speaker Change: Can you talk a little bit about the deeper into state performance or regional performance in 4Q and in which region the states?
Speaker Change: Drew the slowdown that you saw thus far in February , and also a period that there's any evidence that new immigration policy might be hurting sales in some way.
Speaker Change: Paul, it's Michael. In the quarter, as we said in the commentary, the Pacific Northwest and Texas were the top performing regions for other larger markets, California and Florida were relatively in line with the chain.
Speaker Change: From an ethnic perspective, as you know, we overindex to the Hispanic customer versus the general population.
Speaker Change: We'll have to wait and see how the macroeconomic environment, and as you say, the immigration policy impacts this important customer for us, longer term.
Speaker Change: As Jim said, we believe the initial shock value of the recent policy actions could dissipate over time, why we continue to provide great values and support the communities we serve.
Speaker Change: And then just one follow-up, as you think about the comp guidance for up 25, how are you thinking about traffic versus transactions and maybe just again, back to the slowdown, is that a transaction or average ticket sort of. [inaudible]
Slowdown.
Speaker Change: We don't plan the business on traffic or transactions. What's happened over the past couple years is the comp has been driven by both. What we've seen recently is more traffic related, which points to some of the external volatility that everyone is seeing. [inaudible]
Thank you, good luck.
Thanks, Paul.
Speaker Change: And the next question comes from the line of Mark Altschwager with Baird, please proceed with your question.
Good afternoon. Thanks for taking my question.
Mark Altschlager: First, with respect to the guide, I believe you said merchandise margins are expected to be relatively neutral for the year. What's the takeaway there with respect to the merchandising strategy and striking the right balance of value and the assortment? Is that still an area of investment and headwind offset by other factors? Yes, that's right.
Mark Altschlager: And then separately, just any comments on changes you're seeing in the buying environment post-holiday wondering if this consumer choppiness to start the year is yielding some better buying opportunities. Thank you.
Mark Altschlager: Mark, I'm on the first piece that this is Adam. I'm merchandise margin, eat, I think we voiced.
Mark Altschlager: Throughout 2024, that was kind of our investment year, right where we kind of wanted to change the penetration of our branded goods. And we feel like we feel like we accomplished that by year end.
Mark Altschlager: I think 2025 is going to be about learning, listening to what the customer is telling us, and we'll certainly react accordingly, but that's why we feel like merchandise margins this year, we're giving that neutral guide, and that's what's embedded.
Mark Altschlager: for the year. In just first quarter we did build some impact of the tariff that we know thus far which are the goods in transit when the initial tariff were announced.
Mark Altschlager: Beyond that, we haven't included any impact, but merchant margin is relatively neutral for the year in our guttons.
This is Jim on the second part of your question.
Relative to, are we starting to see more closeout opportunities?
Absolutely, as we've seen some softness across mainstream retailers.
Mark Altschlager: Closures, and just sort of a disrupted supply chain. [inaudible]
Mark Altschlager: We're being very opportunistic in picking up these opportunities for closed-out product and we think that bodes well for adding some more excitement to the stores going forward and for buying margin of creative goods going forward.
For more information, visit www.FEMA.gov
That's great. Thank you.
Tomorrow.
Speaker Change: And the next question, comes from the line of Lorraine Hutchinson with Bank of America, please proceed with your question
Lorraine Hutchinson: Q4C, and step up an investment in the store fleet and marketing expense? Or do you think that you can accomplish this under the confines of the existing margin structure? Sure.
Lorraine Hutchinson: At first, I thought your dollar signs were enhanced comp sales dollars, so it was kind of more about the expense side.
Lorraine Hutchinson: Yeah, of course, we need to be sort of prudent and responsible with that and I think we can either do it from a cost neutral standpoint or we would need to be able to prove sort of an ROI on any additional spending.
So it's very early days to kind of... [inaudible]
Lorraine Hutchinson: and get ahead of myself as to what we'll be doing differently. [inaudible]
Straton, but I could expect that. That will...
Lorraine Hutchinson: to find some dollars to invest in both those areas over time. And suddenly, I think somebody has been investing in upgrading the fleet over the last few years as well. I think we'll be continuing that going forward and perhaps trying to scrape some dollars together. Thank you very much.
to enhance our marketing program that.
Thank you [inaudible]
Speaker Change: And the next question comes from the line of Michael Binetti with Evercore ISI, please proceed.
Michael Benetti: Hey guys, Jim Nice to meet you, welcome to Ross and congrats on moving on to your next adventure.
Speaker Change: Cops to be flatter, maybe just a touch negative in the back nine of the year. Could you just help us think about what you're baking in at the low end versus the high end, which is I think closer to two and a half or three. As you think through the scenarios for the back half of the year. And then.
Adam, are there any... Um...
Speaker Change: As we think about the merchandise margin being neutral for the year, is that include an opportunity for you to be leveraging the better brand strategy by the second half of the year? Do you think the second half of the year is still in listen and learn mode? Yes, I do.
For more information visit www.FEMA.gov
Speaker Change: Michael, on the conference for the year, obviously we guided, we would typically come out with two to three comp, obviously we lowered the guidance based on what we saw very earlier in the year and widened the guidance.
Speaker Change: So the variance between the first quarter and the rest of the year, we have comps, you know, fairly neutral, through Q2, Q3 and Q4 to get to the down one to plus two.
Speaker Change: Michael, this is Adam. I'm the second piece on the Merch Margin. There's a lot of moving parts. We thought entering the branded strategy that over time we'd be buying better, right? As we become more important to those brands and we cultivate new but expanded relationships. So that's a piece of it. Obviously doing a lot of work on tariffs. We've talked about that and then shrinks another variable. We're kind of guiding that back to...
Speaker Change: Flyers this year. External environment still feel like it's very tough.
Speaker Change: Straton. But felt like the actions that we continue to take, but also stepped up at the end of last year, we think we'll make that prudent guide for the year. So, those are kind of the puts and takes of how we think about merchandise margin that I'll answer the year.
Speaker Change: Did I miss it? Did you give strength for fourth quarter and for 2024? Yeah, I did, I did.
Speaker Change: On strength, we actually take our physical inventory in the third quarter and we truth it up then, so I know changes are important. Yeah, it didn't change our forecast. We ended it relatively flat to 2023.
Okay, thanks guys.
Speaker Change: And the next question comes from the line of Brooke Roach with Goldman Sachs, please proceed with your question.
Good afternoon and thank you for taking our question. Thank you again.
Brooke Roach: With hoping you could dig into the performance of Dede's Discounts, it sounds like you're seeing some good results there such that you're willing to rebuild the pipeline of store growth in the future.
Speaker Change: is DD seeing the same flow down that the rest of Ross Stores is seeing and how would you describe demographic changes as we've entered one key to date? What drives your confidence in DD's on a go-forward basis?
Scher, Brooke Dedees,
Speaker Change: Posted healthy sales gains that were above Ross, not only for Q4, but throughout 2024.
Speaker Change: and we feel really good about the fashion and value offerings that we've been able to upgrade at DD's.
It's resonating very well with the customers we're especially encouraged. [inaudible]
Speaker Change: If you recall, we slowed down or stopped our real estate program in your markets.
Speaker Change: and we're encouraged by the ongoing improved performance which has been ongoing for a little over a year now.
Speaker Change: are going to start rebuilding that pipeline for expanded growth in the near future although it does take some time to get the pipeline started again and I suspect you'll see increased growth into 26
Speaker Change: Though performing well, Dee Dee saw a similar change in trend as Ross in January , February , timeframe.
Great, thanks so much, best of luck going forward. [inaudible]
Thanks, but thank you
Hey, good morning, good afternoon, thanks.
Speaker Change: Still pretty early in earnings here, but one takeaway is that inventory levels appear much heavier, say it target today. I guess how are you thinking about that from a...
Speaker Change: from a potential headwind on the promotional fund. If we see more aggressive promotions later in the quarter, and then on category performance in the quarter, can you just double click on a parallel and put where in addition to cosmetics and beauty, it sounds like generally things are good, but can you just double click on that? Thanks. Thank you very much.
Speaker Change: On inventory levels, we actually feel good about the levels that we're currently at. We ended the year with the averaged store inventory is up about 2%.
Speaker Change: We had planned our pack away higher versus last year because we last year at this time we used the pack away merchandise to fuel our robust 7% gain in the fourth quarter. So the increase at the end of the year was planned against last year.
and in terms of merchant classifications.
Speaker Change: And the next question comes from the line of Alex Straton with Morgan Stanley . Please proceed with your question.
Alex Strayton: Perfect, thanks so much. Can you just go through what what guidance assumes as a related to freight? Just seems like that might be a source of pressure for all off-pricers this year.
Alex Strayton: and then separately the supply chain and merchant process is focused, you highlighted within the CapEx guide. Can you just elaborate on what you're doing there exactly or if there are any changes relative to 2024? Thanks so much.
Alex Strayton: On freight, we typically, our freight contracts are May, June time frame, so during the first part of the year we're still operating under the
Alex Strayton: The current contract. That said, we currently expect domestic freight to be a headwind in Q1 and the full year. Obviously that's based on fuel.
Alex Strayton: and what happens with fuel over the year and right now it's favorable versus last year but that could change.
Alex Strayton: On the ocean freight, that market has changed pretty dramatically in the last six months. There was a lot of build-up and congestion spot rates were very high, that has since come down so we'll wait and see how our contract renewal.
Happens in May.
Alex Strayton: What we got it to is $855 million for 2025. Most of that step up from 2024 is in supply chain, so we will open our eighth facility this year but the cost are really driven by our ninth facility. Thank you, everybody.
Marnow, but do most of them.
of that construction.
and Tony Twenton.
Speaker Change: and then on that piece of the merchant processes, what exactly are you guys changing there or I guess investing in there?
Speaker Change: A Completion of Buy, and we're also investing in enterprise-wide data that will allow the entire organization, but most specifically the merchants to have a better view of the business at any point done. [inaudible]
Great, thanks so much.
Thank you
Speaker Change: And the next question comes from the line of Adrienne Yih with Barclays. Please proceed with your question.
Speaker Change: Thank you very much. I'm going to go back to, I think you mentioned doing work on the tariff. Can you remind us what your sort of direct sourcing exposure is? I know it's pretty de minimis from China, Canada, and Mexico. And then how are you handling, or how did you handle in the last tariff cycle kind of negotiating power? It would seem that you can certainly push back more so than other business models.
Speaker Change: and my follow-up questions on the branded product. Given that the merchandise are flat, are we anniversary in the penetration of branded and are you seeing ATV higher driven by the new branded product? Thank you.
on the, on the tariff.
Speaker Change: Mexico and Canada are a very small portion, very diminished part of our overall business.
Speaker Change: Clearly, our focus will be maintaining the price umbrella versus traditional retailer and offer the best values to the customer. We certainly wouldn't be on the forefront of raising prices. [inaudible]
Speaker Change: For us, disruptions like this, as Jim mentioned, could be beneficial to all price and as there will be more close-up opportunities down the road.
Speaker Change: and I think Adrienne on the branded question, in terms of mix of assortment, we feel like.
Speaker Change: We are at that inflection point and now we'll anniversary last year on that, you're a question about A.U.R. also.
Speaker Change: Again, as Michael said, we don't plan the business that way going forward but looking back and forth quarter we did have a slight increase in AUR just how the business mixed out with some of those better branded goods as part of the assortment. [inaudible]
Great. Thank you so much. Best of luck. Thank you so much.
Thank you [inaudible]
Speaker Change: And the next question comes to the line of Aneesha Sherman with Bernstein. Please proceed with your question.
Anisha Sherman: Thank you so much. Jim, I want to ask your view about the store opening strategy as you talked about earlier in the call. Some of your competitors are talking about moving into more rural areas, moving into different sized boxes, smaller urban boxes. Do you see opportunities for different store formats for your awesome deities?
Speaker Change: and for the stores that have opened in newer states, like Michigan, New York, last couple of years, can you comment on the performance of those? And I also have a quick follow up on Adrienne's question on the branded strategy.
Speaker Change: Are you seeing an inflection in comp related to that strategy as part of what you had planned? Are you seeing an actual uptick in comp on some of these categories and divisions where you've upped the brandedness in the category? Thank you.
Speaker Change: We have, we believe we have plenty of growth with the existing concepts. DVs is 18 to 20,000 square foot stores. Ross is 23 to 25,000.
Speaker Change: New York and Michigan were pleased with the results thus far. Overall though, over the portfolio, our new store productivity has not changed. It was 60 to 65% of an average store last year and we expect it to be about that level in 2025.
Speaker Change: and on the second picture question on the branded strategy.
Speaker Change: that the brand strategy, while perhaps it's a little bit more important in certain categories, was really a store-wide strategy. So, to see the whole company perform well and have that performance be across
Speaker Change: In terms of specific categories, we have seen some nice sequential improvement in the ladies business from the third quarter into the fourth quarter, and the fourth quarter is really the first time we had hit. [inaudible]
Speaker Change: The percentage of our business targets that we want to hit from a branding standpoint. [inaudible]
Speaker Change: So overall, I think it's a solid strategy. I think we're executing pretty well.
Speaker Change: Certainly we have opportunities to improve it and tweak it going forward and the team is working on that now but I think it's starting to pay some nice dividends.
Speaker Change: And ladies and gentlemen, as a reminder, we ask that you please let me yourself to one question and one follow up so we can get through everyone in the queue. Thank you. The next question comes from the line of Ike Boruchow with Wells Fargo. Please proceed with your question.
Speaker Change: Hey, good afternoon and nice to meet you Jim. I think Michael, I have a clarification and a question for you. The clarification is like, thank you said in one of your answers, fuel is favorable to last year but a headwind to 1Q in fiscal year margin. Did you mean tailwind or am I not following that correctly?
It should have been tailwind.
Speaker Change: I guess when you look at the business, you know, the slowdown that you're seeing, quarter to date, clearly dynamic environment, but, ah, eh.
Speaker Change: How much of a slowdown would you call weather-related versus potentially something in the customer demographic or just more directly if you've seen any notable softness?
Speaker Change: and the Hispanic Consumer Quarter Day. I know you have to wait to see more and get more information, but I know you guys probably have data and look at the store based on zip code, so I decided to get asked that question a lot, I'm curious if you have anything to share.
Speaker Change: I can't you know from history we don't love talking about interquarter trends I will say though at this time of year it is extremely difficult to parse out specific impacts
Speaker Change: and then also trying to parse out external factors. So we did see, as Jim said, as weather improved, we did see an improved improvement in the trend. So we'll have to wait to see...
Speaker Change: Paul the way through the first quarter to understand the real impact of each of those.
Speaker Change: And the next question comes in the line of Marni Shapiro with the retail tracker. Please proceed with your question.
Marnie Shapiro: Hey guys, congrats on a great quarter and I saw for a minute between
Marnie Shapiro: You know, our Jim US CEO and our new CFO , we almost didn't have any mics on a Ross Stores conference call in my decades of following you guys, there's always been a mic.
So can we just talk everybody to get rid of me? [inaudible]
Marnie Shapiro: No, you can't leave, I think, isn't it in the board somewhere the board packet there has to be a mic involved?
Speaker Change: So can you just touch a little bit back onto the advertising question because Ross has never been a big, you know, advertising company. Is it a shift to invest more there or how you advertise would you consider loyalty programs? Are you thinking about social media? You know, you have somewhat decent following at least on Instagram. Just kind of curious what your thoughts are around. [inaudible]
DeMarketing
to perfect our messaging a little.
Speaker Change: I guess what I'd ask is just some patience. I get my arms around the team, we onboard a new ad agency, etc. We'll be able to share a little bit more about our plan because we go forward throughout the year. [inaudible]
Speaker Change: Fair enough. And can you guys quantify all any impact from the fires in LA to your business and have you seen it rebound since then?
Speaker Change: Overall, obviously, we saw an impact when it happened and it impacted, you know, our consumers our associates is very devastating but minimal impact to the quarter and we have seen it rebound since.
John Kernan: The next question comes from the line of John Kernan with TD Cowan. Please proceed with your question.
Good afternoon. Thanks for taking my question. Welcome, Jim.
Thanks, John. Thank you.
I think it's just...
Speaker Change: You've been asking this question on a lot of calls but I just focus back at the margin structure of the business [inaudible]
Speaker Change: Prie, you know, COVID, whatever, whatever time period you want to look at, to now the biggest differences, the SGNA rate has...
Speaker Change: Expenses and line items within SG&A that you see under your control that you could bring down as a percent of sales over time.
Speaker Change: The change, I'll be the historian here, the change between pre-COVID and post-COVID.
in SGNA is primarily a store-related cost driven by it.
Speaker Change: The customer experience, by going forward, the leverage point for SGNA is about a 3%
Got it. Thank you.
Thanks, John.
Speaker Change: The next question comes from the line of Dana Telsey with the Telsey Advisory Group. Please proceed with your question.
Hi, good afternoon everyone and welcome Jim.
Speaker Change: Jim, as you think about your time and accomplishments at Boot Barn, from those accomplishments there in that chain, what do you bring to Ross Stores that you think can be impactful to the business model given it is a different merchandising and buying strategy and it's just a quick follow-up? [inaudible]
Speaker Change: There are some similarities, right? Our core customer is roughly the same income, roughly the same age, roughly the same ethnic diversity at Booporn Scootle, a little bit more male. Now, and then.
Speaker Change: Ross, of course, who's a little bit more female. I guess my goal is by, if I look at the transformation of boot barn over a 12-year period, we slowly made progress on different things like sworn diamond and marketing, and perhaps there's some similarities here.
and I feel very fortunate that I've gotten...
Speaker Change: Brought into the business. It's great about the reception from the management team. I think we're already...
Speaker Change: A very cohesive management team. I feel great about the talent that surrounds me at two very strong, Keith Merchant, one over Ross, and one over GDs.
Speaker Change: We have the ongoing support of Barbara from merchandising standpoint, and so if I were to try to...
Drop Parallel to what I hope to bring here.
that perhaps helped. [inaudible]
Boop Barn B, Successful.
Speaker Change: It's just to kind of get the entire team pointing in the same direction and working collaboratively and to build on the success that Barbara has left behind for me.
Speaker Change: Thank you. And then just on the topic of tariffs, from the last time there were tariffs, can you just remind us, what did the business do to react to those tariffs, what changed in terms of pricing, and is this time, how is it different or the same? Thank you.
Speaker Change: I think overall, it will be the same. How did we react? We negotiated costs, we ...
Speaker Change: Mixed a business where we needed to differently and in some cases we did raise prices.
Speaker Change: and I think it'll be a mix of all of those but will be partly dependent, especially on the price front, what the market, how the market responds. [inaudible]
Speaker Change: I should imagine what we're meeting on this, you know, if not dally, extremely frequently with that.
Ever-changing landscape, fortunately for the team. [inaudible]
Speaker Change: It's not their first rodeo where they've seen this before and I think we have some good strategies in place to mitigate any potential downside.
Speaker Change: But also to maximize the opportunities that might come our way based on the destruction of the supply chain.
Jay Soule: And the next question comes from the line of Jay Sole with UBS. Please proceed with your question.
Jay Soule: Great. Thank you. I know this has been asked in a similar way before, but I'm [inaudible]
Jay Soule: You can just let us know if you need any improvement in the comp trend to get to the negative 3% comp guide at the low end of the guide for Q1, and then secondly just on the fact that there's a three on the base point difference between the low end of the high end of the comp range.
Jay Soule: What's the reason for the wider range than normal? Is there less visibility now? If you could just sort of throw more color on that Debbie Huffle? Thank you.
Jay Soule: Sure, on the wider comprehensive it is absolutely driven by visibility entering the year.
Jay Soule: What we said on the com trend is we have seen an improvement and we've built since early February and since whether it has improved and we've built that into the first quarter guidance.
Speaker Change: So are you saying that you've both continued improvement into the guidance is what you're saying?
Gal, okay, thank you so much.
Thanks Jay.
Speaker Change: And the next question comes from the line of Christina Katai with Deutsche Bank. Please proceed with your question.
Speaker Change: Hi, good afternoon and welcome, Jim. So, you think about the improvement in some of your businesses, like ladies of peril, you noted a nice improvement into the fourth quarter from 3Q.
Speaker Change: I would say the team has made some really nice progress and we've achieved the sort of levels of the levels.
Brands,
in the comp line,
Speaker Change: In terms of more specificity under that, of course, if you go through the different classifications.
Speaker Change: You'll see a different trend line between missing sportswear and active and juniors, etc. So there's always places for us to make some ongoing improvements.
Speaker Change: and I think the team is on top of them. I've been sitting through these sort of planning meetings as we look forward for the spring and fall season and I really like the strategies they have in place and the direction they're taking the assortment. [inaudible]
Great, thank you so much.
Speaker Change: And our final question comes from the line of Laura Champine with Loop Capital Markets. Please proceed with your question.
Laura Champagne: As you look to improve the comp trend in coming quarters, can you get there just from improved weather? Or do you need market share to accelerate or the macro to improve? [inaudible]
Well, the improved weather will obviously help, but...
Laura Champagne: The macro backdrop, there's a lot to end on that. We're not sure if what we're seeing now is shock value of all the volatility.
Laura Champagne: in the market, or in fact, the underlying trend will improve. The good news in off-prices we can operate well in a number of environments.
Laura Champagne: Others around us struggle in a tough macro economic environment that means more close outs for us.
Laura Champagne: which means our ability to get them and pass that on to the consumer with better values.
Laura Champagne: To go back in history, even in tough macroeconomic times, you have to go back to, you know, the 2008-2009 levels, we've been able to navigate in the off-priced environment fairly well.
Hutchith, thank you.
Laura Champagne: And ladies and gentlemen, at this time we have reached the end of the question and answer session, and I would like to turn the floor back over to Jim Conroy for any closing remarks. Thank you very much.
Jim Conroy: Sure, thank you for joining us on our call today. We look forward to speaking with you on our next earnings call. Take care.
Jim Conroy: And thank you. This does conclude today's teleconference. We thank you for your participation. You may disconnect your lines at this time.
and more
Speaker Change: Good afternoon and welcome to the Ross Stores 4th quarter and fiscal 2024 earnings release conference call. The call will be given to prepared comments by management followed by a question and answer session. If anyone should require operator assistance, please press star zero on your telephone keypad.
Speaker Change: 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.
Speaker Change: including sales and earnings forecasts, new store openings and other matters that are based on the company's current forecast of aspects of the teacher business.
Speaker Change: These forward-looking statements are subject to risks and uncertainties that can cause actual results to different materially from historical performance or current expectations.
Speaker Change: Risk factors are included in today's press release, and the company's Fiscal 2023 Warm 10K and Fiscal 2024, Martin 10Qs and 8Ks on file with the SEC.
Speaker Change: And now, I'd like to turn this call over to Connie Kao, Group Vice President of Investor Relations.
Speaker Change: Thank you, Connie, and good afternoon. Also joining me on our call today are Michael Hartshorn, Group President and Chief Operating Officer.
and Adam Orvos, Executive Vice President and Chief Financial Officer.
Speaker Change: I'm grateful she will continue to serve as a strategic advisor and I look forward to building on the foundation that she has created and the company's long history of success.
Now let's turn to the fourth quarter results.
Speaker Change: As noted in today's press release, fourth quarter sales and earnings results were at the high end of our expectations.
Speaker Change: Sales were driven by our customers' positive responses to the improved assortments of quality branded bargains, coupled with strong execution by the store and supply chain teams during the critical holiday selling season.
Speaker Change: Ernest Pershaire for the 13 weeks ended February 1st, 2025, we're $1.79 compared with $1.82 Pershaire for the 14 weeks ended February 3rd, 2024 [inaudible]
Speaker Change: Net income for the period was $587 million versus $610 million last year.
Speaker Change: Sales for the 4th quarter of 2024 were $5.9 billion with a comparable store sales gain of 3% on top of a robust 7% gain in the same period last year.
Speaker Change: For the 2024 fiscal year, earnings per share were $6.32, up from $5.56 for the 53 weeks and in February , 3rd, 2024.
Speaker Change: Net income for fiscal 2024 rose to $2.1 billion, compared to $1.9 billion last year.
Speaker Change: Total sales for the year increased to $21.1 billion, up from $20.4 billion in the prior year period.
Speaker Change: Both the fourth quarter and full-year results include a one-time benefit to earnings equivalent to approximately 14 cents per share related to the sale of a pack-away facility.
Speaker Change: Additionally, as a reminder, prior year sales and earnings results for the 2023-4th quarter and fiscal year included approximately 308 million in sales and a 2010 earnings per share benefit from the 53rd week.
Speaker Change: Fourth Quarter Operating Margin of 12.4% was flat till last year, as the gain from the sale of the pack away facility was offset by planned declines in merchandise margin and unfavorable timing of the pack away related costs.
Speaker Change: The style of the facility contributed about 105 basis points to this year's fourth quarter operating margin, while the 53rd week benefited the prior year's period by about 80 basis points.
Speaker Change: Let's turn now to additional details on our fourth quarter results.
Speaker Change: For the holiday-selling season, cosmetic and children were the best performing merchandise areas, while geographically the Pacific Northwest and Texas were the strongest regions.
Speaker Change: Similar to the prior quarter, Dee Dee's Discounts posted healthy sales games as the team's value and fashion offerings resonated with shoppers.
Speaker Change: We are especially encouraged by the ongoing improved performance of DVDs in our newer markets and expect to begin rebuilding our pipeline there for expanded growth in the near future.
Speaker Change: At the end of the year, consolidated in inventories were up 12% mainly due to higher plan to pack away levels. On an average store basis, inventories were up 2%
Speaker Change: Tackway represented 41% of total inventories compared to 40% last year.
For more information visit www.FEMA.gov
Regarding our store expansion program.
Speaker Change: We added 75 new, raw stress for less stores, and 14 BD discounts during the year.
Speaker Change: Inclusive of 12 closures, we ended the year with 2,186 stores, including 1,831 Ross Dress for Less, and 355 BD Discounts locations.
Speaker Change: As noted in today's release, during the recently completed fourth quarter, 1.7 million shares were repurchased for a total price of $262 million.
Speaker Change: for Fiscal 2024, a total of 7.3 million shares of Common Stocks, where we purchase for an aggregate purchase price of 1.05 billion.
Speaker Change: These purchases were made pursuant to the two year, 2.1 billion dollar program announced in March 2024.
Speaker Change: We expect to complete the $1.05 billion remaining under this authorization in fiscal 2025.
Speaker Change: Our board also recently approved a 10% increase in our quarterly cash dividend to 40.5 cents per share, to be payable on March 31, 2025 to stockholders of record as of March 18, 2025.
Speaker Change: As a result, our ongoing share by back and increased dividend programs reflect our longstanding commitment to return excess cash to our shareholders.
Speaker Change: Now Adam will provide further details on our fourth quarter results and additional color on our outlook for fiscal 2025.
Adam: Thank you, Jim. As previously mentioned, comparable store sales rose 3% for the quarter generated by both higher traffic and average size of the basket.
Adam: Fourth quarter operating margin of 12.4% was flat to last year and included a 105 basis point benefit from the facility sale.
Adam: Merchandise Margin declined by 85 basis points as planned due to the increased mix of quality
Adam: Activity D Loverage by 45 basis points as we anniversary the extra week last year.
Adam: Domestic freight leveraged by 30 basis points while buying improved by 20 basis points mainly due to lower incentive.
Adam: SDNA for the period, leveraged by 80 basis points primarily due to the facility sale.
Adam: Now let's discuss our outlook for fiscal 2025, starting with the first quarter.
Adam: While we were pleased with our 2024 results, including the holiday selling period, sales trends began softening later in January and in December .
Adam: We believe that a combination of unseasonable weather and heightened volatility in the macroeconomic and geopolitical environment has negatively impacted customer traffic.
Adam: Given the lack of visibility we have on these external factors, we believe it is prudent to take a cautious approach in forecasting our business, especially as we start the year.
Adam: As a result, we expect comparable store sales for the 13 weeks ending May 3, 2025 to be down 3% to flat in earnings per share of $1.33 to $1.47 versus $1.46 last year.
Adam: The operating statement assumptions that support our first quarter guides include the following.