Ross Stores (ROST) Stock Turns Red After Missing Expectations for Q4

The roots of Ross Stores Inc. (NASDAQ:ROST) stretch back to 1982 when six small department stores in San Francisco were acquired and transformed into a discounted brand called Ross Dress For Less. The company went public in 1985. It diversified its product offerings over the years, besides increasing its store count across the U.S. Its annual sales reached $2.7 billion in fiscal 2000, nearly $8 billion in 2010, and a record $16 billion in 2019. Today, it is a leading off-price apparel and home fashion retailer in the U.S.

Like rivals, Ross Stores also struggled to boost sales over the last year mainly due to store closures during the peak of the Covid-19 crisis. While many retailers managed to balance the revenue declines through strong e-commerce sales, Ross Stores could not do so because of its limited online presence. ROST stock stayed flat in terms of price change during 2020.

The negative impact of the pandemic is also reflected in the company’s latest quarterly results. Ross Stores reported earnings of 67 cents per share for the fourth quarter ended January 30, well below earnings of $1.28 per share in the comparable period of 2019. Analysts on average were looking for earnings of $1.02 per share.

Revenue came in at $4.25 billion, down from $4.41 billion in the year-ago quarter, and below the consensus forecast of $4.27 billion. Same-store sales in the quarter declined 6 percent, as a resurge in the coronavirus cases during the holiday season negatively impacted sales.

CEO Barbara Rentler said in a statement, “Fourth quarter operating margin of 9.5% declined versus last year as an increase in merchandise margin was more than offset by the deleveraging effect on expenses from lower sales, and higher supply chain and COVID-related operating costs.”

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Looking forward, Ross Stores expects same-store sales to be down between 1 to 5 percent in Q1, versus the comparable period last year. Moreover, the company expects to report earnings in the range of 0.74 cents per share to 0.86 cents per share for the current quarter.

ROST stock fell nearly than 6 percent on Wednesday after reporting disappointing results for the fourth quarter.