Ross Stores Q4 Results Impress; Shares Soar 9%

Ross Stores, Inc. (ROST) delivered upbeat fourth-quarter results, beating both sales and earnings estimates. The company even gave upbeat guidance for fiscal 2022, and announced an increase in both dividend and share purchase program, which pushed the shares up 9.2% during the extended trading session.

Shares of the discount department store chain closed down 2% at $89.55 on March 1. ROST shares have lost 23.1% over the past year.

Impressive Q4 Results

Ross’s Q4 sales of $5.02 billion came in better than analysts’ estimates of $4.97 billion. The number was 18.1% higher than Q4FY20 sales of $4.25 billion.

Moreover, Q4 diluted earnings of $1.04 per share were 6 cents better than analysts’ estimates of $0.98 per share, and higher than the year-ago quarter’s diluted earnings of $0.67 per share.

Similarly, sales for FY21 advanced 51% to $18.91 billion, and diluted earnings of $4.87 per share were significantly higher than FY20 diluted earnings of $0.24 per share.  

Rewarding Shareholders

Drawing from its solid cash position, the company’s Board of Directors authorized a new share buyback program of up to $1.9 billion to be repurchased through fiscal 2023.

Moreover, the company’s board also increased its quarterly common dividend by 9% to $0.31 per share. The dividend is payable on March 31, to shareholders on record as of March 15.

Official Comments

Happy with the company’s results, Ross Stores CEO, Barbara Rentler, said, “We achieved strong sales results in the fourth quarter despite the negative impact from both the surge in Omicron cases during the peak holiday selling period and continued supply chain congestion.”

On enhancing shareholder rewards, Rentler said, “The increases to our stock repurchase and dividend programs reflect our ongoing commitment to enhancing stockholder value and returns, confidence in our projected future cash flows as well as the strength of our balance sheet.”

FY22 Outlook

Talking about future expectations, the company stated that comparing FY22 metrics to FY21 is going to be challenging as 2021 saw government stimulus packages and pent-up demand, which led to boosted sales in the spring.

Based on the same, comparable sales for FY22 are projected to be flat to up 3% over FY21. Likewise, earnings are projected to be between $4.71 per share and $5.12 per share for the full year.

For Q1FY22, comparable sales are expected to fall by 2% to 4% over Q1FY21. Earnings are projected to fall in the range of $0.93 per share and $0.99 per share as the company expects to face increased freight and wage costs in the quarter.

Additionally, the company gave a broad outlook for the fiscal year 2023, wherein it expects to earn double-digit earnings per share growth, which will be aided by a combination of same-store sales growth, improving operating margin, rapid new store openings, and an ongoing stock repurchase program.

Stock Prediction

The ROST stock has a Moderate Buy consensus rating based on 7 Buys and 4 Holds. The average Ross Stores stock prediction of $118.82 implies 32.7% upside potential to current levels.

Hedge Funds

TipRanks’ Hedge Fund Trading Activity tool shows that confidence in Ross Stores is currently Very Positive, as 9 hedge funds increased their cumulative holdings of the ROST stock by 2.1M shares in the last quarter.

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