Ross Stores (RSO) Q2 2026 Earnings Report

The call reported very strong operating and top-line performance: double-digit comparable-store sales in Q2, robust sales and EPS growth, margin expansion even excluding one-time tariff refunds, raised guidance for both the back half of the year and full-year, accelerated store openings, and active share repurchases. Key positive drivers include higher customer traffic (new, lapsed, and existing shoppers), broad-based category and geographic strength (home and cosmetics highlighted), and improved merchandise execution. Major cautions are that a sizable portion of the margin improvement and EPS benefit stems from a one-time ~$253 million tariff refund (≈$0.60 EPS and ~405 bps operating margin benefit), freight/fuel cost headwinds that may continue to deleverage margins, an 18% inventory increase that could be riskier under a consumer slowdown, and some SG&A/buying cost deleverage tied to incentives. Management emphasized that many growth initiatives are still early-stage, and execution will determine sustainability. On balance, the positive operating results, raised guidance, and momentum communicated by management outweigh the transitory and execution risks discussed.

Ross raised its back‑half outlook: Q3 comparable‑store sales are now guided to +6%–7% (total Q3 sales +9%–11%) with operating margin expected at 11.7%–12.0% (vs. 11.6% LY) and EPS $1.75–$1.83 (vs. $1.58 LY); Q4 comps are guided to +4%–5% (vs. +9% LY) with EPS $2.17–$2.26 (vs. $2.00 LY); full‑year EPS is now expected at $8.61–$8.77 (vs. $6.61 LY), which includes roughly $0.60 of EPS from tariff refunds. Other assumptions: ~51 new store openings in Q3 (41 Ross, 10 dd's), 115 total openings in 2026 (up from 110), ~5–10 relocations/closures, diluted shares ≈319M, net interest income ≈$30M, tax rate ≈25%; management expects slightly higher merchandise margins and DC leverage to help flow‑through but flags a freight/headwind from higher fuel; share repurchase plans remain on track (≈1.4M shares / $319M repurchased this quarter; $1.275B targeted repurchases in 2026 under a $2.55B authorization).