Ross Stores 2Q15 Earnings Call Notes

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Pleased with results but face more challenging comps, macro remains uncertain and retail promotional

“While we are pleased with our better than expected results for the first half, we face more challenging sales and earnings comparisons over the balance of the year. In addition, the macroeconomic environment remains uncertain, and we expect the retail landscape to be highly promotional during the fall season, especially given the recent results from other retailers. Based on these factors, while we hope to do better, we believe it is prudent to remain cautious in forecasting our business for the second half of 2015.”

There’s plenty of supply out there for goods which reinforces the uncertain environment

“on the second part of your question, the uncertain environment, I would say the results have been slightly mixed, some good, some not so good. And certainly when we’re out in the market looking for goods it seems like there’s plenty of supply which again reinforces for us that there’s some uncertainty in terms of the economic environment. ”

We planned for an aggressive promotional environment and that’s what we’re seeing

“In terms of the promotional landscape, Oliver, the promotional landscape in Q2, it was aggressive in certain segments of the market. So we were planning on it being aggressive, it was aggressive. I think when back-to-school comes to an end we’re going to see that that was very aggressive and that we’re going to see that continue going into the fall season, especially some retailers are going in to fall with high inventory levels.”

Goods are coming from a lot of different places

“trying to understand where the goods came from, I would say at this point it’s really difficult to tell. I mean departments or business it was difficult and so some goods are clearly coming from that market. And at this point, it’s much more homogenized than the beginning when we saw huge amounts coming everywhere in every business from the port.”

In general, future wage pressures are likely

“In terms of further increases, we think the labor market is fairly dynamic and we like to sort of follow the labor trends before making decisions on any future move. But I think in general, we think as the economy improves over the next couple of years, it’s likely that there’ll be additional wage pressures out there.”

Off price retailers get additional supply in uncertain times

“As it pertains to supply, when business is uncertain and difficult to create supply, any disruption in business creates supplies. So you would think ultimately that there would be a bubble of goods that results from, let’s say, if back-to-school turns out to be more difficult than people anticipated, that there would be goods as a result of that.”

Weak results from department stores lead us to believe that there will be more promotions

“I think mixed results and – actually weak results from the department stores forces us to think that the environment which is already fairly promotional will continue to be pretty promotional in the back half. And how that affects us is we’re all about price differentiation, the differences between the value at Ross and the value elsewhere and to the extent that other stores, department stores etcetera promote, that obviously eats into that price differentiation.”

Texas has stayed strong

“Texas, overall, has consistently been a good performer for us. In the second quarter and year-to-date, it’s performed above the chain average for us. So it continues to be one of our best-performing regions.”