Ross Stores (ROST) 2Q16 Earnings Call Notes

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The market is full of excess inventory and the fourth quarter will be very promotional

the market is full of excess inventory now. There’s a tremendous amount of availability in the market more than there normally would be. So in terms of excess from now through fall, I don’t think there will be any inventory issue. In terms of how promotional they get, I mean, I still believe that even with less inventory, there’s so many uncertain factors out there, the macroeconomic environment, political environment, even though stores are positioned perhaps with less inventory than they have last year, that doesn’t necessarily mean that, that sales will materialize…the fourth quarter will be highly promotional and then, I guess, that will determine the additional excess supply that could be there beyond what we’re seeing in the marketplace today. Barbara Rentler – CEO

 

Despite labor headwinds in retail, ROST still finding ways to cut costs

Clearly, labor costs will be an expense headwind for us and frankly, the whole retail industry. We entered this year in 2016 and we’ve taken minimum wages up across the chain and the impact of those adjustments are reflected in our full-year guidance, which is currently a 7% to 10% increase. So we’ve done a good job organizationally finding efficiencies throughout the business. Michael Hartshorn – Group’s SVP and CFO
However, there is a limit to how much in wage increases ROST can abosrb

So those are things that we’re looking at and as part of our budget and longer-term planning process, we’ll look for ways to offset some of those minimum wage increases. It will get harder over time. I think we’ve done a good job so far as Michael Hartshorn said in absorbing those wage rate increases in the last couple of years. But that’s probably a limit to how much we can absorb. Michael O’Sullivan – President and COO

 

Midewest region has performed well since ROST entered it 5 years ago

In terms of the new region, the Midwest, we entered the Midwest 4 or 5 years ago now. And I would say, we’re very pleased with how it’s going. I mean, you all have heard on these calls over the last couple of years, certainly over the last 1.5 years, the Midwest has been one of our top-performing regions. So we’re very good about the business we’re building there. Michael O’Sullivan – President and COO

 

No real change in message or marketing despite the election year and the highly competitive market

Our marketing strategy and message has been fairly consistent over the year. The message is pretty straightforward that we offer the best values in apparel and home fashions. That’s still the strategy. It’s still the message, so no significant changes. Michael O’Sullivan – President and COO