Ross Stores (ROST) 4Q 2015 Earnings Call Notes

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Ross Stores (ROST) CEO Barbara Rentler said annual sales rose albeit at a decelerating pace from the previous year

“Earnings per share for the fourth quarter grew 10% to $0.66 on net earnings that rose 6% to $264 million. Sales for the quarter increased 7% to $3.251 billion, with comparable store sales up 4% versus on top of last years 6% gain.”

The U.S. Midwest was the strongest geographical region

“The Midwest continues to be our strongest region that’s been true over the last eight quarters. California, our largest region also performed ahead of the same average. I think you also asked about Texas. Texas was relatively aligned with the chain on top of very strong comps last year, when it was one of our top performing regions.”

Ross Stores (ROST) CEO Barbara Rentler said they’ve been buying back their stock consistently for over 20 years

“We have repurchased stock as planned every year since 1993 and raised our cash dividend annually since its inception in 1994. This consistent record reflects our unwavering commitment to enhancing stockholder value and return.”

Ross Stores (ROST) CFO Michael Hartshorn said the average customer order size increased

“Our 4% comparable store sales gain was driven by a combination of higher traffic and an increase in the size of the average baskets.”

The company is raising the starting salary for store employees

“Our guidance includes our plans to raise the minimum wage for eligible hourly associates to $10 per hour in the second quarter of 2016 up from the current $9 minimum. These wage adjustments will help keep us competitive in our hiring practices and enhance our ability to retain talented associates to provide the shopping experience our customers have come to expect.”

Ross Stores (ROST) CEO Barbara Rentler said she does she her competitors in the space being more promotional

“Well I think the increased promotional environment. I think what we saw in the fourth quarter especially in the department store sectors where we’re going to see as we continue through 2016.  But I think what it means to us in our business is that we need to continue to deliver great value.  So we have to make sure that we stay very liquid, so that we’re there and can maximize and closeout opportunities and those closeout opportunities then has to be at the right value.”

Ross Stores (ROST) CFO Michael Hartshorn reiterated their core customer’s treasure hunting mindset

“As we do research on the demographics of customers and what they are looking for, the new customers demographically look very similar. What all our customers have in common, no matter what the demographics is they are all looking for great values and great bargains. So in terms of making sure that we can attract more customers and retain customers, your main focus is having the best assortments we can, the best values we can offer.”

Ross Stores (ROST) CFO Michael Hartshorn said that their merchandise sourcing team is one of their key competitive advantages 

“We believe that fundamentally an enterprise of having the strongest buying team is a key competitive advantage and that applies to Ross and to dd’s. So, dd’s, we have invested in dd’s buying team over the last several years and we’ve build a very strong asset there.”

SK Additions:

Ross Stores’ (ROST) CEO Barbara Rentler on Q4 2015 Results

Doesn’t appear that the retail landscape will get any less competitive

“we continue to face our own challenging multi year sales and earnings comparison. And with the increasing uncertain and volatile macro economic climate, it doesn’t appear that the retail landscape will get any less competitive or promotional in 2016.”

Department stores ended with a bubble of inventory

“if you look at where the department stores ended in January, most of them ended with more inventory and clearly ended with more clearance. And so as we enter into the spring season, one would expect that there would be a bubble of inventory that we would see in spring, which we could use to fuel in spring”

As long as traditional retailers continue to struggle, there will be opportunities

“There will be opportunities in the marketplace. As long as traditional retailers continue to perform the way they are performing, you would think that there would be more opportunities there. So from that perspective on the supply side, we feel good, which is why we are keeping ourselves liquid and feel we are well positioned to take advantage of the opportunities in the marketplace.”

Michael O’Sullivan

Haven’t seen too much impact from competitors getting into off price

“So Michael, its Michael O’Sullivan. We really haven’t seen any impact at this point. I mean if you think about the size of some of those new off price entrants, that’s not too surprising, that is too small to have made much of an impact. But I guess I say more broadly, we try not to get too distracted by what other companies are doing and what new entrance is coming into the market.”