Ross Stores, Inc. Q3 FY2025 earnings call

• Jim Conroy noted strong third quarter sales results with 10% total sales growth and 7% comparable store sales growth, driven by compelling merchandise assortments and marketing campaigns. Operating margin was 11.6%. Earnings per share were $1.58. • Bill Sheehan discussed comparable store sales drivers (higher transactions and average basket size), operating margin, share repurchases, and provided fourth quarter guidance. • Ross Stores opened 36 new stores and 4 DD's discount stores in the third quarter, with a total of 90 locations added for the year. • The branded strategy has been successful, contributing to sequential business improvement, especially in the ladies' business.

Total sales for the third quarter grew 10% to $5.6 billion with comparable store sales increasing 7%. Cosmetics, shoes, and ladies were the strongest merchandise areas. By geography, the Southeast and Midwest performed best. BD's discounts had comp gains relatively similar to Ross Stores, Inc. Total consolidated inventories were up 9% versus last year, with average store inventories up 15% and packaway merchandise representing 36% of total inventories. For the year-to-date period, sales grew to $16.1 billion with comparable store sales up 3% over last year.

• Fourth quarter comparable store sales forecast raised to 3%-4% with EPS range $1.77-$1.85. • Full-year EPS guidance increased to $6.38-$6.46. • Tariff-related costs expected to be negligible in Q4, leading to full-year cost of ~$0.15 per share. • Total sales projected to increase 6%-8%, operating margin 11.5%-11.8%, net interest income ~$30M, tax rate ~24%, weighted average diluted shares ~322M.

• Tariff uncertainties were previously a risk, though currently expecting negligible impact in Q4. • Macro environment challenges remain a risk.

Q: Could you break down the inflection in same-store sales and attribute it to company-specific initiatives vs macro backdrop?

A: Jim Conroy said it was broad-based, with all major merchandise categories positive, and credit to the team's execution including product, marketing, and stores teams.

Q: How much of the fourth quarter raise is supported by strong momentum in November?

A: Jim Conroy noted broad-based strength across merchandise categories and regions, with some macro tailwinds but mostly credit to the team's execution.

Q: Update on tariff mitigation efforts and AUR trend?

A: Michael Hartshorn said merchant teams balanced cost concessions and market-driven price increases, with negligible tariff impact expected in Q4.

Q: Thoughts on marketing change, new customers, and engagement?

A: Jim Conroy said they are gaining new and reengaging lapsed customers, with early marketing efforts showing improvement but early innings.

Q: Insights on store refresh and its role in comp acceleration?

A: Michael Hartshorn said store refreshes include modernizing look and feel, with customer feedback good, and halfway through refreshing all stores.