Ross Stores Inc. (NASDAQ:ROST) Q3 2019 Earnings Conference Call - Final Transcript

Nov 21, 2019 • 04:15 pm ET

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Ross Stores Inc. (NASDAQ:ROST) Q3 2019 Earnings Conference Call - Final Transcript

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Presentation
Executive
Barbara Rentler

DISCOUNTS locations in the third quarter, completing our 2019 store opening program. We expect to end the year with 1,546 Ross and 259 dd's locations for a net increase of 89 for fiscal 2019.

Now Travis Marquette will provide further color on our third quarter results and details on our guidance for the remainder of the year.

Executive
Travis Marquette

Thank you, Barbara. Let's start with our third quarter results. Our 5% comparable store sales gain was driven by higher traffic and an increase in the size of the average basket. Third quarter operating margin of 12.4% was above plan and similar to last year.

Cost of goods sold increased 10 basis points in the period. Merchandise margin grew by 20 basis points, while occupancy and buying levered by 10 and 5 respectively. These favorable items were more than offset by distribution expenses that increased 45 basis points mainly due to the unfavorable timing of packaway related costs and higher wages. Freight was flat for the quarter.

Selling and general administrative expenses for the period decreased 10 basis points. During the third quarter and first nine months of fiscal 2019, we repurchased 3.0 million and 9.6 million shares respectively of common stock for a total purchase price of $326 million and $966 million respectively. We remain on track to buyback a total of $1.275 billion in stock for the year.

Let's turn now to our fourth quarter outlook. As noted in today's press release, we continue to project fourth quarter comparable store sales to increase 1% to 2% versus a 4% gain last year. In addition, our guidance for fourth quarter earnings per share remains unchanged at $1.20 to $1.25, which now includes a one-time non-cash benefit of $0.02 per share, primarily due to the favorable resolution of a tax matter offset by slightly higher pre-tax expenses. This forecasted guidance compares to $1.20 per share in the prior period, which also included a one-time per share benefit of $0.07 related to the favorable resolution of a tax matter.

Excluding both of these one-time items and if comparable sales only perform in line with our guidance, earnings per share are forecasted to grow 4% to 9% over last year. The operating statement assumptions for the fourth quarter include the following: total sales are projected to grow 5% to 6%; operating margin is projected to be in the range 13.0% to 13.2%, compared to last year's 13.2%. We expect net interest income of about $2.3 million. Our tax rate is expected to be approximately 22% to 23%, which includes the aforementioned one-time tax benefit and weighted average diluted shares outstanding are projected to be about $357 million.

Based on our year-to-date results and updated fourth quarter guidance, we now project earnings per share for the full-year to be in the range of $4.52 to $4.57, compared to $4.26 in fiscal 2018, which included the previously mentioned one-time per share benefit of $0.07.

Now I will turn the call back to Barbara for closing comments.

Executive
Barbara Rentler

Thank