Key facts
- Ross Stores raised its annual profit forecast to $8.61-$8.77 per share.
- The company reported Q2 revenue of $6.26 billion, up 13% year-over-year.
- Q2 adjusted EPS was $2.06, exceeding analyst estimates.
- Comparable store sales are projected to rise 6%-7% in Q3 and 4%-5% in Q4.
- Consumer spending is shifting towards essentials, with occasional splurges on affordable treats.
- Walmart reported its slowest same-store sales growth in six years.
- U.S. retail sales declined in July for the first time in nine months.
Ross Stores' shares surged nearly 9% in premarket trading after the value retailer raised its annual profit guidance for the second time, signaling robust demand for discounted apparel despite economic uncertainties. The company now forecasts annual earnings per share between $8.61 and $8.77, up from its previous outlook of $7.50 to $7.74.
The retailer reported second-quarter revenue of $6.26 billion, a 13% increase from the prior year and surpassing analyst estimates of $6.18 billion. Adjusted earnings per share for the quarter came in at $2.06, which included a benefit from tariff refunds. This performance contrasts with rival TJX Companies, which noted a slowdown at its TJ Maxx and Marshalls chains.
Ross Stores expects comparable store sales to increase 6% to 7% in the third quarter and 4% to 5% in the fourth quarter, exceeding analyst expectations. Morningstar analyst Brett Husslein commented that Ross Stores' strategy of absorbing price increases last year cemented its low-price leadership, resonating with customers. Following the results, several brokerages, including J.P.Morgan and Barclays, raised their price targets on the stock.
Broader consumer trends indicate a more deliberate approach to spending, with shoppers prioritizing essentials but still making room for affordable treats and occasional splurges. While affluent consumers continue to support luxury brands, lower-income shoppers are stretching their budgets at discount retailers like Ross Stores and fast-food chains like Taco Bell. This trend is expected to persist into the holiday shopping season, with retailers likely to employ a combination of discounts and higher-end brands to attract customers. Walmart reported its slowest same-store sales growth in six years, and U.S. retail sales declined in July for the first time in nine months, underscoring consumer caution. However, some companies like Starbucks and those offering affordable luxury goods have seen sales recover, indicating a bifurcated consumer landscape.