Santa Barbara, CA – (StockNewsDesk) – 11/22/2014 — Ross Stores reported better than expected earnings late on Thursday. The earnings of the company rose nearly 12%. Both revenue and earnings per share (EPS) of the company beat Wall Street’s expectations. California-based Ross Stores surprised investors by reporting net income of $192.72 million compared to the earlier period’s figure of $171.62 million. This comes to $0.93 a share, compared to last year’s EPS figure of $0.80. The Street expected an EPS of $0.87. The revenue of the company increased to $2.60 billion. This is well above Wall Street expectations of $2.55 billion and earlier period’s figure of $2.40 billion.
Ross Stores maintained its fourth quarter outlook while raising expectations for the full-year guidance. For the fourth quarter, the company expects to report an EPS in the range of $1.05 and $1.09 against investors’ expectations of $1.10 a share. For the fiscal year, Ross Stores expect to earn an EPS in the range of $4.28 and $4.32. Earlier, the company expected to earn an EPS in the range of $4.18 and $4.26. The Street expected $4.27 a share. The company’s Unique Selling Point (USP) is it provides discounts on famous brands.
Falling Costs Help Profit
Comparable store sales of the company increased nearly 4% compared to company’s expectations of 1% to 2%. The best-performing categories that helped the company beat the Street’s expectations were juniors and home. The declinations of cost of goods proved helpful for the company’s profitability. Cost of Goods Sold (COGS) declined 40 basis points (bps) while selling, general & administrative expenses decreased by 15 bps. All these factors helped operating margin beat the company’s estimates. Operating margin bettered to 11.8%, up 55 bps compared to expectations, which fell in the range of 10 bps and 30 bps.
Ross Plans to Expand
Ross Stores increased its availability to more people by opening more stores during the third quarter. The company added 95 stores during the quarter. Of the 95 stores, 75 belonged to Ross and 20 to DD Discounts outlet. For the full year 2014, the company expects the tally to reach 1362 of which 1210 will belong to Ross and the remaining to DD Discounts. For the fourth quarter, COGS may increase on the back of buying and distribution costs. Acquisition of a new office in New York and renovation of a centre in South Carolina will weigh on the expenses. In addition to this, interest-expense may reach $2 million. Despite these expenses in sight, Ross Stores may meet its guidance provided for the fiscal year.