Dive Brief:
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On Tuesday, Ross Stores reported third quarter net earnings of $338 million, compared to $274 million in the year-ago quarter. Sales in the quarter reached $3.5 billion, up 7%, while comparable store sales increased 3%, according to a company press release.
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For the fiscal year, earnings per share were $3.06, up from $2.36 last year, while net earnings reached $1.1 billion, up from $912 million the prior year.
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Shares of Ross fell 7.9% in premarket trading Tuesday morning in light of lower-than-expected same-store sales projections for the fourth quarter (an increase of just 1% to 2% compared to 5% the year before), according to MarketWatch.
Dive Insight:
While Ross beat profit expectations and fell only slightly short on revenue, the retailer took a beating from Wall Street on Tuesday on news that its same-store sales in the fourth quarter wouldn't be quite as high as expected.
It's a storyline that's somewhat at odds with the news coming out of Ross lately, which has been — for the most part — store openings and the success of the off-price market. In the company's second-quarter earnings in August, Ross not only saw increased sales, but also upped its long-term store potential, projecting 3,000 locations across all of its banners, up from previous plans for 2,500.
Just this year alone, the company had plans to open 100 additional stores, 30 of which opened in July, followed by an additional 40 in October, at which point the retailer tallied its store openings at 99 for the year. Similar to specialty beauty player Ulta, which has plans to open 100 stores per year, Ross doesn't seem to be slowing down on store openings (the retailer finished this quarter with 1,720 as compared to 1,627 in the year-ago quarter) — a good problem to have in a retail landscape that is forcing many traditional retailers to shutter locations and even turn to bankruptcy to slim down their footprints.
The off-price sector has been lucky in that sense. Low prices and a treasure hunt atmosphere have shielded off-price retailers from many of the industry's woes lately, but analysts have begun to question the success of the model, especially with the amount of expansion that retailers like Ross and TJX have undergone in recent quarters.
Lower projected guidance also caused Ross shares to fall in March, and a recent lawsuit about the retailer's pricing practices forced the company to shell out a $4.9 million settlement.
