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Category: Stock Market and Ross Stores
Date: 25 November 2019 Stock Price: $112.65 We take a look at the 3rd quarter earnings release of their 2019 fiscal year of Ross Stores a clothing retailer with revenues topping $15 billion and stores in over 1500 locations across 39 states in the USA.
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About Ross Stores
Ross Stores, Inc. is an S&P 500, Fortune 500, and Nasdaq 100 (ROST) company headquartered in Dublin, California, with fiscal 2018 revenues of $15.0 billion. Currently, the Company operates Ross Dress for Less® (“Ross”), the largest off-price apparel and home fashion chain in the United States with 1,550 locations in 39 states, the District of Columbia, and Guam. Ross offers first-quality, in-season, name brand and designer apparel, accessories, footwear, and home fashions for the entire family at savings of 20% to 60% off department and specialty store regular prices every day. The Company also currently operates 260 dd’s DISCOUNTS® in 19 states that feature a more moderately-priced assortment of first-quality, in-season, name brand apparel, accessories, footwear, and home fashions for the entire family at savings of 20% to 70% off moderate department and discount store regular prices every day.
Overview of Ross Stores' 3rd quarter 2019 earnings report
Data below refers to the most recent quarter unless specified otherwise
- Net Sales: $3.849 billion (up from $3.549 billion from the same quarter of the previous year)
- Sales increased by 8.5% over the last 12 months
- Costs and expenses: $3.366 billion (up from $3.105 billion for the same quarter of the previous year)
- Cost and expenses sold increased by 8.4% over the last 12 months
- Net earnings: $370.932 million (up from $338.108 million for the same quarter of the previous year)
- Diluted earnings per share: $1.03 (up from $0.91 for the same quarter of the previous year)
- PE ratio of Ross Stores: 27.2
- Dividend declared: $0.255
- Dividend yield of Ross Stores: 0.9%
- Dividend yield of Ross Stores: 0.9%
- Diluted weighted-average shares outstanding: 359.299 million (down -3.16% from 371.061 million for the same quarter of the previous year)
- Cash and cash equivalents: $1.142 billion
- Cash and cash equivalents per share: $3.17
- Cash and cash equivalents makes up 2.8% of Ross Stores' market capital
- Cash and cash equivalents makes up 12.2% of Ross Stores' total assets
- Merchandise inventories: $2.168 billion
- Inventories makes up 23% of Ross Stores' total assets
- Stockholders equity in Ross Stores: $3.276 billion
- Stockholders equity per share: $34.8
- Ross Stores is trading at 3.24 times its stockholders equity per share which is within the expected range of between 2 and 4 that most firms tend to trade at
- Cash generated by operations for 3 quarters of 2019: $1.41 billion
- Cash generated per share for 3 quarters of 2019: $3.92
Ross Stores' management commentary on their 3rd quarter 2019 earnings
DUBLIN, Calif.--(BUSINESS WIRE)--Nov. 21, 2019-- Ross Stores, Inc. (Nasdaq: ROST) today reported earnings per share for the third quarter ended November 2, 2019 of $1.03, up from $.91 last year. Net earnings grew to $371 million from $338 million in the prior year. Third quarter sales rose 8% to $3.8 billion, with comparable store sales up a strong 5% on top of last year’s gain of 3%.
Barbara Rentler, Chief Executive Officer, commented, “We are pleased that our third quarter results were ahead of expectations. Operating margin of 12.4% was also above-plan mainly due to better than expected sales and merchandise margin.” Ms. Rentler continued, “During the third quarter and first nine months of fiscal 2019, we repurchased 3.0 million and 9.6 million shares of common stock, respectively, for an aggregate price of $326 million in the quarter and $966 million year-to-date. We remain on track to buy back a total of $1.275 billion in common stock during fiscal 2019.”
Looking ahead, Ms. Rentler said, “As we enter this year’s holiday season, we are up against multiple years of strong comparable store sales gains. In addition, we expect another fiercely competitive retail landscape, along with ongoing uncertainty surrounding the macro-economic and political environment. As such, while we hope to do better, we continue to project fourth quarter comparable store sales gains of 1% to 2% versus a 4% increase last year.”
Barbara Rentler, Chief Executive Officer, commented, “We are pleased that our third quarter results were ahead of expectations. Operating margin of 12.4% was also above-plan mainly due to better than expected sales and merchandise margin.” Ms. Rentler continued, “During the third quarter and first nine months of fiscal 2019, we repurchased 3.0 million and 9.6 million shares of common stock, respectively, for an aggregate price of $326 million in the quarter and $966 million year-to-date. We remain on track to buy back a total of $1.275 billion in common stock during fiscal 2019.”
Looking ahead, Ms. Rentler said, “As we enter this year’s holiday season, we are up against multiple years of strong comparable store sales gains. In addition, we expect another fiercely competitive retail landscape, along with ongoing uncertainty surrounding the macro-economic and political environment. As such, while we hope to do better, we continue to project fourth quarter comparable store sales gains of 1% to 2% versus a 4% increase last year.”
Ms. Rentler continued, “Given these sales assumptions, we continue to expect fourth quarter earnings per share to be in the range of $1.20 to $1.25, which now includes a one-time, non-cash benefit of $.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 year period, which also included a one-time per share benefit of $.07 related to the favorable resolution of a tax matter.”
Ms. Rentler concluded, “Based on our year-to-date results, and our updated fourth quarter guidance, we are now planning earnings per share for fiscal 2019 to be in the range of $4.52 to $4.57, up from $4.26 in fiscal 2018.”
Ms. Rentler concluded, “Based on our year-to-date results, and our updated fourth quarter guidance, we are now planning earnings per share for fiscal 2019 to be in the range of $4.52 to $4.57, up from $4.26 in fiscal 2018.”
Ross Stores (NASDAQ: ROST) stock price history
The image below, obtained from Google, shows the stock price history of Post Holdings (NYSE: POST) over the last 5 years. And it's been a very good time for Post stockholders. 5 years ago the stock of Post was trading around $40 and its currently trading at $99.91. That's a strong gain of 149.8% returned to Post stockholders over the last 5 years. The stock of Post is trading at close to the mid point between its 52 week high of $113.73 and its 52 week low of $83.88 which to us is an indication that the short term sentiment and momentum of Post Holdings' stock is neutral.
Recent coverage of Ross Stores
The extract below covers the latest dividend announcement of Ross Stores as obtained from TheStreet.com
Ross Stores, Inc. (Nasdaq: ROST) announced today that the Company's Board of Directors declared a regular quarterly cash dividend of $.255 per common share, payable on December 31, 2019 to stockholders of record as of December 6, 2019. Ross Stores, Inc. is an S&P 500, Fortune 500, and Nasdaq 100 (ROST) company headquartered in Dublin, California, with fiscal 2018 revenues of $15.0 billion. As of November 2, 2019, the Company operates Ross Dress for Less® ("Ross"), the largest off-price apparel and home fashion chain in the United States with 1,550 locations in 39 states, the District of Columbia, and Guam
Ross Stores, Inc. (Nasdaq: ROST) announced today that the Company's Board of Directors declared a regular quarterly cash dividend of $.255 per common share, payable on December 31, 2019 to stockholders of record as of December 6, 2019. Ross Stores, Inc. is an S&P 500, Fortune 500, and Nasdaq 100 (ROST) company headquartered in Dublin, California, with fiscal 2018 revenues of $15.0 billion. As of November 2, 2019, the Company operates Ross Dress for Less® ("Ross"), the largest off-price apparel and home fashion chain in the United States with 1,550 locations in 39 states, the District of Columbia, and Guam
Ross Stores (NASDAQ: ROST) latest stock valuation
So based on Ross Stores latest earnings report and their fiscal guidance what do we value the company's stock at? Based on Ross Stores' latest earnings report and fiscal guidance provided our valuation model gives a target (full value) price for Ross Stores at $93.80 a stock. We therefore believe the stock of Post Holdings is overvalued
We usually recommend that long term fundamental or value investors look to enter a stock at least 10% below our target (full value) price which in this case is $93.80. A good entry point into the stock of Ross Stores would therefore be at $84.40 or below. Since Ross Stores is trading at well above our target price and suggested entry point into the stock we expect the stock of Ross Stores to pull back strongly from current levels to levels closer to our target (full value) price in coming weeks and months.
We usually recommend that long term fundamental or value investors look to enter a stock at least 10% below our target (full value) price which in this case is $93.80. A good entry point into the stock of Ross Stores would therefore be at $84.40 or below. Since Ross Stores is trading at well above our target price and suggested entry point into the stock we expect the stock of Ross Stores to pull back strongly from current levels to levels closer to our target (full value) price in coming weeks and months.