UPDATE 2-Ross Stores profit beats, margins hit record

* Q1 EPS $1.16 vs Street view $1.16

* Q1 same-store sales up 10 pct; sees Q2 up 3-4 pct

* Sees Q2 EPS $0.95-$0.99 vs Street view $1

* Sees FY EPS $4.11-$4.24 vs Street view $4.21

* Shares up 1.2 pct
(Rewrites, adds CEO quote, analyst comment, updates share
move)

By Phil Wahba

NEW YORK, May 20 (BestGrowthStock) – Ross Stores Inc (ROST.O: )
reported a higher-than-expected quarterly profit, helped by
bargain-hunting shoppers, and said operating margins hit an
all-time high, sending its shares up.

But Ross maintained a profit outlook that fell short of
Wall Street expectations, raising questions about whether the
off-price retailer can hang onto shoppers in the long term as
the economy heals.

“Consumers are finally returning to full-price retailers,”
Jefferies analyst Randal Konik wrote in a research note.
“Average unit retails (spending per visit) could fall soon
while traffic trends could stall or decline.”

Sales at Ross stores open at least a year, or same-store
sales, rose 10 percent during the quarter, while overall sales
rose 14.4 percent to $1.93 billion.

The company said its operating profit margin had hit an
all-time high, rising 3.2 percentage points to 12.1 percent,
and that it was on track to buy back $375 million in stock by
the end of its fiscal year.

Ross Chief Executive Michael Balmuth in a statement
credited his company’s “favorable position as a value retailer
in the current economic and retail environment.”

Ross and its larger rival TJX Cos Inc (TJX.N: ) buy excess
inventory from vendors and sell them at steep discounts of as
much as 60 percent compared to department stores.

Ross said net income in the first quarter, which ended May
1, was $142.3 million, or $1.16 per share, in line with
analysts’ average forecast, according to Thomson Reuters
I/B/E/S. That is up 55.8 percent from $91.4 million, or 72
cents, per share a year ago.

Ross shares were up 62 cents at $52.35 on the Nasdaq.

TEPID OUTLOOK

On Thursday morning, the economy got a fresh jolt of bad
news, when the U.S. government released data showing the number
of jobless claims unexpectedly rose last week. [ID:nN20125298]

In another sign that the economic recovery has some way to
go, Dollar Tree Inc (DLTR.O: ), which sells most of its
merchandise for $1, reported stronger than expected earnings
and raised its profit forecast. [ID:nN20242554]

While such economic conditions typically favor discounters
and off-price retailers, Ross maintained its view that
same-store sales will rise at a more moderate pace of 3 percent
and 4 percent.

Ross, based in Pleasanton, California, still expects
second-quarter earnings between 95 cents and 99 cents per
share, below Wall Street analysts’ average forecast of $1.

The chain’s full-year forecast of earnings in the range of
$4.11 to $4.24 per share compared to Wall Street expectations
of full-year earnings of $4.21 per share.

Earlier this week, TJX also reported higher net income
along with a disappointing profit outlook. [ID:nN18197193]

As of May 1, Ross operated 1,021 stores, up from 974 a year
earlier.

Investing Analysis

(Reporting by Phil Wahba, editing by Dave Zimmerman)

UPDATE 2-Ross Stores profit beats, margins hit record