Ross Stores Gears Up for Q1 Earnings: Will Investors See a Surprise?

Ross Stores, Inc. ROST is expected to register growth in its top line and a decline in its bottom line when it reports first-quarter fiscal 2025 earnings on May 22, after market close. The Zacks Consensus Estimate for earnings is pegged at $1.43 per share, implying a 2.1% drop from $1.46 reported in the year-earlier period. The consensus mark has moved up a penny in the past 30 days.

The consensus estimate for quarterly revenues is pegged at $4.97 billion, indicating growth of 2.3% from the year-ago quarter’s reported figure.

ROST has a trailing four-quarter earnings surprise of 7.7%, on average. In the last reported quarter, the company posted an earnings surprise of 8.5%.

Ross Stores, Inc. Price, Consensus and EPS Surprise

Ross Stores, Inc. price-consensus-eps-surprise-chart | Ross Stores, Inc. Quote

Earnings Whispers for ROST Stock

Our proven model conclusively predicts an earnings beat for Ross Stores this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. You can uncover the best stocks before they are reported with our Earnings ESP Filter.

Ross Stores currently has an Earnings ESP of +1.27% and a Zacks Rank of 3.

Key Factors to Influence ROST’s Q1 Results

Ross Stores’ first-quarter fiscal 2025 performance is expected to have been bolstered by strong growth across its merchandise categories, driven by positive customer responses across both banners. The company’s ability to offer value-driven bargains continues to resonate with price-conscious consumers, particularly in an environment where discretionary spending remains cautious.

Ross Stores is expected to have benefited from its off-price retail model to attract value-focused shoppers. Additionally, its micro-merchandising strategy optimizes product allocation, ensuring inventory aligns with regional consumer preferences and supports margins. The company’s proven business model is likely to have driven higher traffic, boosted same-store sales growth and improved profitability. It foresees its fiscal first-quarter EPS to be $1.33-$1.47 compared with $1.46 in the prior-year quarter.

Consistent execution of store expansion plans is also expected to have supported top-line growth. These efforts have focused on expanding penetration in existing and new markets, with contributions from new stores anticipated to be reflected in the to-be-reported quarter’s results.
However, Ross Stores has been cautious regarding the ongoing macroeconomic and geopolitical uncertainties and persistent inflation, which have been impacting consumer spending on essentials like housing, food and gasoline.

On its last reported quarter’s earnings call, the company expected some of the recent challenges to be temporary. For the first quarter of fiscal 2025, Ross Stores anticipates comps between a decline of 3% and flat compared with 3% growth in the prior-year quarter. Total sales are likely to be down 1% to up 3% year over year, while operating margin is predicted in the band of 11.4-12.1% compared with 12.2% recorded last year. This decline is mainly owing to deleveraged sales and unfavorable timing of packaway-related costs. Merchandise margin is likely to be down slightly in the impending quarter. We expect an operating margin of 11.7% for the fiscal first quarter. Our model expects a 50 bps contraction in the operating margin.

Our model expects a year-over-year sales increase of 2.4% and a comps decline of 0.6% for the fiscal first quarter.

ROST’s Stock Price Performance & Valuation Picture

From a valuation perspective, Ross Stores is trading at a discount relative to industry benchmarks. The company has a forward 12-month price-to-earnings of 23.13x, lower than the Retail-Discount Stores industry’s average of 32.49x.

The recent market movements show that ROST’s shares have gained 9.5% in the past three months compared with the industry's 3.8% growth.

Other Stocks With the Favorable Combination

Here are some other companies, which according to our model, have the right combination of elements to beat on earnings this reporting cycle.
 
Five Below, Inc. FIVE currently has an Earnings ESP of +4.18% and a Zacks Rank of 3. FIVE is likely to register a top-line increase when it reports fourth-quarter fiscal 2025 results. The Zacks Consensus Estimate for its quarterly revenues is pegged at $961.1 billion, indicating an 18.4% rise from the figure reported in the prior-year quarter. You can see the complete list of today’s Zacks #1 Rank stocks here.

The consensus estimate for Five Below’s earnings is pegged at 80 cents per share, implying a 33.3% jump from the year-ago quarter. FIVE delivered an earnings surprise of 40.5% in the last quarter.

Gap GAP has an Earnings ESP of +5.58% and a Zacks Rank of 3 at present. GAP is likely to register top-line growth when it releases first-quarter 2025 results. The Zacks Consensus Estimate for its quarterly revenues is pegged at $3.42 billion, which implies growth of 0.8% from the figure reported in the year-ago quarter.

The consensus estimate for GAP’s quarterly earnings has increased a penny in the past 30 days to 44 cents per share, implying growth of 7.3% from the year-ago quarter’s number. GAP delivered an earnings surprise of 77.5%, on average, in the trailing four quarters.

American Eagle Outfitters Inc. AEO has an Earnings ESP of +9.09% and a Zacks Rank of 3 at present. AEO is likely to register a top-line decline when it releases first-quarter 2025 results. The Zacks Consensus Estimate for its quarterly revenues is pegged at $1.08 billion, which implies a decline of 5.30% from the figure reported in the year-ago quarter.

The consensus estimate for AEO’s quarterly earnings has remained flat in the past 30 days at 11 cents per share, implying a dip of 67.7% from the year-ago quarter’s number. AEO delivered an earnings surprise of 9.1%, on average, in the trailing four quarters.

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This article originally published on Zacks Investment Research (zacks.com).

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