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Glitch Lingers at Ross Stores

Shares of Ross Stores (ROST - Get Report) fell Wednesday after the company said second-quarter profit dropped by almost half due in part to problems with a new merchandising system.

Further, the company reportedly said in a post-earnings conference call that it is operating with less visibility than it has in the past and that results so far in August have been softer than expected.

Ross said earlier Wednesday that it "made progress during the quarter in resolving many of the problems we have experienced with this new system. We continue to make progress addressing the information requirements most important to the buying process and believe that most of these data needs will be addressed in the next few weeks, with some planned to be complete later in the third quarter."

Shares of the company were lately off $1.21, or 5%, at $22.91, approaching their 52-week low of $21.98, reached on Aug. 4. Earlier in the session it seemed investors believed the company had dealt with the problems, as the stock rose about 2%.

Before the bell Wednesday, Ross said it earned $32.6 million, or 22 cents a share, in the three months ended July 31, compared with $54.6 million, or 35 cents a share, in the year-earlier period. Results included a non-cash charge of 7 cents a share from a write-down related to the company's former headquarters and distribution center. Sales in the quarter rose 4% to $1.01 billion, while same-store sales decreased 3%.

Analysts were expecting earnings of 29 cents a share on $1.02 billion in revenue.

"We believe our business in the second quarter was affected by problems associated with our new core merchandising system and the resulting limitations these placed on our ability to identify and respond to changes in customer trends -- especially in what appears recently to be a more difficult retail climate. This situation resulted in below-plan sales and a decline in gross margin," Ross said.
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