Ross Stores Lowers Targets

The off-price retailer has had weak August sales and margin pressure.
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Ross Stores

(ROST) - Get Report

said Wednesday that second-quarter earnings rose 7.2%, meeting Wall Street's expectations, but the off-price retailer lowered its guidance for the full year amid weaker-than-expected sales and gross margin pressure.

The company earned $45.4 million, or 32 cents a share, in the quarter ended July 29, compared with $42.3 million, or 29 cents a share, a year ago. Analysts surveyed by Thomson First Call expected earnings of 32 cents a share forthe most recent quarter.

Second-quarter revenue rose 12% from a year ago to $1.31 billion, in line with the analysts' expectations. Same-store sales rose 4% from a year earlier.

"Second quarter sales and earnings were at the high end of our initial forecast for the period, benefiting from broadbased geographic and merchandise trends," the company said. "As a percent of sales, improvements in distribution costs and merchandise margin were offset by higher shrink accruals, freight, store and occupancy expenses."

Looking ahead, though, Ross said same-store sales for the first two weeks of August were up only 2%, below its plan. The company also noted that it has residual inventory and clearance levels that might pressure gross margins.

The company forecast third-quarter earnings of 24 cents a share to 27 cents a share. Analysts predict earnings of 29 cents a share. Ross expects to earn $1.54 a share to $1.63 a share for full year, slightly lower than its prior view of $1.58 to $1.66. Analysts are forecasting earnings of $1.63 a share for the full year.

Same-store sales are projected to rise 1% to 3% in the third and fourth quarters and 3% to 4% for the full year.

Ross shares were trading at $23.28, down 33 cents, or 1.4%.

This story was created through a joint venture between TheStreet.com and IRIS.