Ross Stores shares climbed 5.3% in extended trading Thursday after the discount retailer lifted its full-year sales and profit forecasts, signaling that budget-conscious shoppers continue to seek bargains even as household budgets tighten.
The stock rose to $228.70 at 5:57 p.m. Eastern, recovering from a 0.3% decline to $217.19 at the market close. The move came after the company reported first-quarter results that surpassed Wall Street expectations.
Strong Quarterly Performance
For the period ended May 2, Ross Stores posted total sales of $6.0 billion, up 21% from the prior year. Comparable-store sales surged 17%, well above the company's earlier guidance. Net income rose to $650 million, or $2.02 per share, compared with $479 million, or $1.47 per share, a year earlier. Analysts had expected earnings of $1.73 per share on revenue of $5.64 billion.
Chief Executive Jim Conroy attributed the strong performance to robust customer traffic, effective marketing, improved merchandising, and better store execution. He noted that comparable sales growth was driven by higher transaction volumes and "healthy increases in customer count" across income groups, ethnicities, and age brackets, including younger shoppers.
Raised Full-Year Outlook
Ross now expects fiscal 2026 same-store sales to rise 6% to 7%, up from its previous forecast of 3% to 4%. The company also raised its earnings guidance to $7.50 to $7.74 per share, compared with the earlier range of $7.02 to $7.36. For the second quarter, Ross projects comparable-store sales growth of 6% to 7% and earnings of $1.85 to $1.93 per share.
The updated outlook will test whether the first-quarter surge was sustainable or merely a temporary boost from tax refunds and a short-term traffic spike.
Improved Margins and Share Buybacks
Operating margin improved to 13.4% from 12.2% a year ago, driven by better merchandise margins, lower distribution costs, and reduced domestic freight expenses. Higher incentive costs partially offset those gains after the earnings beat.
Ross repurchased 1.5 million shares for $319 million during the quarter and remains on track to buy back $1.275 billion in stock this fiscal year. The retailer also plans to open approximately 110 new stores, including 85 Ross Dress for Less locations and 25 dd's DISCOUNTS outlets.
Industry Context
The upbeat report follows a similar move by rival TJX Companies, owner of T.J. Maxx and Marshalls, which raised its annual targets earlier this week. Both companies are benefiting from a shift in consumer behavior as shoppers increasingly seek discounts amid persistent inflation and tighter budgets.
Guggenheim Securities analyst Simeon Siegel noted that TJX is viewed as a destination for "expensive clothing cheap," a positioning that resonates when consumers pull back on spending.
Risks and Headwinds
Despite the positive momentum, Ross flagged several risks, including inflation, tariffs, trade policy changes, fuel costs, weather disruptions, supply-chain issues, and shifts in consumer demand. Chief Financial Officer William Sheehan warned that higher fuel costs would pressure freight expenses in the second quarter and throughout the year.
Headquartered in Dublin, California, Ross operates 1,917 Ross Dress for Less and 366 dd's DISCOUNTS stores. The company is listed on both the S&P 500 and Nasdaq 100.
