The Ross Stores Fourth Quarter and Fiscal 2023 Earnings Release Conference Call began with prepared comments from management. The call included forward-looking statements about future growth and financial results, as well as a review of fourth quarter and 2023 performance. Sales and earnings were above expectations, driven by customers' positive response to improved assortments. Net income for the period also increased compared to the previous year.

In the fourth quarter of 2023, sales for the company grew to $6 billion with a 7% increase in comparable store sales. Earnings per share for the fiscal year were $5.56, up from $4.38 in the previous year. Net income also saw an increase, reaching $1.9 billion. The company saw strong sales in cosmetics, home, and children's departments, with broad geographic performance. However, sales at dd's discount stores were slightly lower. The company plans to slow down store growth in newer markets and focus on existing regions. Inventory levels increased by 8% at the end of the quarter.

In the fourth quarter of fiscal 2023, store inventories were up 9% compared to the previous year, with 40% of total inventories being packaway items. The company added 94 new stores in 2023 and completed a $1.9 billion stock repurchase program. A new $2.1 billion repurchase plan and a 10% increase in quarterly dividend were also approved by the Board of Directors. In the fourth quarter, comparable store sales increased by 7% due to higher traffic and positive customer response to improved assortments.

In the fourth quarter, the operating margin increased by 165 basis points, with a benefit of 80 basis points from the extra week in 2023. Cost of goods sold improved by 265 basis points, primarily due to lower ocean freight costs. However, buying costs increased by 40 basis points. SG&A delevered by 100 basis points due to higher incentive costs and wages. For fiscal 2024, the company is expecting a 2-3% increase in comparable store sales and an EPS range of $5.64 to $5.89. This is a 52-week year compared to 53 weeks in 2023, which had an additional $0.20 of EPS from the extra week. The company is taking a conservative approach to forecasting due to ongoing uncertainty in the macroeconomic and geopolitical environment.

The company plans to increase total sales by 2% to 4% for the 52-week period ending February 1, 2025, compared to the 53-week period ending February 3, 2024. This increase is affected by the extra week in the previous year and is expected to result in an operating margin of 11.2% to 11.5%. The company also plans to open 90 new locations and close or relocate 10 to 15 older stores. Other financial projections include an estimated net interest income of $143 million, depreciation and amortization expenses of $610 million, and a tax rate of 24% to 25%. Capital expenditures for the year are expected to be $840 million. For the first quarter of 2024, the company anticipates a 2% to 3% increase in comparable store sales and earnings per share of $1.29 to $1.35.

The paragraph discusses the operating statement assumptions for the first quarter and the company's plans to increase sales and operating margin. It also mentions the addition of new stores and the estimated net interest income, tax rate, and diluted shares. Barbara Rentler, the CEO, emphasizes the uncertain external environment and the impact it has on their low- to moderate-income customers' discretionary spending. She also mentions the company's plan to offer more sharply priced brands to increase market share and addresses a question about the impact on merchandise margins.

Barbara Rentler, CEO of Ross Stores, discusses the company's plan to improve gross margins through the introduction of more sharply priced brands and a tiered strategy. The company saw success with this strategy in 2023 and plans to continue building upon it in 2024. Rentler also mentions opportunities for improvement in domestic freight and credits the success of the fourth quarter to customer demand for value offerings.

In response to a question about attracting new customers and raising the initial comp view for 2024, Ross Stores executives Michael Hartshorn and Barbara Rentler discuss the company's recent performance across categories and regions. They note that the company's overall performance has been broad-based and that it is difficult to determine if it is due to new customers or existing customers spending more. They also mention that cosmetics, home, and children's categories performed well, while accessories were slightly above the chain and apparel trailed. Adam Orvos adds that there has been no change to the expected EBIT margin flow through and that they are seeing some benefit from lower incentive costs. In response to a question about the weaker than expected performance in newer markets, Rentler mentions that there has been a big push in home on gifting and that they have added new classifications, which has driven performance. She also notes that Ross Dress for Less stores in newer markets have been performing well.

The Ross new markets have been performing well, but dd's new market performance has been disappointing. The company believes this is due to not satisfying diverse customers with their assortments. The buying environment is positive, but there is still merchandise in the market. The company's strategy is to offer customers great value and pass on potential savings to drive market share. In terms of categories, the company sees the biggest opportunities in 2024 as those with sharp prices. On the shrink front, the company has seen improvements and expects this trend to continue in 2024.

The speaker discusses the opportunity for the brand strategy being put in place for '24 and mentions the need to improve the apparel business. Another speaker discusses investments made to combat external theft and organized crime. The questioner asks about the impact of the extra week on gross margin in the fourth quarter and how the company built to the comp guidance for the year. The speaker responds that the merchandise strategy is expected to accelerate throughout the year, with a focus on being more intentional in certain businesses.

The company expects their apparel business to improve in the coming year and is working to close the gap in EBIT margin compared to pre-COVID levels. They believe that sustained strong sales growth, investments in capabilities, and cost savings will contribute to this goal. The company's main priority for the year is to gain market share through diligent execution of their strategy.

The company has been focusing on gaining market share and understanding the customer in order to satisfy their needs in newer markets. The dd's store strategy is different from Ross, with a focus on finding the right assortment for different ethnicities. The company saw a 7% comp driven by traffic and flat average basket, with slightly higher AUR and lower items per transaction. The outlook for SG&A expense for the year takes into account wage and other investments, but it is not specified what the assumptions are. The company is also seeing changes in the wage environment currently.

Adam Orvos, CEO of a company, says that wage increases are stabilized, and they are only increasing wages where it is required by state minimum wage laws. They have been able to offset the pressure of minimum wage changes through efficiencies. In response to a question about freight, Michael Hartshorn, another executive, clarifies that they expect domestic freight to be a benefit this year, but not as much as in 2023. They may also see some slight benefit from lower fuel prices on the domestic side. However, they are closely monitoring the situation with the Suez Canal and its potential impact on ocean freight.

Adam Orvos, responding to a question about ocean freight, states that the biggest variable is the ongoing conflict. The next question is from Simeon Siegel, who asks about any potential trade down benefit and the impact of sharply priced brands on AUR (average unit retail). Michael Hartshorn responds that it's hard to see a trade down customer, as performance was broad based across geographies and income levels. The comp was driven by transaction data, with the average basket being flat and weather having no impact. Barbara Rentler adds that AUR fluctuates based on the mix and value of goods, and their strategy is to offer great value at sharp prices.

The company is not aiming for a specific AUR and expects it to fluctuate throughout the year. They do not disclose the number of disappointing stores in their regions, but Ross stores are performing well. They plan to close 10-15 stores, but have not decided which ones yet. The pricing strategy for Sharp Place is focused on finding a balance between sharp opening prices and gradually increasing margins, rather than taking shorter margins here and there.

Barbara Rentler, CEO of a retail company, explains their pricing strategy. They focus on the value of the products and not just the price. They have been adding more brands at different price points and assessing them based on customer response. The company has been actively seeking new resources and remixing products to offer at competitive prices. Beauty is also a successful category for them, with good margins. The company is constantly evaluating and improving their strategies based on customer feedback.

The company's focus is on providing the best values and brands for customers, with a merchant-driven process. Comps were slightly stronger during the peak holiday period, and investments are being made in stores to improve efficiency and offset rising minimum wages. These include technology investments such as self-checkout and handheld devices.

The speaker discusses the rollout of initiatives for the next fiscal year, which will offset the minimum wage increase. They also mention potential changes to the store profile in 2024 and the current size of the merchant team. The impact of weather on the company's comps in January is also addressed.

In the paragraph, Corey Tarlowe asks Michael Hartshorn about the company's new store productivity and how they are investing their capital. Hartshorn explains that 60-65% of their new stores will be Ross stores and the rest will be dd's, with similar sales levels to existing stores. He also mentions that 40% of their capital is going towards opening new distribution centers and that they are exploring the use of AI to find efficiencies in the business. When asked about future store growth, Hartshorn states that their long-term store target remains at 2,900 Ross stores and 700 dd's stores.

The company expects to open about 100 stores per year, but is comfortable with the current plan of 75 Ross stores annually. They do not have concerns about competition for real estate and have a healthy pipeline. The question is asked about inventory levels, and the company explains that post-holiday is their lowest inventory period and they manage inventory based on turn. They aim to beat the turn from the previous year in order to leverage markdowns.

Krisztina Katai asks about the competitive landscape and how other retailers are planning their inventories for the spring. Barbara Rentler explains that their inventory planning is based on sales and churn, and they chase receipts to drive sales and profit. The decision on which categories to focus on is driven by merchants and their ability to add assortment and show value. The business model is flexible, allowing for adjustments in inventory levels based on sales performance.

Barbara Rentler, CEO of Ross Stores, discusses the company's strategy for taking market share in the off-price retail industry. She explains that they aim to satisfy their current customers and attract new ones, as there are opportunities for growth with the closure of other stores. The company's focus on customer satisfaction and the current market trends have helped fuel their success.

This summary was generated with AI and may contain some inaccuracies.