The Ross Stores First Quarter 2024 Earnings Release Conference Call began with a statement from the operator regarding the format of the call and a disclaimer about forward-looking statements. CEO Barbara Rentler then discussed the company's first quarter results, which were in line with guidance despite economic challenges. Total sales grew 8% and comparable store sales rose 3%.

The company's earnings per share for the first quarter of 2024 were $1.46, compared to $1.09 in the same period last year. The strongest merchandise areas were accessories and children's, while California and the Pacific Northwest were the top-performing regions. The company is updating assortments in newer markets to better cater to diverse customer preferences. Inventory levels were up, with packaway merchandise representing 41% of total inventories. The company opened 11 new Ross and seven dd's DISCOUNTS locations in the quarter and plans to open approximately 90 new stores this year. Comparable store sales were up 3%, driven by an increase in traffic. Operating margin improved by 205 basis points, primarily due to lower costs.

In the first quarter of 2024, the company saw improvements in distribution costs and buying, while domestic freight improved and merchandise margin declined. SG&A was also levered due to higher sales and lower incentives. The company also repurchased shares and is on track to buy back more in the future. The company remains focused on offering affordable brands for low-to-moderate income customers. For the second quarter of 2024, the company forecasts an increase in comparable sales and earnings per share. Total sales are expected to increase and new store openings are planned. Operating margin is projected to be higher, but merchandise margin may decline due to efforts to offer more affordable brands.

The company expects net interest income to be $37 million, with a projected tax rate of 25% and diluted shares outstanding at 332 million. Comparable store sales for the full year are expected to remain unchanged at 2-3%, with projected earnings per share of $5.79-$5.98. The CEO emphasizes the importance of offering the best values and managing expenses tightly in light of external uncertainties. The call is then opened for questions, with the first one regarding the company's efforts to offer more affordable products and potential market share gains.

In the fifth paragraph of the article, Barbara Rentler discusses the progress of their initiatives and the potential market share gained from them. Adam Orvos adds that higher-quality branded merchandise may lead to lower margins, but they believe it is the right move for long-term success. When asked about the new normal algorithm for same store sales and EBIT margin, they mention lower expenses and cannot provide a definitive answer. They also note that they will not be leveraging 200 basis points on 3% going forward.

In response to a question about the factors that contributed to the company's 2-3% guidance, Adam Orvos, the speaker, explains that the EPS beat and operating margin benefit were due to lower distribution costs, higher productivity in distribution centers, and investments in productivity. He also mentions that domestic freight costs were better than expected and fuel prices are slightly helping the company. However, he notes that there were also incentives in Q1 that will be winded out throughout the year, so they are still facing challenges from the previous year's strong performance.

Michael Hartshorn and Michael Binetti discuss the first quarter sales and comps for the company. They note that there is an outsized impact on the comps due to a disconnect between sales and fiscal basis. They expect leverage to be at 3% to 4% in the long term. They also mention that sales trends at dd's were ahead of Ross, and attribute this to improved value offerings. They clarify that the efficiencies from DC costs will likely continue through the year, but not at the same level as in Q1. The next question is from Matthew Boss, who asks about the health of the core consumer and the cadence of traffic and basket trends. Barbara responds that the core consumer is doing well, and that there has been no change in their view from three months ago. She also mentions that traffic and basket trends were strong in the first quarter, and they are confident in similar performance for the rest of the year.

The speaker is uncertain about the health of the consumer, but believes that their business is in a good position to offer value to customers. They do not disclose monthly sales information, but mention that weather, Easter calendar shift, and tax refund timing affected performance during the quarter. The average basket size was slightly higher due to a higher mix of brands, but units per transaction were lower. The low-to-moderate income consumer is still facing economic challenges, so the company's focus is on providing branded bargains at affordable prices. The speaker believes that continuing to offer value will drive sales, but acknowledges the need to execute at a higher level.

The speaker discusses the company's performance in the first quarter and acknowledges that there is room for improvement in their apparel business. They believe that by executing their strategies and focusing on brand increases and penetrations, they can improve their sales. They do not see any easy solutions or "low-hanging fruit" to improve their performance.

The company has seen increased opportunities in certain areas as they expand their brands and strategies. This has helped drive their business and improve sales. The buying environment is broad-based with some businesses having more availability than others. The company is focused on offering good quality branded products at competitive prices to satisfy customers. The dd's segment had a strong performance, and there was also positive performance in the home category.

In the paragraph, Michael Hartshorn and Barbara Rentler discuss the performance of dd's and Ross stores, with Rentler emphasizing the importance of improving value offerings and satisfying low-income customers. The home category outperformed the company, but there are still areas for improvement. Rentler also mentions using merchandise and value strategies to assess the success of these initiatives.

The company has lowered its margins in order to gain market share and is focused on passing along values to customers. They have a strategy in place to execute this and have built metrics based on the products and values they want to offer. They have seen favorability in cost of goods sold, specifically in freight and DC costs. While the recognizable brands may turn quickly, the company turns all products quickly and does not expect a significant benefit from this in terms of markdowns. They have built their strategy bottom-up.

The speaker explains that their company is constantly learning and evolving, so they did not have specific expectations for certain things to turn at certain weeks of supply. They also mention that their packaway items typically stay for about four months, but can be used for short stays if needed. They also mention that some vendors may be holding onto goods due to the recent tough weather across the country.

In paragraph 14, the speaker discusses the factors that influence closeouts and short-stay deals for vendors, including their needs, cash flow, and public status. They mention that there have been some closeouts but vendors are not feeling anxious about these products yet. The speaker also mentions that the strongest geographic performance was in California and the Pacific Northwest, with Texas above the chain and Florida slightly below. Finally, they do not disclose the implied sharp prices within their comp guides.

The speakers discuss their focus on delivering compelling values and driving sales and market share gains, rather than prioritizing a specific price point. They clarify that their strategy is to offer stronger values across all tiers, rather than just focusing on lower prices. They believe this will attract customers and help them gain market share.

The speaker discusses the company's goal of gaining market share and attracting new customers by focusing on branding, value, and assortment. They also mention the potential for revising their real estate strategy for dd's stores. The speaker then addresses a question about the performance of the apparel category, stating that they see room for improvement in execution and do not believe weather is a major factor.

The speaker discusses the challenges faced by the company's apparel business in the first quarter and their conservative approach to addressing these challenges. They mention a new strategy of sharpening prices and assortments, particularly in ladies apparel, and see potential for improvement in this area. However, they acknowledge that the apparel business is naturally challenging and any improvements will take time. They also mention that the approach to value offerings may differ by category and concept within the company.

The company sets different targets for different categories based on outside brands and their own brand strategies. The strategy is built with the belief of what it should be, but it may evolve as they learn from customers. In the home category, some parts are branded and some are not. The company's strategy is based on a good, better, best approach and will be adjusted based on customer feedback. The dd's customer has a different version of what is considered best and the company wants to offer different tiers of quality, fashion, and prices for them.

The speaker discusses the company's comp guidance of 2% to 3% for the year, which is an acceleration from the current quarter and previous years. The confidence in this acceleration is attributed to changes in assortment and pricing, as well as potential macro factors. The speaker also mentions that wages were not mentioned as a headwind and asks if the company is satisfied with current wage investments.

The executives discuss the company's guidance and plans for increasing branded bargains. They also mention that wages are stable and they will take a market-by-market approach to raising them. The growth in inventory is attributed to the fiscal calendar and goods in transit due to the Suez Canal blockage.

Laura Champine asks about the impact of the Suez Canal issue on freight costs for Ross Stores. Michael Hartshorn and Adam Orvos explain that the issue will not have a significant impact and that their contracts are already locked in. They also mention that Ross Stores has been more active on social media, but it is not related to the increase in traffic.

In response to a question about the performance of younger shoppers and attracting new customers, Michael Hartshorn, a representative from the company, states that they have always done well with the younger demographic and have seen a broad customer base in recent quarters. Another representative, Marni Shapiro, wishes them luck for the upcoming quarter. The next question is about gross margin and the sequencing for the next fiscal year. Adam Orvos, another representative, explains that domestic freight is expected to be favorable and distribution costs are under control. However, merchandise margin is expected to be lower than last year due to the company's focus on a branded strategy. He also mentions that they are still confident in their ability to drive leverage.

The company expects to see operating margin leverage between 3% and 4% with increased sales growth. The main variables affecting this are fuel prices, wages, and freight costs. The company has made progress in reducing these costs and expects to continue doing so in the future. There are no further questions at this time. The CEO thanks everyone for participating in the call.

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