The paragraph is an introduction to Ross Stores' third quarter 2024 earnings release conference call. It includes forward-looking statements subject to risks and uncertainties, as noted in the company's filings with the SEC. Barbara Rentler, the CEO, announces the upcoming leadership transition with Jim Conroy joining as CEO-elect, transitioning to CEO on February 2, 2025. Rentler will move into an advisory role in fiscal 2025, supporting the company through March 2027. The earnings results are set to be discussed further in the call.

In the third quarter of 2024, the company faced a slowdown in sales, attributed to high costs affecting low to moderate-income customers and external factors like severe weather. Despite disappointing sales, earnings exceeded expectations, with an operating margin increase due to lower freight and distribution costs. Total sales rose to $5.1 billion, and net income grew to $489 million, with earnings per share increasing to $1.48. Year-to-date sales reached $15.2 billion with a three percent rise in comparable store sales. The strongest merchandise categories were cosmetics, accessories, and children's items, with California and Texas performing well regionally. DD's Discounts outperformed Ross's results, and inventories increased by nine percent overall compared to last year.

The company expanded its store network by adding 89 new locations this year, including both Ross and DD's Discount stores, while planning to close or relocate seven locations by year-end. In the third quarter, comparable store sales grew by 1%, and the operating margin improved to 11.9%. Significant cost improvements were seen in goods sold, buying, distribution, and domestic freight, although there were slight increases in occupancy costs and decreases in merchandise margins. The company repurchased 1.8 million shares for $262 million, targeting a total of $1.05 billion in stock buybacks for the year. For the fourth quarter, they anticipate a 2-3% rise in comparable store sales and project earnings per share to be between $1.57 and $1.64. This figure is lower than the previous year's, partially due to timing issues with packaway-related expenses.

The company expects earnings per share for the fiscal year ending February 1, 2025, to be between $6.10 and $6.17, compared to $5.56 the previous year, which had an extra week boosting earnings by $0.20. The fourth-quarter sales are projected to decline by 1% to 3%, and the operating margin is expected to decrease to 11.2% to 11.5% from 12.4% the prior year, partly due to last year's extra week and changes in merchandise margins. Net interest income is projected at $24 million, with 329 million weighted average diluted shares outstanding. The call concludes with Barbara Rentler expressing confidence in improving merchandise execution for growth, followed by a question and answer session.

The paragraph involves a Q&A session where Matthew Boss from JPMorgan asks Barbara Rentler about opportunities to enhance merchandising execution and her confidence in achieving two to three percent comps for the fourth quarter. Barbara explains that there were execution issues in some business areas that are being addressed, particularly related to product assortment and brand strategy. She expresses confidence in the stronger performance of key categories like gifting, cosmetics, and accessories during the holiday season, which supports their guidance. Additionally, Adam is asked about gross margin considerations, especially concerning merchandise margin drivers between the third and fourth quarters.

The paragraph discusses the company's strategies and challenges, including execution issues and weather impacts in Q3. Adam Orvos responds to questions about Q3 and Q4, mentioning a 60 basis point decline in merchandise margin in Q3 due to better-than-expected shrink results. Looking ahead to Q4, there might be added pressure on merchandise margin as they aim to offer better-priced brands for the holiday season. Domestic freight is expected to remain stable, barring fuel cost changes, while distribution costs may increase due to a packaway shift. Incentives should remain favorable, and there's a mention of a fifty-third week impact. Matthew Boss comments positively, and Mark Altschwager asks Barbara about her transition to an advisory role, seeking insights on her focus during this period.

In the paragraph, Barbara Rentler discusses her focus on spending time with Jim, a seasoned new CEO, to help him onboard and support merchandising efforts. She emphasizes the importance of their brand strategy to market share gains and states there won't be significant changes despite ongoing iterations. Rentler also notes that Jim will complement the existing team strengths in merchandising and operations. In response to Paul Lejuez's questions, she clarifies that merchandise execution issues are separate from brand strategy and that the brand strategy evolves based on customer feedback.

The paragraph is a part of a Q&A session during a financial discussion, where Michael Hartshorn and Paul Lejuez discuss the impact of shrinkage on EBIT margins, particularly benefiting from inventory adjustments in the third quarter. They also mention that shrinkage is expected to remain stable compared to 2023. Brian expands on the branded strategy and its effect on merchandise margins, explaining that as brand relationships grow, they expect margins to improve over time. Lorraine Hutchinson raises the question of margin headwinds, and Chuck Grom asks about sales cadence, while also congratulating Barbara on her upcoming retirement.

Michael Hartshorn discusses how sales comps were strongest early in the quarter, influenced by traffic, and were affected by weather changes. Simeon Siegel asks about brand strategy shifts and customer response. Barbara Rentler explains that while some branches are performing well and don't need changes, others require bolder adjustments. The focus is on offering a good range from moderate to higher pricing, depending on customer response in different areas.

The paragraph discusses the varying levels of customer acceptance on a company's product journey, highlighting that they're still figuring out customer preferences, particularly in the challenging ladies' apparel sector. The focus is on offering a mix of brands at different price points, rather than increasing the Average Unit Retail (AUR). The strategy is value-driven, aiming to cater to diverse customer preferences and maintain an engaging shopping experience.

The paragraph features a financial discussion during an earnings call, where Adrienne Yih from Barclays congratulates Barbara on her upcoming retirement and asks about brand penetration and merchandise margins. Adrienne seeks clarity on the extent of adjustments made to their assortment, specifically regarding brand tweaks and their impact on the margin structure across brands. She inquires if margin pressure can be offset by achieving better than historical comparable sales growth. Michael Hartshorn indicates he will address her last question first.

The paragraph discusses the company's plans for operating margin growth, which will be driven by new store openings, comparable store sales growth, operating margin improvements, and share buybacks. The focus is on technology investments and cost control to counteract any negative impacts on merchant margins. The company believes that, over time, they can increase merchant margins through vendor relationships and understanding customer preferences. Barbara Rentler emphasizes the importance of responding to customer feedback regarding brand offerings, acknowledging that branding needs vary by product category and are difficult to quantify. She highlights that the company's approach is to adapt to customer demands without committing to specific targets.

The paragraph discusses the performance of Ross Stores and DD's Discounts. Ross Stores evaluates their business by analyzing how quickly merchandise moves and adjusting their strategies accordingly. In response to a question about consumer engagement, it is noted that DD's Discounts is currently outperforming Ross Stores. Michael Hartshorn attributes this success to effective adjustments in value and fashion offerings, which have resonated well with consumers, particularly in newer markets.

In the paragraph, there is a discussion about sales performance and customer engagement in the context of weather events and early holiday shopping. Barbara Rentler mentions that sales started strong in the third quarter but were impacted by weather, though customers returned as weather conditions improved. She also notes that an earlier Christmas might affect shopping dynamics. Despite these factors, there hasn't been a significant shift in customer demographics such as income or age. Alex Straton from Morgan Stanley asks if the full quarter guidance has changed since the last update, aside from a packaway shift, and inquires about the confidence behind the embedded comp acceleration in the quarter-to-date figures.

In the paragraph, Michael Hartshorn discusses the company's unchanged guidance and highlights the impact of unfavorable weather on the third quarter, which they do not expect to continue into the fourth quarter. They feel optimistic about their merchandise assortments and holiday plans. Michael Binetti from Evercore asks about the substantial margin beat and if there are any changes in leverage points or merchandise margin trends. Hartshorn attributes the margin beat to better merchandise margins and cost management, emphasizing that the shrink adjustment is a one-time event. He confirms that their leverage point target of 3-4% comp growth remains unchanged and acknowledges the one-time nature of packaway.

The paragraph captures a discussion during a conference call where Michael Binetti and Michael Hartshorn address financial performance aspects of a company, noting that EPS has benefited from higher interest income. Despite potential future interest rate cuts, the leverage point remains stable and unaffected by one-time factors from the past quarter. Dana Telsey from the Telsey Advisory Group inquires about the company's strategy concerning potential tariff implementation and management changes, specifically regarding DD's performance. Michael Hartshorn responds that the company will monitor tariff developments and focus on offering competitive pricing without leading price increases. Barbara Rentler adds that DD's strategy will continue building on its current success without major changes. Ike Boruchow from Wells Fargo is queued for the next question.

In the paragraph, Adam provides an update on the freight situation, with a slight improvement expected in domestic freight for Q4 and minimal impact on ocean freight, but he notes potential disruptions related to East and Gulf Coast port strikes. He promises further updates next year. Jay Sole from UBS asks Barbara about inventory-related issues affecting Q3 performance, questioning if inventory was purchased too early, but Barbara clarifies that this was not the case.

The paragraph involves a discussion about the potential impact of dollar store closures on DD's and Ross stores. Marni Shapiro from Retail Tracker inquires about possible opportunities for DD's and Ross as dollar stores close, and whether customers have shifted their purchases to them. Michael Hartshorn emphasizes the distinct difference in merchandise and limited overlap with dollar stores, which primarily sell consumables, implying little direct impact or opportunity for significant gain. Barbara Rentler also notes that while there is some business in consumables, the overlap is minimal, suggesting limited potential for capitalizing on the closure of dollar stores.

In the paragraph, Aneesha Sherman from Bernstein asks about the performance difference between the "good" and "best" segments in a brand strategy, as well as the impact of weather improvements on store performance. Michael Hartshorn responds that they have observed improvements in sell-throughs in markets affected by weather changes. Barbara Rentler discusses the quick turnover in stores, emphasizing the importance of fitting the right product to the right value to ensure fast sales. She stresses the importance of value and product availability in driving sales. Following this exchange, John Kernan from TD Cowen asks about real estate and store growth plans for Ross Stores and its competitors over the next few years.

The paragraph discusses the real estate outlook for Ross Stores and the off-price retail sector. Michael Hartshorn expresses confidence in their current real estate situation, despite limited new construction and increased competition for preferred locations. He highlights their strong team and strategic planning to maintain a healthy real estate pipeline. In response to a question from Laura Champine about the new CEO's challenges and team structure, Barbara Rentler assures that the incoming CEO will have experienced direct reports and a strong support team with substantial tenure in the industry, suggesting the new CEO's external background will complement the existing team well.

The paragraph discusses the speaker's decision to step down from their position once they found the right successor, Jim, who was chosen after considering both internal and external candidates. The speaker emphasizes that the timing of this decision was not influenced by the company's brand strategy but rather by the presence of the right person. They express confidence in Jim's capabilities and highlight the long tenure of experienced staff within the company who will support him. The decision to appoint Jim was opportunistic but deemed beneficial for the company's future.

The teleconference concluded with no further questions, and Barbara Rentler thanked the participants, wishing them a happy holiday. The operator then officially ended the call, inviting participants to disconnect.

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