The paragraph is from the Ross Stores First Quarter 2025 Earnings Release Conference Call. It begins with an introduction by the operator, mentioning that the call will feature prepared comments from management and a Q&A session, and notes that the statements made will include forward-looking information subject to uncertainties. Jim Conroy, the CEO, then expresses gratitude to the company's associates for their efforts in a challenging environment. He reports that total sales increased by 3% to $5 billion, but comparable store sales remained flat compared to the previous year. Earnings per share slightly rose to $1.47, and net income decreased to $479 million from $488 million in the first quarter of 2024.

During the first quarter, the company's sales and earnings met the high end of expectations, with operating margins stable at 12.2% year-over-year. Cosmetics performed particularly well, and the southeast region showed the strongest sales growth. The dd's discount brand maintained its momentum, contributing positively to sales and profits. Inventory levels increased by 8% due to strategic purchases, but average store inventories rose just 4% as planned. The company opened 19 new stores and plans to open a total of 90 this year while closing or relocating up to 15 older stores. Although a significant portion of merchandise comes from China, leading to potential tariff-related impacts, the company is exploring strategies to mitigate these pressures on profitability.

The paragraph discusses the company's focus on providing high-quality merchandise at competitive prices despite experiencing broad-based inflation in the retail industry. The company remains committed to maintaining lower prices compared to traditional retailers, despite unpredictability in trade policy and uncertain economic conditions. Their inventory is well-positioned to handle closeouts, and they have strategies in place to gain market share while minimizing tariff impacts. However, due to many unknown factors, they have decided to withdraw their annual guidance for the fiscal year. Historically, supply chain disruptions have allowed Ross Stores and the off-price sector to benefit, and they expect similar opportunities this time. The paragraph also provides an overview of first-quarter financial results, noting flat comparable store sales, a stable operating margin, unchanged cost of goods sold, a decline in merchandise margin due to higher ocean freight costs and tariffs, and slight increases in occupancy and distribution costs.

The company experienced a decline in filing costs and flat SG&A for the period due to offsetting factors. In the first quarter, 2 million shares were repurchased for $263 million as part of a $2.1 billion buyback plan. They aim to repurchase $1.05 billion in stock by 2025. For the 13 weeks ending August 2, 2025, comparable store sales are expected to be flat to up 3%, with earnings per share projected at $1.40 to $1.55, factoring in tariff costs. Total sales are forecasted to rise by 2% to 6%, and operating margins, affected by tariffs, are expected to be 10.7% to 11.4%. Excluding tariffs, merchandise margins should match the previous year. Higher distribution costs are anticipated due to a new distribution center opening, partially offset by lower incentives. The company plans to open 31 new stores and forecasts $29 million in net interest income, with tax rates between 24% and 25%, and diluted shares outstanding at approximately 325 million.

Jim Conroy concluded the call by highlighting the broad-based improvement seen throughout the quarter after a slow start in February, achieving the high end of guidance for both sales and earnings. He acknowledged uncertainties due to inflation, consumer sentiment, and potential tariff fluctuations but expressed confidence in navigating these challenges thanks to a seasoned executive team, a flexible business model, and a strong financial foundation. Conroy commended the team for their work in driving sales growth and managing tariffs. The call then opened for a Q&A session, with Matthew Boss from JPMorgan asking about the improvement in comparable sales throughout the first quarter and insights on May's performance relative to the expected flat to 3% outlook.

In the discussion, Jim Conroy and Michael Hartshorn address strategies to mitigate the impact of tariffs. Jim notes a broad-based improvement in business performance, reflecting optimism about the business's health moving forward. Michael outlines three main strategies to counteract tariff costs: improving vendor costing, being cautious with price increases to maintain competitive value, and leveraging existing inventory that predates tariffs. They also consider shifting the country of origin to minimize tariff effects. Additionally, Lorraine Hutchinson from Bank of America inquires about the second-quarter gross margin impact from tariffs expected to be at their peak rates.

In the paragraph, several speakers discuss the challenges of predicting the financial impact of tariffs on product costs and inventory management for the second half of the year. Michael Hartshorn explains that the second quarter was affected by costs from tariffs on existing orders and additional ticketing efforts. He mentions the unpredictability of consumer behavior and retail market dynamics as factors complicating future forecasts. Jim Conroy notes that they have already absorbed costs for goods in transit during Q2, using strategies like closeouts and packaways to mitigate tariff impacts. Mark Altschwager asks about potential concerns regarding product flow and inventory availability for the upcoming period, referencing Hartshorn's earlier comments on uncertainties affecting visibility.

Jim Conroy discusses the impact of macro trade policy on short-term strategies, particularly regarding marketing and store environment enhancements. He notes the availability of closeout goods due to tariff changes, which initially froze products in China and then released them, creating an influx. While some of these goods may not be seasonally appropriate, Ross Stores is well-positioned to manage any potential gaps in receipts. In the short term, they foresee no major issues and predict that the off-price sector, including Ross Stores, will benefit from economic and retail disruptions. Additionally, there are plans to enhance the brand and store experience, aligning with previous strategies discussed.

The paragraph is from a discussion about a company's strategic approach to transforming its brand without taking drastic or revolutionizing steps. The company plans to synchronize merchandising, marketing, and stores to modernize the brand and increase store traffic, doing so without significantly increasing expenses due to the current macroeconomic environment. During an earnings call, Tracy Kogan from Citigroup asked about cost mitigations for the second quarter and whether there was evidence of customers opting for lower-priced options. Michael Hartshorn responded that the second-quarter figures included some cost mitigations but also involved unavoidable costs due to tariffs. He further noted that sales were consistent across different income groups, suggesting there hasn't been a significant customer trade-down.

The paragraph discusses the company's cautious outlook for the second quarter due to macroeconomic and geopolitical uncertainties, including ongoing inflation and expected tariffs impacting customers around June or July. Michael Hartshorn explains that the guidance range is broad due to these factors. Additionally, he addresses the sourcing strategy, highlighting that a small portion of goods are directly sourced, which makes the company responsible for tariffs on those items. Most of their goods are obtained through a closeout business model, focusing on providing value to customers regardless of the sourcing location.

The paragraph discusses a business's sourcing and competitive strategy. Although they take possession of goods already in the country, their products are primarily sourced from China, especially in home goods and shoes. They note that the market, including all off-price players, relies heavily on imports from China, suggesting that they don't anticipate being at a competitive disadvantage. The discussion shifts to their branded strategy, initiated last year, which is now aligning with their targets and has repositioned their product assortment to offer genuine branded value. There was initially a slight impact on margins, but this has now been resolved, and no further margin headwinds are expected from this strategy.

The paragraph discusses the company's strategy related to the women's business and pricing elasticity amidst potential tariff impacts. The women's business has recently performed slightly better than the company average, indicating positive trends. Regarding pricing, the company plans to strategically adjust prices based on the item's purpose and market conditions, considering both discretionary and functional categories. Jim Conroy emphasizes that elasticity will vary across and within categories, acknowledging the influence of broader retail trends on pricing decisions. Lastly, he points out that all companies are similarly navigating challenges related to price elasticity.

The paragraph discusses retailers facing inflationary pressures and potential disruptions due to tariffs, particularly those involved in selling footwear, apparel, and home goods. Brooke Roach from Goldman Sachs asks about strategies for mitigating the impact of tariffs, specifically regarding shifting product sourcing from China to other countries. Jim Conroy explains that there is considerable flexibility in adjusting product assortments based on timing and item specifics. For example, signature items like backpacks need to be included regardless of tariffs. As the fall season approaches, retailers can adjust their assortments to manage margins and minimize tariff impacts. Vendors and the marketplace are actively working to source goods from different locations, although this process takes several months.

The paragraph is a discussion during a conference call involving questions from analysts at Wells Fargo and BMO Capital Markets. An analyst, Juliana Duque, asks about consumer trends based on income levels and their impact on traffic and spending. Michael Hartshorn responds that their analysis is based on store locations and income levels, noting that performance was broad-based across these levels, with flat comparable store sales due to a slightly higher basket size offset by a slight decline in traffic, especially earlier in the quarter. Simeon Siegel from BMO Capital Markets asks about the necessary comparable sales growth to leverage selling, general, and administrative expenses (SG&A), given the flat SG&A and flat comparables in the current quarter, and inquires about future category opportunities and challenges, particularly regarding Children's products.

In the discussed paragraph, Michael Hartshorn addresses questions about the company’s quarterly performance, mentioning that despite the varying impact of tariffs from quarter to quarter, EBIT margins were maintained. He notes no significant changes in the children's category and provides some color on overperforming product categories. Meanwhile, Jim Conroy responds to Dana Telsey's inquiries by highlighting geographic performance metrics: the Southeast was the best-performing region, while the largest markets—California, Florida, and Texas—performed in line with company averages. However, Texas border stores underperformed due to long cross-border traffic delays, slightly impacting overall results. Similarly, northern border stores experienced negative impacts, although their numbers are limited.

The paragraph discusses the performance of Ross and dd's, noting both brands showed sequential improvement over a quarter. Ross's acceleration was stronger, though it started from a lower point. dd's business contributed positively to the company's performance, supported by strategies targeting cold weather stores and young customers. The merchandise margin is expected to be neutral in the second quarter, with past pressure from brand strategy subsiding. Aneesha Sherman from Bernstein inquired about Ross's pricing strategy, noting that in the past, the company absorbed cost inflation rather than raising prices. She questioned why their approach has changed now, especially with competitors raising prices, and whether Ross can still maintain its value perception among lower-income consumers. Michael Hartshorn responded by distinguishing the brand strategy from price decisions.

The paragraph focuses on a discussion between Marnie Shapiro and Jim Conroy about store openings and inventory management. Conroy clarifies that three dd's stores were opened during the quarter. Regarding inventory strategies, he highlights the use of "packaways" to mitigate the risk of supply delays, ensuring timely availability of goods for occasions like Father's Day and holidays. Conroy emphasizes that their approach to packaways hasn't significantly changed from previous years, and they aim to maintain the flow of quality, branded products in stores while managing the impact of tariffs.

In the paragraph, Laura Champine from Loop Capital Markets questions Jim Conroy about the company's strategy regarding tariffs, given that over 50% of their goods are sourced from China. Conroy acknowledges the challenge of sourcing outside China quickly but notes that for the next six months, a significant portion of their products will still come from China. He emphasizes that their focus is on delivering a compelling product assortment at great value, often relying on closeouts and potentially resourcing merchandise from overseas. However, he doesn't provide specific future sourcing percentages. The conversation then shifts to a question from Corey Tarlowe from Jefferies, asking for more detail on traffic trends in the recent quarter, suggesting improvements despite overall declines.

The paragraph is a question-and-answer segment from a conference call. Jim Conroy discusses retail performance in the recent quarter, noting an initially slow start that improved significantly from February to April, partly due to the shift in Easter. The improvements were driven by an increase in transactions, a small rise in Average Unit Retail (AUR), and a larger basket size through more units per transaction. Conroy is pleased with growth in these areas. Jessica Taylor from Deutsche Bank inquires about changes in customer behavior or spending over the past six months, to which Jim Conroy responds that there hasn't been significant change, despite slight movements in income bands, and no clear trends have emerged from the data.

In the earnings call, the discussion highlighted a shift in consumer behavior towards functional items over discretionary ones. Angus Kelleher, speaking for Adrienne Yih, inquired about the strong performance of cosmetics in Q1. Jim Conroy attributed this success to excellent execution and a strong brand assortment, noting a trend in a particular type of cosmetic. As for consumer behavior, there were no significant changes in basket size or purchase frequency. The call concluded with an acknowledgement of the audience's participation and an announcement of the next earnings call.

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