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Investing.com -- Ross Stores Inc (NASDAQ:ROST) shares tumbled nearly 12% after the discount retailer issued weaker-than-expected guidance for the second quarter, citing concerns over tariffs and macroeconomic uncertainty.
The company reported first-quarter earnings per share of $1.47, beating analyst estimates of $1.43. Revenue came in at $4.98 billion, surpassing the consensus of $4.94 billion and up 2.6% YoY. Comparable store sales were flat compared to the same period last year.
For the second quarter, Ross Stores expects earnings per share between $1.40 and $1.55, well below analyst estimates of $1.66. The guidance includes an estimated $0.11 to $0.16 per share impact from announced tariffs.
The company also expects a 90-120 basis point (bps) headwind for Q2 gross margin (GM).
"This was not only the cost impact of direct import goods that were suddenly tariffed, but also of heavier use of packaway, costs of ticketing items, and a continued heavy skew to China in the direct imports mix," Bernstein analysts led by Aneesha Sherman said in a note.
"We expect to see a net negative margin impact for the year, as well as slightly slower comps from price raises in the second half (H2)," they added.
Separately, Morgan Stanley (NYSE:MS) analysts said they were "more negative on ROST than consensus/investors heading into the print, & think 1Q validated that view."
"The print left us incrementally convicted in our negatively tilted Equal-weight rating," they added, trimming their price target on the stock to $126 from $128.
CEO Jim Conroy commented on the outlook, stating, "Heightened macroeconomic and geopolitical uncertainty persists, most notably prolonged inflation and evolving trade policies. While we directly import only a small portion of our merchandise, more than half of the goods we sell originate from China."
The company withdrew its previously provided annual sales and earnings guidance due to the uncertain trade environment. Conroy added, "The volatility of trade policies and the corresponding impact on the economy, the consumer, and our profitability is highly unpredictable."
During the first quarter, Ross Stores repurchased 2.0 million shares for $263 million and remains on track to buy back $1.05 billion in common stock during fiscal 2025.
Luke Juricic contributed to this report.