Earnings call transcript: Ross Stores Q2 2025 beats EPS expectations

Ross Stores Inc., a prominent player in the Specialty Retail industry according to InvestingPro, reported its second-quarter earnings for 2025, showcasing a robust performance with earnings per share (EPS) of $1.56, surpassing the forecasted $1.53. Revenue slightly missed expectations, coming in at $5.53 billion against a forecast of $5.54 billion. With a market capitalization of $47.55 billion, the company’s stock experienced a slight downturn, closing at $146.35, a decrease of 0.5% in regular trading hours, though it saw a modest rise in after-hours trading. Based on InvestingPro’s Fair Value analysis, the stock appears fairly valued at current levels.

Key Takeaways

• EPS exceeded expectations, reaching $1.56 compared to the forecast of $1.53.
• Revenue fell short of projections, totaling $5.53 billion versus $5.54 billion expected.
• Stock price decreased by 0.5% during regular trading but gained 0.38% in after-hours.
• Operating margin decreased by 95 basis points, impacted by tariff-related costs.
• The company opened 31 new locations and plans further expansion.

Company Performance

Ross Stores demonstrated solid performance in the second quarter of 2025, with total sales increasing by 5% to $5.5 billion. The company maintains strong financial health with a current ratio of 1.55, indicating robust liquidity. Comparable store sales rose by 2%, reflecting the company’s successful strategies in merchandise and operations. The cosmetics and ladies’ apparel segments were standout performers, contributing significantly to the sales growth. InvestingPro subscribers have access to 10+ additional key insights about Ross Stores, including detailed analysis of its competitive position and growth metrics.

Financial Highlights

• Revenue: $5.53 billion, up 5% year-over-year
• Earnings per share: $1.56, down from $1.59 in the previous year
• Operating margin: 11.5%, a decline of 95 basis points

Earnings vs. Forecast

Ross Stores delivered an EPS of $1.56, surpassing the forecast of $1.53 by 1.96%. Despite this positive earnings surprise, revenue slightly missed expectations by 0.18%. This mixed result reflects some challenges in achieving revenue targets while maintaining profitability.

Market Reaction

The stock of Ross Stores closed down 0.5% during regular trading but showed resilience in after-hours trading, rising 0.38% to $146.90. This movement suggests a cautious but optimistic investor sentiment, potentially driven by the positive EPS surprise despite the revenue miss.

Outlook & Guidance

Looking forward, Ross Stores projects Q3 EPS between $1.31 and $1.37, and Q4 EPS between $1.74 and $1.81. The company anticipates a 2% to 3% growth in comparable store sales, building on its trailing twelve-month revenue of $21.26 billion. Full-year EPS guidance is set between $6.08 and $6.21, slightly below last year’s $6.32, factoring in potential trade policy impacts. The company’s strong dividend history, having maintained payments for 32 consecutive years with a current yield of 1.11%, demonstrates its commitment to shareholder returns. For comprehensive analysis of Ross Stores’ financial outlook and peer comparison, explore the detailed Pro Research Report available on InvestingPro.

Executive Commentary

CEO Jim Conroy emphasized, "We strongly believe this strengthens our competitive position to capture market share over the balance of the year." He highlighted the off-price sector’s advantages during retail disruptions, stating, "The off-price sector has historically benefited from disruptions within the supply chain and retail industry."

Risks and Challenges

• Tariff-related costs: These impacted earnings by approximately $0.11 per share.
• Market saturation: Potential challenges in expanding into new markets.
• Trade policies: Expected to impact EPS by $0.22 to $0.25 per share.
• Supply chain disruptions: Could affect merchandise availability and pricing.
• Competitive pressure: Maintaining a price umbrella against mainstream retailers.

Q&A

During the earnings call, analysts inquired about Ross Stores’ strategies for mitigating tariffs, its pricing approach, and consumer response. The company addressed inventory management and elaborated on its store renovation and expansion strategies, reaffirming its commitment to growth and innovation.

Full transcript - Ross Stores Inc (ROST) Q2 2026:

Moderator/Operator, Ross Stores: Afternoon, and welcome to the Ross Stores Second Quarter twenty twenty five Earnings Release Conference Call. The call will begin with prepared comments by management followed by a question and answer session. Before we get started, on behalf of Ross Stores, I would like to note that the comments made on this call will contain forward looking statements regarding expectations about future growth and financial results, including sales and earnings forecasts, new store openings and other matters that are based on the company’s current forecast of aspects of its future business. These forward looking statements are subject to risks and uncertainties that could cause actual results to differ materially from historical performance or current expectations. Risk factors are included in today’s press release and in the company’s fiscal twenty twenty four Form 10 ks and fiscal twenty twenty five Form 10 Q and eight Ks on file with the SEC.

And now I’d like to turn the call over to Jim Conroy, Chief Executive Officer.

Jim Conroy, Chief Executive Officer, Ross Stores: Good afternoon. Joining me on our call today are Michael Hartshorn, Group President and Chief Operating Officer Adam Borvis, Executive Vice President and Chief Financial Officer Bill Sheehan, Group Senior Vice President and Deputy Chief Financial Officer and Connie Kao, Group Vice President, Investor Relations. I’d like to begin the call by recognizing the efforts of the entire Ross organization this past quarter. Despite ongoing uncertainty in the external environment, the team’s dedication and hard work have been truly commendable. Their commitment has helped us to adapt quickly, execute on our ongoing initiatives, and deliver a solid quarter.

Now let’s turn to our second quarter results. As noted in today’s press release, we are encouraged by the sequential improvement in sales trends relative to the first quarter. This improvement was broad based with a positive change in trend in nearly all major merchandise categories and most of the regions across the company. During the second quarter, sales in May were strong and softened in June before rebounding sharply in July. We were pleased to see the improved trend at the end of the quarter, particularly with the early sales performance related to the back to school selling season, which bodes well for the third quarter.

We ended the period with second quarter sales in line with our expectations, while earnings modestly exceeded the high end of our guidance range due to lower than expected tariff related costs. Operating margin decreased 95 basis points to 11.5% compared to the prior year period, primarily reflecting tariff related costs. Total sales for the period grew 5% to $5,500,000,000 up from $5,300,000,000 last year, with comparable store sales up 2%. Earnings per share for the thirteen weeks ended 08/02/2025 were $1.56 on net income of $5.00 $8,000,000 Included in this year’s second quarter earnings is approximate $0.11 per share negative impact from tariff related costs. These results compared to $1.59 per share on net earnings of $527,000,000 in last year’s second quarter.

For the first six months, earnings per share were $3.3 on net income of $987,000,000 These results compared to earnings per share of $3.5 on net earnings of $1,000,000,000 for the 2024. Sales for the 2025 to date period grew to $10,500,000,000 up from $10,100,000,000 in the prior year. Comparable sales for the 2025 were up 1%. In the second quarter, cosmetics was the best merchandise area. By geographic region, the strongest markets were the Southeast and the Midwest.

Overall comp store sales at BB’s discounts were solid and ahead of Ross, while monthly trends were closely aligned between the two chains throughout the quarter. It was encouraging that both chains saw growth in both traffic and basket size with strong momentum exiting the quarter. At quarter end, both total consolidated inventories and average store inventories were up 5% versus last year. Packaway merchandise was 38% of total inventories at quarter end compared to 39% last year. We feel good about our inventory levels and believe we are well positioned for the back half of the year.

Turning to store growth. In Q2, we opened 28 new Ross and three dd’s Discount locations. These openings reflect our expansion into new and existing markets. New market entries included several stores in the New York Metro Area, as well as our three inaugural stores in Puerto Rico. We remain on track to open a total of approximately 90 new locations this year, comprised of about 80 Ross and 10 DeeDee’s.

As usual, these numbers do not reflect our plans to close or relocate about 10 to 15 older stores. Before I turn the call over to Adam to provide further details on our financial performance and guidance, I wanted to provide an update on tariffs. While tariffs remain at elevated levels, we feel good about the progress the merchants have made to mitigate the impact on margin. The team has worked tirelessly to execute a multipronged approach, including vendor negotiations, diversifying our sourcing mix, and adjusting prices strategically. Additionally, we were able to expand the portion of our business driven by closeouts, which further mitigated the impact.

Looking ahead, we are confident that we can continue to offset most of the impact of tariffs, but we do anticipate modest pressure in the third quarter, which we expect will be further mitigated in the fourth quarter. From a pricing perspective, we are beginning to see higher prices across the retail industry. With this backdrop, we are focused on maintaining our value proposition relative to traditional retailers, while balancing the opportunity to preserve our merchandise margin. Our top priority will always be providing high quality branded merchandise at outstanding value. The off price sector has historically benefited from disruptions within the supply chain and retail industry.

We believe this time will be no different. I will now turn the call over to Adam to provide further details on our second quarter results and additional color on our outlook for the remainder of fiscal twenty twenty five.

Adam Borvis, Executive Vice President and Chief Financial Officer, Ross Stores: Thank you, Jim. Second quarter operating margin decreased 95 basis points to 11.5% and included an approximate 90 basis point negative impact from tariff related costs. Cost of goods sold during the period increased by 70 basis points. Distribution costs deleveraged by 55 basis points, primarily from the opening of a new distribution center in the second quarter and tariff related processing costs. Merchandise margin decreased 30 basis points, which included the impact of tariffs and occupancy deleveraged 10 basis points.

Partially offsetting these higher costs were lower domestic freight and buying costs of fifteen and ten basis points respectively. SG and A for the period deleveraged by 25 basis points, partly due to CEO transition costs. During the second quarter, we repurchased 1,900,000.0 shares of common stock for an aggregate cost of $262,000,000 As a result, we remain on track to buy back a total of $1,050,000,000 in stock for the year. Now let’s discuss our outlook for the remainder of 2025. As Jim noted in today’s press release, given the uncertainty associated with the macroeconomic environment, we will maintain a somewhat cautious approach to planning our business for the balance of the year.

For both the third and fourth quarters, we are planning comparable store sales growth of up two to 3%. If sales perform in line with this guidance, third quarter earnings per share are expected to be in the range of $1.31 to $1.37 versus $1.48 last year and $1.74 to $1.81 for the fourth quarter compared to $1.79 in 2024. These ranges include a negative tariff cost of approximately $07 to $08 and $04 to $06 per share in the third and fourth quarters respectively. These estimates are based on the current level of announced tariffs. If the 2025 performs in line with these projections, earnings per share for the full year are now forecast to be in the range of $6.08 to $6.21 versus $6.32 last year.

For fiscal twenty twenty five, we anticipate an approximate $0.22 to $0.25 per share impact from announced trade policies. As a reminder, last year’s fourth quarter and fiscal year results included a one time benefit to earnings equivalent to approximately $0.14 per share related to the sale of a packaway facility. Now let’s turn to our guidance assumptions for the 2025. Total sales are forecast to increase 5% to 7% versus the prior year. We expect to open 40 stores during the quarter, including 36 Ross and four DDs locations.

Operating margin for the third quarter is planned to be in the 10.1% to 10.5% range, which includes a 50 basis to 60 basis point negative impact from tariff related costs. Our forecast also reflects unfavorable timing of packaway related costs and continued deleverage from the opening of a new distribution center in the quarter. Net interest income is estimated to be approximately $27,000,000 The tax rate is projected to be about 25% and diluted shares outstanding are expected to be approximately $323,000,000. Now I will turn the call over to Jim for closing comments.

Jim Conroy, Chief Executive Officer, Ross Stores: Thank you, Adam. We are encouraged by the sequential improvement in sales trend relative to the first quarter, particularly the strength of our early back to school business in July. We believe pricing will move higher across the entire retail landscape, leading consumers to seek more value this fall season. As such, we are positioning our assortments to deliver high quality branded merchandise at compelling price points to reinforce our value proposition. We strongly believe this strengthens our competitive position to capture market share over the balance of the year.

Before we turn to your questions, I would like to take a moment to recognize and thank Adam Orvis for his contributions to Ross. As many of you know, Adam is retiring from Ross at the September. His leadership and financial expertise have been instrumental to our success, and we wish him well in this exciting new chapter. We also appreciate Adam working closely with Bill to ensure a smooth transition. At this point, we would like to open the call and respond to any questions that you may have.

John?

Moderator/Operator, Ross Stores: Thank you, sir. We will now be conducting the question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate that your line is in the queue. And the first question comes from the line of Matthew Boss with JPMorgan.

Please proceed with your question.

Matthew Boss, Analyst, JPMorgan: Thanks and nice to see the improvement.

Michael Hartshorn, Group President and Chief Operating Officer, Ross Stores: Thanks, Matt. Thanks, Matt.

Matthew Boss, Analyst, JPMorgan: So Jim, could you speak to notable areas of sequential top line improvement that you saw and elaborate on the sharp rebound in July and early back to school trends that you’re seeing, maybe relative to your 2% to 3% comp guide, which I think you said embeds a somewhat cautious planning approach? And then just for Adam, gross margin drivers in the third and fourth quarter, if you could just help break down relative to the 70 basis point decline in the second quarter, I think would be really helpful.

Jim Conroy, Chief Executive Officer, Ross Stores: Is that your one question, Nick?

Matthew Boss, Analyst, JPMorgan: Trying my best for you, Jim.

Jim Conroy, Chief Executive Officer, Ross Stores: On the first part of your question, I’ll give some color on the specifics. The most encouraging thing was we’ve seen broad based sequential improvement from the first quarter into the second quarter. Nearly every merchandise category improved, and most were positive in the second quarter. And towards the tail end of the second quarter, particularly in July, nearly everything was turning positive or was positive. So we felt very good about that.

And if you went back even to the end of the first quarter, we had called out that we had sequential improvement from February into March, March into April, part of that was the Easter shift, we had a solid May. June was a little bit depressed, going up against the strongest month last year. But then July was very strong. So we felt very good or feel very good about the momentum coming out of the quarter. From a category perspective, cosmetics was very strong.

It was nice to see the ladies business comping nicely positive and better than the chain average. That’s gotten a lot of attention over the last few years. So kind of kudos to that merchandising team that has gotten that business up to the comps that they’re achieving now. And with that, I’ll turn it over to Adam for the balance of this question.

Adam Borvis, Executive Vice President and Chief Financial Officer, Ross Stores: Yeah, Matt, on the second half, so let me take tariff costs first. So I talked about the 90 basis point impact on operating margin in Q2. That was primarily in two components of cost of goods sold. The impact on product cost was the primary driver and the other is DC processing costs as we had less merchandise pre ticketed by our vendors, which impacted our profitability. So do expect tariff pressure on merchandise margin the balance of the year, but expect it to be slightly lower than what we experienced in Q2.

The remaining improvement quarter by quarter in tariff costs is primarily in distribution as we expect to revert back closer to those historical pre ticketing levels. Other moving parts in the back half, I mentioned in the call commentary packaway, just based on how we see the flow of goods in the back half, that’ll put pressure on our Q3 earnings and then expect to recoup that in fourth quarter based on how we see year end inventory. The other big moving part is, I mentioned the new distribution center in Q2, as we ramp up the production in that facility, it’ll put pressure on that portion of DC costs for the balance of the year.

Jim Conroy, Chief Executive Officer, Ross Stores: Matt, I wanna circle There was a piece of your question I didn’t address, which was the two to three comp guide. As we put in the press release, we are looking at the balance of the year with some cautious optimism, so we’ve embedded a little bit of that into the two to three guide. If you wanted to play at a bullish case, we are going up against a softer quarter last year in q three than q two. But there’s a lot going on in the macro environment, so we wanna embed some some conservatism.

Matthew Boss, Analyst, JPMorgan: Great color. Best of luck.

Jim Conroy, Chief Executive Officer, Ross Stores: Thanks, Matt. Thanks.

Moderator/Operator, Ross Stores: And the next question comes from the line of Lorraine Hutchinson with Bank of America. Please proceed with your question.

Lorraine Hutchinson, Analyst, Bank of America: Thank you. Good afternoon. It sounds like your appetite for raising prices has increased as you see it gets going up throughout the industry. How is the customer responding? And do you expect prices to fully offset the tariff pressures by next year?

Jim Conroy, Chief Executive Officer, Ross Stores: I wouldn’t read too much into our We’ve had a very, very modest change in prices. Low, low single digit change in AUR. We’re gonna be very cautious about our changes in AUR going forward. The Ross brand depends on being the best bargains in the market, and we’re gonna be looking at our direct competitors and sort of the broader retail landscape to see movement before we make any significant changes in AUR. On the last part of your question, I do think that going into next year, there’ll be just a new equilibrium of prices.

And as you’ll note in this particular year, the tariff related impact will get smaller between Q2 and Q3 and Q4. And we’d like to come out next year, and we’re certainly not gonna guide on this call, and not be spiking out tariffs separately. But I think by then there’ll be just another set of retail price equilibrium and we’ll find our place with an umbrella underneath where everybody else is priced.

Dana Telsey, Analyst, Telsey Advisory Group: Thank you.

Moderator/Operator, Ross Stores: And the next question comes from the line of Michael Binetti with Evercore ISI. Please proceed with your question.

Michael Binetti, Analyst, Evercore ISI: Hey guys, thanks for taking our questions. Congrats on the improvement in the quarter. Maybe just help me think through a couple of the guidance components. The original guidance you gave us for the year, the high end was $6.55. Good performance against what you were planning in the first half year, but then we had $0.22 to $25 of tariffs.

I rethought maybe 6.3 to $6.33 versus the new guidance at $6.21 at the high end. Is there anything you can point me to beyond tariffs that you guys have embedded in this year? And then

Adam Borvis, Executive Vice President and Chief Financial Officer, Ross Stores: can you I guess, Jim, can you just can we hear

Jim Conroy, Chief Executive Officer, Ross Stores: a little bit about some of

Michael Binetti, Analyst, Evercore ISI: the initiatives that you spoke to early on here? You outlined signage, marketing, store operations, QLine. Any positive proof points you can point to so far in the stores that have received the majority of those initiatives?

Michael Hartshorn, Group President and Chief Operating Officer, Ross Stores: Michael, I’ll start with some of the initiatives. It’s Michael Hartshorn. On the Hey, some of the things we spoke about, first was the store refreshes, We’re we expect to get through about half of our stores this year. And as a reminder, what we’re doing in the existing stores is changing up the signage, includes new perimeter and way finding signage along with addressing cosmetic type repairs in the stores. We expect to get through half of the stores this year for the stores we completed.

We think the stores look great and then we expect to complete the chain in 02/1926. I think you also know we’ve been piloting self checkout. We have that in about 80 stores, today and that’s been very successful for us. We’ve been able to the customer has really enjoyed the experience, it’s allowed us to reduce line lengths and we’ve been able to control the shortage. So we’re planning to expand to a number of stores next year, mainly in our high volume stores that will help us, improve customer throughput.

Adam Borvis, Executive Vice President and Chief Financial Officer, Ross Stores: And Michael, this is Adam. If your question was back to how we guided at the beginning of the year, obviously, the biggest driver is the tariff impact, which we’re now kind of pegging at $0.22 to $0.25 for the year. And then secondarily, have a little bit more conservative sales assumption for the full year than we did back in March based on first quarter performance.

Michael Binetti, Analyst, Evercore ISI: Could I follow that by just asking the SG and A dollar budget for the year, where it’s at today versus what you initially set it at coming into the year in March? Any change there to be noted?

Michael Hartshorn, Group President and Chief Operating Officer, Ross Stores: I I think we’re we’re pretty consistent. Michael, we have there hasn’t been significant changes in our SG and

Michael Binetti, Analyst, Evercore ISI: Okay. Thanks a lot, guys. Appreciate

Jim Conroy, Chief Executive Officer, Ross Stores: And and, Michael, I we never got to your question around initiatives, store environment, marketing. Michael addressed the store signage piece, which is a a very nice upgrade to contemporizing the store look and feel. We are looking at a lot of things in terms of the store labor model, given the fact that we have more than 2,000 stores and it’s a very complicated equation, we have deployed a number of tests that are out there right now, tweaking different things to see if we can get more throughput and try to drive sales by putting more labor into some stores. So it’s much too early to comment on the results of that. From a marketing standpoint, we have launched a new campaign in both brands.

So at Ross, it’s a campaign called Work Your Magic. There’s four just terrific spots that the team has put together. They hearken back to friends at a great value, but maybe with a bit more of a emotional connection for a customer. And then DD’s has its own campaign called Don’t Sleep on DD’s, that’s entirely a digital campaign, so you have to be on one of the meta platforms or on TikTok to see it. But a very cool and energetic campaign for dds as well.

So it’s very early days, but I’m really pleased to see organization respond so quickly and come up with some, what I believe to be some really nice changes early on.

Michael Binetti, Analyst, Evercore ISI: That’s great to hear. Thanks guys. And

Moderator/Operator, Ross Stores: the next question comes from the line of Paul Lejuez with Citigroup. Please proceed with your question.

Adam Borvis, Executive Vice President and Chief Financial Officer, Ross Stores: Hey, thanks guys. Curious if you could talk a little bit more about your transactions versus ticket, how that changed during the quarter when you in July? Curious what are those metrics for the bigger driver? Any color you can give there? And just also how you’re thinking about transactions versus ticket in the back half?

And then second, Jim, I’m sure you guys had an availability of merchant in terms of like what merchandise would look like availability of merchandise would look like before the quarter coming into the quarter. I’m curious what you’re seeing relative to your expectations. Any surprises within certain categories? Do you anticipate having any holes in the assortment for holiday? Thanks.

Michael Hartshorn, Group President and Chief Operating Officer, Ross Stores: Paul, it’s Michael Hartzorn. You’re breaking up a bit, but I think your question was the composition of the comp in terms of transactions and what we saw during the quarter. As we said in the commentary, the two comp was driven by a slight increase in traffic and also an average increase in the average basket. The basket itself was driven by both slight increases in AUR and units per transactions. If you looked at that where we were very strong in May, dipped in June and then strong again in July, across the quarter, was driven by a mix of traffic and also a higher basket.

Jim Conroy, Chief Executive Officer, Ross Stores: In terms of availability, we feel very good about the availability of closeouts. In the second quarter, one of the things we called out in the script was that was one of the things that helped us get to the low end of the range of the tariff impact by leaning in more into closeout. I’d say availability is super strong. Thanks, guys. Good luck.

Moderator/Operator, Ross Stores: And the next question comes from the line of Alex Stratton with Morgan Stanley. Please proceed with your question.

Alex Stratton, Analyst, Morgan Stanley: Perfect. Thanks so much. Congrats on a nice quarter. Maybe just looking at profitability, I know that the second quarter makes for the second one where you’re lapping that branded strategy from last year. So is higher branded mix a permanent margin headwind to the business?

Or do you see scope for it to eventually drive total profitability higher, which I think was the initial intent? Maybe bigger picture, can this business return to kind of low teens margin over time or does that branded mix being higher keep you from getting there? Thanks a lot.

Michael Hartshorn, Group President and Chief Operating Officer, Ross Stores: Alex, initial idea with the branded strategy is that early on it would be a margin hit, but we’d be able to build on that over time, as we sharpened our expertise, built better vendor relationships, had access to branded closeout, and our thoughts on that have not changed. So we believe we can build on it over time.

Alex Stratton, Analyst, Morgan Stanley: Thank you.

Jim Conroy, Chief Executive Officer, Ross Stores: Thank you.

Moderator/Operator, Ross Stores: And the next question comes from the line of Brooke Roche with Goldman Sachs. Please proceed with your question.

Brooke Roche, Analyst, Goldman Sachs: Good afternoon and thank you for taking our question. Are you seeing any increased signs of consumer trade down activity or changes in the demographic mix of consumers in your store either by income or race as prices have increased across the ecosystem this holiday season? Thank you.

Michael Hartshorn, Group President and Chief Operating Officer, Ross Stores: Brooke, on on trade down, we we didn’t see a change in income cohorts. It was pretty broad based in the quarter. From a ethnic standpoint, as we’ve said in the past, we do serve a broad customer base, but Hispanic customers are very important to us, they skew higher than The US census. During the quarter stores that had a high concentration of Hispanic population That was especially true in June and especially in Southern California.

The good news is we did see a bounce back in July.

Brooke Roche, Analyst, Goldman Sachs: Great, thanks so much. I’ll pass it on.

Jim Conroy, Chief Executive Officer, Ross Stores: Thanks Brooke.

Moderator/Operator, Ross Stores: And the next question comes from the line of Mark Altschwager with Baird. Please proceed with your question.

Adam Borvis, Executive Vice President and Chief Financial Officer, Ross Stores: Good afternoon. Thank you for taking my question. Just on the tariff mitigation front, I wanted to get a little bit more detail there. Just any update on the actions you’re taking that are working here? Think about better buying, category flexibility, price, what’s moving the needle to offset the pressure on merchandise margin and what are the factors that could potentially drive greater than expected mitigation in the back half

Jim Conroy, Chief Executive Officer, Ross Stores0: of the year? Thank you.

Jim Conroy, Chief Executive Officer, Ross Stores: Sure, well the merchandising team has just been working tirelessly to mitigate the impact. If you were to take the tariff rates that are out there and just do simple back of the envelope math and just flow it through unmitigated, of course, the impact would be much greater than what we’ve seen. So that’s thanks to just a tremendous amount of hard work in shifting buys, negotiating with vendors, very little increase in AUR. So that really hasn’t been a factor. But also increasing the amount of closeout merchandise versus upfront than we initially had planned.

So as we roll forward, as I said earlier, I do think we’ll wind up with pricing equilibrium. We have no intentions of being the first ones to go out with higher prices. So we’ll be watching sort of the rest of the retail industry. As soon as that equilibrium starts to take effect, we’ll have some room to kind of grow into any inflated costs that we need to accept.

Michael Hartshorn, Group President and Chief Operating Officer, Ross Stores: The other change that Adam had mentioned is at the very beginning when China was at 145%, we stopped vendor pre ticketing to give us the flexibility if we chose to change prices once the goods came into the country. We expect we did have an impact in Q2, we have a lesser impact in Q3 and we expect that to completely wane in the back half of the year as we return to our historic levels of vendor pre ticketing.

Jim Conroy, Chief Executive Officer, Ross Stores: Thank you. Thank you.

Moderator/Operator, Ross Stores: And the next question comes from the line of Chuck Grom with Gordon Haskett. Please proceed with your question.

Jim Conroy, Chief Executive Officer, Ross Stores1: Hey guys, this is Ryan Bulger on for Chuck here.

Michael Binetti, Analyst, Evercore ISI: I wanted to ask a related

Jim Conroy, Chief Executive Officer, Ross Stores1: question on the restored guide. Obviously, you have a lot more confidence now and what business is going to look like for the second half of the year as compared to 1Q. And I was just wondering if you could unpack how much of that is more stability in the environment versus things you’ve learned as you’ve undertaken these efforts over the past few months? Thanks very much.

Michael Hartshorn, Group President and Chief Operating Officer, Ross Stores: Sure, Ryan. It’s actually pretty simple. At the time, we had, just, come off the 145 and we hadn’t purchased a significant majority of our merchandise for the back half of the year. So now that we’re Q3 substantially bought, we have the majority bought more than the majority bought in Q4. We have a good read on our fall purchasing.

At the same time, although it still changes quite often and it’s dynamic on the tariff front, it’s more stable than it was at the May.

Jim Conroy, Chief Executive Officer, Ross Stores1: Great, thanks. And then one other thing I wanted to ask, have you seen anything different on customer cohort trends by age? Are you mixing any younger, seeing any more millennials or Gen Z customers? Thanks.

Jim Conroy, Chief Executive Officer, Ross Stores: Nothing to call out.

Moderator/Operator, Ross Stores: And the next question comes from the line of Ike Boruchow with Wells Fargo. Please proceed with your question.

Jim Conroy, Chief Executive Officer, Ross Stores2: Hey, everyone. Thanks for taking the question. Adam, just a little bit more on the third quarter, trying to make sure I understand. So the margin degradation relative to 2Q is decently greater, but the revenue is pretty similar 2% to three comp. The tariff headwind is a little bit less.

I guess I’m just trying to make sure I understand what’s the driving factor. If you can maybe just give us what the gross margin plan is for third quarter. Just trying to understand the moving pieces.

Adam Borvis, Executive Vice President and Chief Financial Officer, Ross Stores: Yes, the biggest piece is the packaway impact. We’re on second quarter on a year over year basis was pretty flat in Q3 based on how we see that inventory flowing. It’ll be a significant headwind in Q2 or in Q3. And again, would expect that to revert in Q4.

Jim Conroy, Chief Executive Officer, Ross Stores: Got it. Thanks, Adam.

Michael Hartshorn, Group President and Chief Operating Officer, Ross Stores: Thanks, Adam.

Moderator/Operator, Ross Stores: And the next question comes from the line of Adrienne Yih with Barclays. Please proceed with your question.

Jim Conroy, Chief Executive Officer, Ross Stores3: Great. Thank you very much. Good afternoon and nice to see the progress. My first question is the comment on pricing you’re starting to see it come through. In what type of I know for you, you’re at the low, low single digit range, but across kind of frontline retail, how are you seeing kind of those prices come up?

And are there categories, say apparel or footwear, where you’re seeing it more so? And then just clarification on the tariff impact. Is this just the portion that is direct to you or does it also encompass things that you’re seeing from your app upfront by getting passed along to you? Thank you.

Michael Hartshorn, Group President and Chief Operating Officer, Ross Stores: On your on your last question, it’s across the merchandise categories. We have small percentage, we have a direct impact, because we’re paying the tariff, but we, you know, the vendors we are seeing cost increases, outside our direct import. So it’s across the universe of merchandise categories.

Adam Borvis, Executive Vice President and Chief Financial Officer, Ross Stores: And then in terms of where

Jim Conroy, Chief Executive Officer, Ross Stores: we’re speaking some inflation, if you go to some of the sort of more mainstream retailers, you can see some of their prices are going up in terms of apparel or home. Probably the center of the bull’s eye are products made with metals. That’s been one of the most obvious places where we’ve seen prices go up. And a lot of that falls of course into the home category. So we a very experienced team of merchants that are just constantly comp shopping.

And we’re gonna ensure that we have the best bargains in the store. And at some point over time, pressure that we’re facing today will abate.

Jim Conroy, Chief Executive Officer, Ross Stores3: Okay. And then just a final clarification. We’re hearing from, there’s this grace period that if you shipped out before, I think it was August, and then you, it arrived here before October 5, it’s still on the prior tariffs. So it would seem that a lot of the retail inventory for holiday will be under that prior tariffs and that we’ve been told by some brands that they will be raising prices again in spring of next year under the second wave of tariffs. Do you believe that the tariff is kind of isolated or you will have had enough mitigation strategies put in place that you’ll be able to offset this kind of next kind of kick it down the road into or do you even think that that that’s actually happening into spring?

Thank you.

Michael Hartshorn, Group President and Chief Operating Officer, Ross Stores: No, I think I think it will happen to your point, some of the India tariffs, especially if the ’25 goes to 50. No, I think that, you’ll see this go into next year, and I think we would expect to see price increases, over time, as Jim mentioned it, we think it will reach equilibrium and it’ll be business as usual.

Jim Conroy, Chief Executive Officer, Ross Stores3: Great. Thank you very much and best of luck for holiday.

Jim Conroy, Chief Executive Officer, Ross Stores: Thank you. Thanks.

Moderator/Operator, Ross Stores: And the next question comes from the line of Dana Telsey with the Telsey Advisory Group. Please proceed with your question.

Dana Telsey, Analyst, Telsey Advisory Group: Hi, good afternoon everyone and nice to see the progress. Jim, we heard about cosmetics continuing to be the best performing category. Can you expand on apparel and what you’ve been seeing there with the initiatives that you’ve put in place and also on home? And then secondly, with the new store openings, what are you seeing in cost to open, leasing costs, and productivity of new stores as they’re opening? Thank you.

Jim Conroy, Chief Executive Officer, Ross Stores: Sure. I’ll take the the merchandising piece of it. Michael can take the new stores piece. I think we’re pretty encouraged that the business has just improved between Q1 and Q2 across the board. The exit velocity, so to speak, in July was very strong across nearly every major merchandise department.

Within apparel, the ladies business, which is driver of the branded strategy, not the only piece of the branded strategy, but the driver was really to get the ladies business rated. And it’s just been great to see that part of the business comping more positively than the chain. And then beneath ladies, if you went sort of category by category, we’ve seen once again broad based strength and broad based improvement within each of the sort of subclassifications there, or at least most of them. So that’s been great. From a home perspective, home’s been a little bit more complicated.

It was comp eroding in the quarter. It eked out a positive comp at the end of the quarter. I think part of that was what we had probably a little bit of a footfall in getting our product inbound when tariffs first came out. So we had a little bit of a receipt hole, if you will, towards as we got through the June period. We’ve shuffled that organization a little bit, we feel really good about the team that’s in place there now.

And I’m optimistic about the future of the home business for us. Still very early days, but it’s nice to see that business turn slightly positive in July.

Michael Hartshorn, Group President and Chief Operating Officer, Ross Stores: On real estate, so we feel good about the real estate landscape, Dana, have a healthy pipeline. As you know, there’s not a high volume of any new development and we’ve been able to take advantage of store closures from bankruptcy filings or, other retailers downsizing their fleets. During the quarter, we did acquire a number of stores in the Rite Aid bankruptcy deal mostly in our core West Coast market. That strengthens our existing pipeline especially for 2026 and also helps in reaccelerating DD’s growth for us. In terms of new store openings, we noted a couple of these in our comments, but that we entered Puerto Rico, during the quarter with three stores in July and the initial response has, I would say far exceeded our expectations.

It’s still early, but based on this, we’re optimistic this will be a strong, market for us. We also had a number of New York Metro stores that we opened, again, very good customer response, and so based on this thus far, we’re optimistic about expanding in the Northeast.

Dana Telsey, Analyst, Telsey Advisory Group: Thank you.

Lorraine Hutchinson, Analyst, Bank of America: Of course.

Moderator/Operator, Ross Stores: And the next question comes from the line of Anisha Sherman with Bernstein Research. Please proceed with your question.

Brooke Roche, Analyst, Goldman Sachs: Thank you so much. I’m curious about your comments around pricing, Jim. Last quarter you said you were planning to maintain the price umbrella versus full price retail. It sounds like you’re now saying you’re being a little bit more cautious, very low single digit increases and perhaps broadening the gap versus full price retail. And I think you said you will grow into those price points over time.

Can you talk about what may have changed? Are you seeing a consumer response that’s maybe making you a little bit more cautious than perhaps a few months ago? And then a quick follow-up on the ladies business. You talked about ladies comping better than chain average. That’s a real clear acceleration there.

Can you talk about what’s driving that? Do you attribute that to the better brand strategy paying off? Or is it around availability of closeout? Or anything in particular that’s driving that outperformance versus what we’ve seen in the last few quarters? Thank you.

Jim Conroy, Chief Executive Officer, Ross Stores: Sure. I don’t think we’re being particularly more cautious. I think we’ll continue to maintain the price umbrella against mainstream retail.

Adam Borvis, Executive Vice President and Chief Financial Officer, Ross Stores: And we’re just hyper

Jim Conroy, Chief Executive Officer, Ross Stores: conscious of what’s going on in the broader retail landscape now. We’re taking somewhat of a longer term view that we want to impress a customer that comes in looking to buy something and have them feel like we’re still delivering the bargains that they’ve become accustomed to. And as we see prices start to move, we’ll start to move as well. Of course, there’s always a lag for competitors and for us based on product that’s come in pre ticketed, we’re not gonna go throughout the chain in the store and re ticket things. So it would be on the next set of receipts anyway.

On the ladies acceleration, again, I’d come back to giving credit to the team. The buying offices have really been steadfast in executing against the brand strategy. They’ve leaned into young contemporary a bit more. We’ve seen a nice impact in our juniors business. The ladies business kind of across the board has been strong.

The denim business has been strong. So we’ve seen a lot of strength in ladies.

Moderator/Operator, Ross Stores: The next question comes from the line of John Kernan with TD Cowen. Please proceed with your question.

Jim Conroy, Chief Executive Officer, Ross Stores0: Good afternoon, guys. Congrats on the momentum into or through back to school and into fall. Thank you. Just on the expenses in COGS related to the distribution centers, also the CapEx dollars, which are being a lot of which I think are being dedicated DCs. What are the near and long term returns on this?

How can this lift the overall margin profile of the business long term?

Michael Hartshorn, Group President and Chief Operating Officer, Ross Stores: Well, what typically happens with the DCs is it’s a capacity place. So as sales grow, you need the excess capacity and then what happens when you open it up, you, are able to leverage the volume in that DC and you should get leverage, over time. Right now, the DC that we opened, is in Arizona, DC Capital that we’re devoting this year, it’s about 20 a little over 28% of our total capital. We are building our next DC, but it’s three years two and a half years away, two to three years away would be the next opening. So over the next two years, we expect to get leverage on DC.

Jim Conroy, Chief Executive Officer, Ross Stores0: Understood. And Jim, maybe a quick follow-up for you. Ex tariffs, the business at a 2% to 3% comp, we’ve seen about mid single digit earnings growth based on the new full year guidance. With Bill stepping into the CFO seat pretty soon, what do you see as like a long term earnings algorithm? Where’s the opportunity on the margin profile of the business?

Michael Hartshorn, Group President and Chief Operating Officer, Ross Stores: Well, I’ll answer that for you. So the long algorithm is about 5% new store growth, get, our new stores are in the 60% range, so that drives 2% of the EPS growth. If you comp at 3%, that gets you 3% of EPS growth, that gets you to five. There’s EBIT upside in that of one to 3%, and then you have your stock buyback at two to 3%, and that gets you to right around double digit EPS growth on a three comp.

Jim Conroy, Chief Executive Officer, Ross Stores0: Understood, thank you. And

Moderator/Operator, Ross Stores: the next question comes from the line of Cory Tarlow with Jefferies. Please proceed with your question.

Michael Hartshorn, Group President and Chief Operating Officer, Ross Stores: Great, thanks.

Jim Conroy, Chief Executive Officer, Ross Stores4: I had a bigger picture question for Jim and then just a follow-up. On the big picture question on growth, as you come into the business and you’ve assessed sort of where Ross is at and where the competition is in terms of growth and you think about the scalability of Ross from a unit perspective, what are some key attributes that stand out to you? And where do you think kind of longer term and what the advantage could be of kind of accelerating potentially accelerating unit growth. Could that be a possibility? And how do you think about the ability of the business to potentially do something like that if even was feasible?

Jim Conroy, Chief Executive Officer, Ross Stores: Sure. Great great question, Corey. I guess a couple of things. I I was I was fortunate enough to be recruited into a company that was already extremely well run and already growing. So

Michael Hartshorn, Group President and Chief Operating Officer, Ross Stores: I’ve had

Jim Conroy, Chief Executive Officer, Ross Stores: the good fortune of spending the first six months and intend to spend the balance of this year really learning about the business. That said, and answering your question maybe a little bit more specifically, there’s a tremendous amount of organizational muscle here. And we’ve been adding 90 ish stores. I think that’s the plan for this year. We’re certainly not going to guide future years, but you know me well.

I do think there’s an opportunity for us to accelerate. And I certainly don’t think we have any capability shortfall. I think we have the resources to do that. We would have to grow the supply chain capability at the same time we grow the store footprint, but we have capability to do that as well. And we also have we’ve been experiencing some really nice openings in our existing markets.

But what Michael covered is very encouraging. We’ve been opening up stores in brand new markets to us that are well established to our competitors and seeing some really nice returns. So if I’m just thinking about what our white space opportunities just for unit growth and unit acceleration, I think it’s pretty optimistic.

Jim Conroy, Chief Executive Officer, Ross Stores4: That’s great. Thanks for the color. And then just as a follow-up on the renovation plan, can you just remind us what the comp lift is and what some of the benefits are that you’re seeing from the initiative?

Michael Hartshorn, Group President and Chief Operating Officer, Ross Stores: We haven’t disclosed. It’s still early innings. We’re doing the first half of the stores this year, so we’ll finish up the first half, and then complete the chain next year. Customer response has been good. It’s too early to measure the sales impact.

Adam Borvis, Executive Vice President and Chief Financial Officer, Ross Stores: Okay. Thank you very much, and best of luck.

Jim Conroy, Chief Executive Officer, Ross Stores: Thank you.

Moderator/Operator, Ross Stores: And our final question comes from the line of Marni Shapiro with Retail Tracker. Please proceed with your question.

Lorraine Hutchinson, Analyst, Bank of America: Thanks guys, in under the wire. Congrats on all the improvements. I had two quick questions. One, I just want to clarify on the AUR conversation from earlier. To date, AUR is up very minimally, low single digits, I believe you said.

However, you’re seeing price And

Michael Hartshorn, Group President and Chief Operating Officer, Ross Stores: mix related, Marni, versus price

Lorraine Hutchinson, Analyst, Bank of America: And mix related. So as we get into the back half of the year, and we’ve all heard this from retailers. I’ve heard it from so many friends where suppliers prices are going up. Will you move up in line with the industry? So could we should we expect to see in the back half of the year AUR increases?

And I guess the kind of adjacent question is, how does your packaway strategy impact that? Because could you have had some really great holiday items packed away from last year that could try to mitigate some of this as well?

Michael Hartshorn, Group President and Chief Operating Officer, Ross Stores: Marni, on how we move into it, I think we use the word cautious, but we won’t be the first to raise retails. If retails go up, it will certainly give us flexibility to follow. In some places, we’ll we’ll move along and and raise prices, test it, see how the customer impacts. In other places, we may give more value. So it really is a area by area decision by the merchant, but if prices go up, it gives us the flexibility to follow for sure.

Lorraine Hutchinson, Analyst, Bank of America: K. And then just one following question. Are you seeing a reversal or less pressure on wages at the stores in the DCs? I know retail has a lot of turnover, but I’m also wondering if you’re finding less turnover as more broadly people are staying in their jobs and, kind of it shifted from the worker to the, employer in general out there. Curious what you guys are seeing.

Michael Hartshorn, Group President and Chief Operating Officer, Ross Stores: Yeah, the workforce has been, it’s nothing new, but the workforce has been stable for the last couple of years. So I don’t think anything’s changed. We’ve had, with all the ticketing efforts, for instance, related to the tariffs, we’ve had no problem filling jobs to be able to do that. So I think the overall environment is fairly stable.

Lorraine Hutchinson, Analyst, Bank of America: And fairly favorable, I’m assuming for you guys.

Michael Hartshorn, Group President and Chief Operating Officer, Ross Stores: I would say stable. It hasn’t changed a lot for us. Fantastic. Our has been stable for a while. Fantastic.

Lorraine Hutchinson, Analyst, Bank of America: Thank you so much, guys. Good luck with the next season.

Michael Hartshorn, Group President and Chief Operating Officer, Ross Stores: Thanks, Marty. Thanks, Marty.

Moderator/Operator, Ross Stores: Thank you. There are no further questions at this time. And I’d to turn the floor back over to Jim Conroy for any closing remarks.

Jim Conroy, Chief Executive Officer, Ross Stores: Thank you everyone for joining us on the call today. And we look forward to speaking with you on our next earnings call. Take care.

Moderator/Operator, Ross Stores: And thank you, everyone. This does conclude today’s teleconference. We thank you for your participation. You may disconnect your lines at this time.

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