Ross Stores is the latest off-price retailer to post disappointing sales in the second quarter, as spiking inflation impacts consumer buying habits.
On Thursday, the Dublin, Calif.-based company reported total sales in Q2 of $4.6 billion versus $4.8 billion in the prior-year period. Comparable-store sales were down 7% compared with a robust 15% increase in last year’s second quarter, which was the retailer’s strongest period of 2021. Net income was $385 million in Q2, down from $494 million in the same period last year.
“We are disappointed with our sales results, which were impacted by the mounting inflationary pressures our customers faced, as well as an increasingly promotional retail environment,” Ross Stores CEO Barbara Rentler said on the company’s earnings call on Thursday. “Earnings came in above our guidance range, primarily due to lower incentive costs resulting from the below-plan top line performance.”
Rentler also noted that the company’s DD’s Discounts division continued to perform “well below Ross’s,” mainly due to today’s escalating inflationary pressures that are having a larger impact on DD’s lower-income customers.
As for a few bright spots in Q2, Rentler noted on Thursday’s call that shoes and men’s were the strongest merchandise areas during the quarter. Both Florida and Texas were the top-performing regions, mainly due to the outperformance of the company’s border and tourist locations, Rentler added.
“We are making merchandising adjustments to meet changing customer demand,” the CEO said. “That said, the actions we have taken thus far were unable to offset the mounting financial pressures on our low- to moderate-income consumers and the impact on our business from an increasingly promotional retail environment.”
Looking ahead, Rentler said that given the company’s first-half results, as well as the increasingly challenging and unpredictable macroeconomic landscape and today’s more promotional retail environment, she believes it is prudent to adopt a more conservative outlook for the balance of the year.
As such, the company is now planning Q3 same-store sales to decline 7% to 9%, versus a strong 14% gain last year. For Q4, same-store sales are forecast to be down 4% to 7%, compared with a 9% increase in the same period a year ago.
Ross’s results come days after its competitor TJX Companies also posted lower sales for the quarter and cut its full-year forecast. For Q2, the Framingham, Mass.-based off-price retailer reported net sales of $11.8 billion, a decrease of 2% versus the same period last year. U.S. comp-store sales also fell by 5%.
