Factors Likely to Influence Ross Stores (ROST) in Q2 Earnings

Ross Stores, Inc. ROST is scheduled to release second-quarter fiscal 2022 results on Aug 18. The off-price retailer of apparel and home accessories is likely to have witnessed top and bottom-line declines in the to-be-reported quarter.

The Zacks Consensus Estimate for fiscal second-quarter revenues is pegged at $4.6 billion, indicating a decline of 43.5% from the figure reported in the year-ago quarter. For fiscal second-quarter earnings, the consensus mark of $1.02 per share suggests a decrease of 26.6% from the year-ago quarter's reported number. The consensus mark has been moved down by a penny in the past seven days.

In the last reported quarter, Ross Stores delivered a negative earnings surprise of 2.02%. However, it has delivered an earnings beat of 20.5%, on average, in the trailing four quarters.

Key Factors to Note

Ross Stores has been reeling under cost headwinds, inflationary pressures and the adverse impacts of the Russia-Ukraine conflict. The company has been witnessing continued supply-chain congestions, which has led to higher freight costs and distribution expenses. This, along with lower merchandise margins, occupancy deleverage and increased distribution costs, is likely to have dented margins in the quarter under review.

Also, headwinds related to higher wages have been resulting in increased SG&A expenses. On its last reported quarter’s earnings call, management expected an operating margin of 10.4-10.8% for the fiscal second quarter, suggesting a decline from the prior-year quarter. The operating margin is expected to be affected by the negative comp forecast, and elevated freight and wage expenses, which are expected to continue through the first half of fiscal 2022.

For second-quarter fiscal 2022, the company anticipated a comps decline of 4-6% compared with 15% growth in the prior-year quarter. Total sales are expected to decline 1-4% in the fiscal second quarter. Earnings per share are envisioned to be between 99 cents and $1.07 per share compared with $1.39 reported in second-quarter fiscal 2021.

However, Ross Stores has been gaining from strength in the core business. Also, its store expansion plans bode well, which is likely to have aided the top line. The company's store-expansion efforts remain focused on continually increasing penetration in the existing, as well as new markets. For the second quarter of fiscal 2022, management expected to open 29 stores, including 21 Ross and eight dd’s DISCOUNTS stores.

Ross Stores, Inc. Price and EPS Surprise

 

Ross Stores, Inc. price-eps-surprise | Ross Stores, Inc. Quote

Zacks Model

Our proven model does not conclusively predict an earnings beat for Ross Stores this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that’s not the case here. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter.

Ross Stores has a Zacks Rank #3 and an Earnings ESP of -5.52%.

Stocks Poised to Beat Earnings Estimates

Here are some companies you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat:

Kroger KR currently has an Earnings ESP of +1.17% and a Zacks Rank of #2. The company is expected to register top and bottom-line growth when it reports second-quarter fiscal 2022 numbers. The Zacks Consensus Estimate for KR's quarterly revenues is pegged at $34 billion, which suggests growth of 7.3% from the prior-year quarter's reported figure.

You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Kroger’s quarterly earnings has been unchanged in the past 30 days to 81 cents per share, suggesting 1.3% growth from the year-ago reported number. KR has a trailing four-quarter earnings surprise of 20.3%, on average.

Home Depot HD currently has an Earnings ESP of +1.15% and a Zacks Rank #3. HD is likely to register top-line growth when it reports second-quarter fiscal 2022 numbers. The Zacks Consensus Estimate for its quarterly revenues is pegged at $43.4 billion, which suggests growth of 5.5% from the figure reported in the prior-year quarter.

The Zacks Consensus Estimate for Home Depot’s quarterly earnings has been unchanged in the past 30 days at $4.94 per share, suggesting growth of 9.1% from the year-ago quarter's reported number. HD has a trailing four-quarter earnings surprise of 7.2%, on average.

Tapestry TPR currently has an Earnings ESP of +3.62% and a Zacks Rank #3. TPR is anticipated to register top and bottom-line growth when it reports fourth-quarter fiscal 2022 results. The Zacks Consensus Estimate for quarterly revenues is pegged at $1.64 billion, indicating an improvement of 1.8% from the prior-year quarter’s reported number.

The Zacks Consensus Estimate for Tapestry’s bottom line has been unchanged in the past 30 days at 78 cents per share. The consensus estimate suggests growth of 5.4% from the year-ago quarter's reported figure. TPR has a trailing four-quarter earnings surprise of 17.6%, on average.

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