What Happened?
Shares of off-price retail company Ross Stores (NASDAQ: ROST) fell 12.8% in the afternoon session after the company reported an underwhelming first quarter of 2025 results: its revenue and EPS guidance for the next quarter fell short of Wall Street's estimates. Management also withdrew full-year guidance, reflecting the uncertainty around evolving trade policy and inflation, especially given that over half of its merchandise originates from China.
On the other hand, Ross Stores beat analysts' revenue, EPS, and EBITDA expectations during the quarter. Still, this was a softer quarter.
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What The Market Is Telling Us
Ross Stores’s shares are not very volatile and have only had 2 moves greater than 5% over the last year. Moves this big are rare for Ross Stores and indicate this news significantly impacted the market’s perception of the business.
The biggest move we wrote about over the last year was 12 months ago when the stock gained 9.2% on the news that the company reported strong first-quarter 2024 results that beat analysts' gross margin expectations, which led to operating profit and EPS beats.
Adding to the positive aspect, revenue came in slightly ahead of analysts' expectations due to an increase in traffic. This suggested healthy demand from its consumer base despite some of the macro concerns raised by some of the retailers that have reported earnings this quarter.
Ross also acknowledged challenges with low-to-moderate income consumers, as well as other concerns, including "the weather, the Easter calendar shift, and tax refund timing."
On the other hand, its full-year earnings forecast--while raised from the previous outlook--was below expectations. To blunt the impact of that, the company guided to next quarter's EPS in line with expectations.
Also, the company planned to open 24 locations in Q2, which supported the sales momentum, with revenue expected to grow by 6% year-on-year during the quarter. Zooming out, we think this was a very good quarter with less exciting guidance.
Ross Stores is down 11.6% since the beginning of the year, and at $134.92 per share, it is trading 13.8% below its 52-week high of $156.61 from December 2024. Investors who bought $1,000 worth of Ross Stores’s shares 5 years ago would now be looking at an investment worth $1,427.
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