Ross Stores stock dives after the retailer cut its forecast
Yahoo Finance Live anchors discuss first-quarter earnings for Ross Stores.
Video transcript
- All right, let's take a look at another retailer, shall we? We were talking TJX earlier in the week.
- We were, yeah.
- Talking about their counterpart, Ross Stores, it's a very different story. TJX, as we told you earlier, when we were showing you the big board of retailers, one of the only retailers higher on the week, Ross Stores, a very, very different picture. Those shares are down 21%. This year the company says its comparable sales are going to fall 2% to 4%. That is a decrease from its prior guidance. They are also cutting their earnings forecast here.
And again, it has to do with inflation. It has to do with inventory management. And the company's CEO Barbara Rentler saying that it is prudent to adopt a more conservative outlook for the balance of the year. The company is also saying the quarter started strong, and then consumers started to pull back and the COO Michael Hartshorn saying discretionary spending for the lower end consumer is being squeezed. That's in line with what else we've been hearing this week.
- That's right. Barbara Rentler also said that the first quarter operating margin of 10.8%, that was actually lower year over year. It was at 14.2% in 2021 in that same quarter. And so they also mentioned that this really reflected that same store sales decline that they also saw, ongoing headwinds. And this is a company that also has looked towards freight, particularly.
And then additionally the wage cost pressures have also been impacting them. Those began rising in the second half of 2021, continued to impact the company through this quarter. But I think going forward here, the conservative outlook, certainly what's impacting them here on the day as well.
Any time you have a company whose net margins have been squeezed in the current quarter that they're reporting for and then anticipating much of that to permeate into the current quarter that we're in and future forecasts, that's exactly where you'll see a company like Ross Stores moving lower here on the day as well and then just quickly doing a search on inventory levels--
- Yes.
- --because that's been such a massive item. I mean, inventory, $1.7 billion, rough math here, or rough numbers, $1.7 billion the same quarter last year, this year, $2.6.
- Wow. So obviously they're seeing that big inventory build too. And just quickly when you look at those Ross shares right now, they dropped as much as 25% at the open. I think they've pulled back a little bit from that level. But at that 25%, worst single day since 1986. We've been hearing a lot of that this week from the retailers. We heard it earlier in the week with Walmart and Target, worst single day drop since 1987.
- Wow.
