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    ROST
    Earnings call· Jan 2026(Q4 FY26)

    ROSS STORES Q4 FY26 earnings call ROST

    Mar 3, 2026 Source

    Executive summary

    Ross Stores Q4 FY26 — Strong Sales and Earnings Beat Expectations, Accelerating Store Growth

    Ross Stores delivered a strong Q4 FY26, exceeding expectations with robust sales and earnings, fueled by broad-based strength across merchandise categories and geographies, and effective marketing. Management is optimistic about continued momentum into FY26, supported by accelerated store expansion plans and increased shareholder returns. The company is focused on sustaining customer engagement and operational efficiencies, despite anticipating some near-term margin pressures in the first quarter.

    Highlights

    5

    • Total sales grew 12% in Q4 FY26 to $6.6 billion, significantly surpassing expectations.

    • Comparable store sales increased a robust 9% in Q4 FY26, primarily driven by transactions and customer growth.

    • Full-year FY25 total sales increased 8% to a record $22.8 billion.

    • The Board approved a new 2-year $2.55 billion stock repurchase authorization, representing a 21% increase.

    • The quarterly cash dividend was increased by 10% to $0.445 per share.

    Concerns

    2

    • Q4 FY26 operating margin was 12.3%, a decrease from 12.4% in the prior year (which included a 105 bps benefit from a facility sale).

    • Q1 FY26 operating margin is projected to decrease to 11.8%-12.1% from 12.2% last year, due to higher DC costs, unfavorable packaway timing, and higher incentive costs.

    Guidance & targets

    22
    CategoryTargetConfidence
    Q1 FY26 Comparable store sales growth
    up 7% to 8%
    high materiality
    High
    Q1 FY26 Earnings per share
    $1.60 to $1.67
    high materiality
    High
    Q1 FY26 Total sales growth
    up 10% to 12%
    medium materiality
    High
    Q1 FY26 Operating margin
    11.8% to 12.1%
    medium materiality
    High
    Q1 FY26 New store openings
    17 stores (13 Ross, 4 dd's DISCOUNTS)
    low materiality
    High
    Q1 FY26 Net interest income
    $27 million
    low materiality
    High
    Q1 FY26 Tax rate
    23% to 24%
    low materiality
    High
    Q1 FY26 Weighted average diluted shares outstanding
    322 million
    low materiality
    High
    FY26 Same-store sales growth
    up 3% to 4%
    high materiality
    Medium
    FY26 Earnings per share
    $7.02 to $7.36
    high materiality
    Medium
    FY26 Total sales growth
    up 5% to 7%
    medium materiality
    Medium
    FY26 Operating margin
    12% to 12.3%
    medium materiality
    Medium
    FY26 Store base growth
    5%
    medium materiality
    High
    FY26 New store openings
    110 locations (85 Ross, 25 dd's DISCOUNTS)
    medium materiality
    High
    FY26 Store closures or relocations
    10 to 15 older stores
    low materiality
    High
    FY26 Net interest income
    $92 million
    low materiality
    High
    FY26 Depreciation and amortization expense
    $740 million
    low materiality
    High
    FY26 Tax rate
    24% to 25%
    low materiality
    High
    FY26 Weighted average diluted shares outstanding
    319 million
    low materiality
    High
    FY26 Capital expenditures
    $1.1 billion
    medium materiality
    High
    Long-term Ross store count potential
    2,900 stores
    low materiality
    High
    Long-term dd's DISCOUNTS store count potential
    700 stores
    low materiality
    High

    Segment performance

    2
    SegmentRevenueYoYQoQMargin
    Ross Dress for Less
    Expanded into several new markets, including New York Metro and Puerto Rico. Strong new store productivity.
    Stores opened FY25: 80Total stores end of FY25: 1,904
    		————
    dd's DISCOUNTS
    Posted healthy sales gains with broad-based growth across merchandise categories and regions. Reaccelerating store openings in FY26.
    Stores opened FY25: 10Total stores end of FY25: 363
    		————

    Operational metrics

    27
    Q4 FY25 Total Sales
    $6.6 billionup 12%
    Q4 FY25

    Significantly surpassed expectations.

    Q4 FY25 Net Income
    $646 millionvs $587 million prior year
    Q4 FY25

    Reported net income for the quarter.

    Q4 FY25 Earnings per share
    $2.00vs $1.79 prior year
    Q4 FY25

    Reported EPS for the quarter.

    Q4 FY25 Earnings per share (ex-facility sale benefit)
    grew 21%
    Q4 FY25

    Excluding approximately $0.14 per share benefit from the sale of a packaway facility in the prior year.

    Q4 FY25 Operating Margin
    12.3%vs 12.4% prior year
    Q4 FY25

    Prior year included a 105 basis point benefit from a facility sale.

    Q4 FY25 Operating Margin increase (ex-facility sale benefit)
    95 bps
    Q4 FY25

    Excluding the 105 basis point benefit from the sale of a packaway facility in the prior year.

    Q4 FY25 Cost of Goods Sold leverage
    65 bpslower
    Q4 FY25

    Component of operating margin improvement.

    Q4 FY25 Occupancy leverage
    30 bps
    Q4 FY25

    Leveraged on strong sales results.

    Q4 FY25 Distribution costs
    20 bpsdeclined
    Q4 FY25

    Component of operating margin improvement.

    Q4 FY25 Domestic freight costs
    15 bpsdeclined
    Q4 FY25

    Component of operating margin improvement.

    Q4 FY25 Merchandise margin improvement
    10 bps
    Q4 FY25

    Improved, mainly due to better buying.

    Q4 FY25 Buying costs
    10 bpsrose
    Q4 FY25

    Mainly due to higher incentives given earnings outperformance.

    Q4 FY25 SG&A increase
    75 bps
    Q4 FY25

    Primarily due to prior year's packaway facility sale.

    Q4 FY25 SG&A (ex-facility sale benefit)
    30 bpslower
    Q4 FY25

    Excluding the impact of the prior year's packaway facility sale.

    FY25 Total Sales
    $22.8 billionup 8% vs $21.1 billion prior year
    FY25

    Record total sales for the fiscal year.

    FY25 Net Income
    $2.1 billionsimilar to prior year
    FY25

    Reported net income for the fiscal year.

    FY25 Earnings per share
    $6.61up from $6.32 prior year
    FY25

    Reported EPS for the fiscal year.

    FY25 Earnings per share growth (ex-facility sale & tariff impact)
    10%
    FY25

    Excluding $0.14 gain from facility sale last year and $0.16 per share impact from tariff-related costs this year.

    FY25 Operating Margin
    11.9%
    FY25

    Reported operating margin for the fiscal year.

    Shares repurchased
    1.5 million
    Q4 FY25

    Repurchased during the quarter, completing the 2-year $2.1 billion program.

    Stock repurchase authorization (new)
    $2.55 billion21% increase over prior program
    FY26-FY27

    Approved by Board of Directors.

    Quarterly cash dividend
    $0.44510% increase
    Quarterly

    Approved by Board of Directors.

    New store productivity
    70% to 75%
    FY26

    Productivity of new stores relative to an average store, built into FY26 guidance.

    Tax refunds (Treasury data)
    up 7%
    Early Q1 FY26

    Treasury data on tax refunds, with 2/3 of refunds still to come.

    Average Unit Retail (AUR) increase
    modest
    Q4 FY25

    Observed in the quarter, with UPT being flattish.

    Units per transaction (UPT)
    flattishvs last year
    Q4 FY25

    Observed in the quarter.

    Capital expenditure split
    1/3 DCs, 1/3 new stores, 25% store maintenance
    FY26

    Approximate allocation of the $1.1 billion capital expenditures for FY26.

    Industry KPIs

    7
    MetricValueDetails
    Sg a OPEX ratiorose 75 bpsbps
    Comparable sales9%%
    Store count growth2,267stores
    Gross margin driversimproved 10 bpsbps
    Inventory position markdown riskup 8%%
    Same sku like for like inflationmodest increase
    Distribution supply chain cost economicsdeclined 20 bpsbps

    Risks & headwinds

    7
    Weather impact on comparable salesQ4 FY25

    1 percentage point erosion in Q4 FY25 comps

    Mitigation: Not explicitly stated, but the company still achieved robust comp growth.

    Tariff impact on home categoryFY25

    Heavy pressure throughout FY25

    Mitigation: Buying organization navigated tariffs, home business turned around and regained ground by Q4.

    Uncertainty in macro environmentOngoing

    Unquantified

    Mitigation: Company remains resilient and focused on executing strategies.

    Q1 FY26 operating margin decreaseQ1 FY26

    Expected decrease to 11.8%-12.1% from 12.2% last year

    Mitigation: Higher merchandise margin and lower distribution costs expected for the full year to partially offset.

    Higher DC costsQ1 FY26

    Unquantified impact on Q1 FY26 operating margin

    Mitigation: Related to the opening of a new distribution center in Q2 FY25; will be lapped in Q2 FY26.

    Unfavorable timing of packaway-related expensesQ1 FY26

    Unquantified impact on Q1 FY26 operating margin

    Mitigation: Not explicitly stated, but expected to be a timing issue.

    Higher incentive costsQ1 FY26

    Unquantified impact on Q1 FY26 operating margin

    Mitigation: Versus FY25 when the company underperformed its plan; reflects current earnings outperformance.

    Q&A highlights

    8

    Can you elaborate on the 8% traffic-led comp inflection in H2 FY25 and the 7-8% Q1 FY26 comp guide, especially given the company's historical conservatism? Did you embed any tax refund lift?

    The H2 inflection was broad-based across categories (Ladies, Men's, center core, home) and regions, driven by strong assortments, marketing, and in-store improvements. The Q1 guide reflects momentum and initiatives, but also weak prior-year compares. No specific lift from tax refunds is embedded, as it's early in the refund season.

    “we haven't changed the conservative nature of our guide. So it's not like we're putting out some high-flying number to get headlines, we still feel pretty good about it.”

    asked by Matthew Boss · answered by James Conroy

    2 min read6 chapters

    Detailed Narrative

    01

    Q4 Performance Drivers and Broad-Based Strength

    The company's business momentum accelerated in Q4 FY26, with total sales growing 12% and comparable store sales increasing a robust 9%. This growth was broad-based across all major merchandise categories, with shoes and cosmetics performing best, and every region of the country showing positive sales, led by the Midwest and Mountain regions. The comp growth was primarily driven by an increase in transactions and customers, with a modest increase in basket size.

    02

    Inventory Management and Marketplace Availability

    Consolidated inventories were up 8% at year-end, which was lower than the overall sales growth, indicating efficient inventory management. Packaway represented 37% of total inventory, down from 41% last year, reflecting a healthy inventory position. Management expressed satisfaction with current inventory levels and noted ample availability in the marketplace to support future business trends.

    03

    Store Expansion and New Market Entry

    In FY25, Ross Stores added 80 new Ross Dress for Less stores and 10 dd's DISCOUNTS stores, expanding into new markets such as the New York Metro area and Puerto Rico. Inclusive of 9 closures, the company ended the year with 2,267 stores. The strong new store productivity observed in FY25 bolsters confidence for accelerating store openings to 110 new locations in FY26, targeting 85 Ross and 25 dd's DISCOUNTS.

    04

    Marketing and Customer Engagement Initiatives

    New marketing campaigns launched in 2025 were successful in refining brand messaging and connecting with shoppers, contributing to higher customer awareness and engagement. The increase in customer traffic and count is seen as a positive indicator for continued growth. Management noted that marketing spend as a rate of sales has remained consistent, indicating efficient use of marketing to drive traffic.

    05

    Operational Improvements and Supply Chain Efficiency

    Meaningful merchandising and operational improvements were implemented in stores, contributing to the outsized sales growth. The stores team effectively managed the holiday surge, while the supply chain organization executed well during peak season, ensuring fresh receipts and fast-turning inventory. These operational enhancements are expected to support growth plans in FY26 and beyond.

    06

    Shareholder Return Program Enhancements

    The company completed its 2-year, $2.1 billion stock repurchase program in Q4 FY25 by repurchasing 1.5 million shares. The Board approved a new 2-year, $2.55 billion stock repurchase authorization, representing a 21% increase over the prior program. Additionally, the quarterly cash dividend was increased by 10% to $0.445 per share, underscoring the company's commitment to returning excess cash to shareholders.

    AI-generated summary of the company’s earnings call. Not investment advice.