On March 6, Ross Stores Inc. (ROST, Financial) and Urban Outfitters Inc. (URBN, Financial) released their earnings performance for the final quarter of fiscal 2017. Based on their earnings reports, both companies offer good growth potential for upcoming quarters.
Ross
The Dublin, California-based discount retailer said revenues for the 14-week period ending Feb. 3 increased 16% from the 13-week period ending Jan. 28, 2017. Comparable store sales increased 5%, up 1% from the prior-year quarter.
CEO Barbara Rentler said sales and earnings performance exceeded management’s expectations even in a “competitive retail landscape.” Fiscal 2017 operating margins of a record 14.50% represent a 0.5% increase from that of fiscal 2016, driven primarily by strong merchandise margins and expense leverage from solid gains in same-store sales. The company’s profit margins are near a 10-year high and outperform over 87% of global competitors.
Urban Outfitters
Philadelphia-based Urban Outfitters said fourth-quarter net sales increased 5.7% year over year, including 4% growth in Comparable Retail net sales primarily due to “strong double-digit growth in the digital channel.”
CEO Richard Hayne said Urban Outfitters’ record revenues were driven by high comparable sales and positive customer reaction to the new spring offerings across the company’s three brands.
Companies offer good growth potential
As a result of the “strong customer reaction to the new spring offerings,” management provided optimistic guidance for the first half of the new fiscal year. GuruFocus ranked Urban Outfitters’ profitability 8 out of 10 as the company has a strong Piotroski F-score of 7 and a business predictability rank of 4.5 stars.
Ross has four positive investing signs, including expanding operating margins, consistent revenue growth, solid interest coverage and an excellent Piotroski F-score of 8. GuruFocus ranked Ross’ profitability 9 out of 10, one rank higher than it did for Urban Outfitters.
During the three months ending Dec. 31, 2017, Louis Moore Bacon (Trades, Portfolio) invested in Ross while Pioneer Investments (Trades, Portfolio) invested in Urban Outfitters as the companies offer good growth potential for the upcoming quarters.
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Disclosure: No positions.
