Q2 2026 Ross Stores Inc Earnings Call Transcript
Key Points
- Ross Stores Inc (ROST) delivered a robust 10% comparable store sales growth in Q2 2026, marking the second consecutive quarter of double-digit comps, driven primarily by increased customer traffic.
- The company saw broad-based strength across all merchandise categories and geographies, with home and cosmetics being the strongest performers, and the Midwest leading in regional sales.
- Ross Stores Inc (ROST) successfully attracted new and lapsed customers across a wide range of income demographics and age cohorts, including younger shoppers, reflecting the broad appeal of its brand and marketing efforts.
- The company raised its new store opening plans for 2026 to 115 locations, up from 110, citing strong performance in both existing and newer markets, which boosts confidence in future growth.
- Ross Stores Inc (ROST) raised its guidance for the third and fourth quarters, with comparable store sales expected to increase 6% to 7% and 4% to 5%, respectively, despite challenging year-over-year comparisons.
- The company's inventory strategy is paying off, with a 18% increase in inventories and packaway at 36% of total, enabling broader merchandise offerings and improved merchandise margins while maintaining fast inventory turns.
- Ross Stores Inc (ROST) faces higher freight costs due to increased fuel prices, which negatively impacted gross margin by 10 basis points in Q2 and is expected to continue as a headwind in the back half of the year.
- SG&A expenses deleveraged by 15 basis points in Q2 due to higher incentives from earnings outperformance, which could pressure margins if performance normalizes.
- The company's strong performance is partly attributed to tariff refunds, which contributed 405 basis points to gross margin and $0.60 to EPS; excluding these, operating margin increased only 205 basis points, indicating reliance on one-time benefits.
- Ross Stores Inc (ROST) faces increasingly challenging year-over-year comparisons in the back half of 2026, with Q4 comps expected to moderate to 4% to 5% on top of a robust 9% increase last year.
- The company's guidance assumes modest AUR increases in the low single digits, but any shift in consumer spending or increased competition from other retailers investing in price could pressure its value proposition and sales.
- While the company is investing in growth initiatives, it remains cautious about over-investing, and the long-term comp algorithm of 3% to 4% has not been updated, suggesting uncertainty about sustaining the current elevated growth rates.
Good afternoon, and welcome to the Ross Stores second-quarter 2026 earnings release conference call. (Operator Instructions) As a reminder, this conference is being recorded.
Before we get started, on behalf of Ross Stores, I would like to note that the comments made on this call will contain forward-looking statements regarding expectations about future growth and financial results, including sales and earnings forecasts, new store openings and other matters that are based on the company's current forecast of aspects of its future business.
These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from historical performance or current expectations. Risk factors are included in today's press release and in the company's fiscal 2025 Form 10-K and fiscal 2026 Form 10-Q and 8-Ks on file with the SEC.
Now I'd like to turn the call over to Jim Conroy, Chief Executive Officer.
Thank you, Diego, and good
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