Ross Stores Has Delivered 5 Straight EPS Beats and Typically Guides Conservatively

That wraps up our initial coverage of Ross’s Q2 results. Thank you for stopping by!

A potential blemish in Ross’s blowout quarter may be hiding on the company’s balance sheet. Merchandise inventory increased 18.4% year over year to $3.08 billion, meaningfully outpacing total sales growth of 13.3%. That reverses the trend from Q1, when sales increased 21% while inventory grew only 11.5%.

The buildup could reflect deliberate holiday preparation or opportunistic purchases of attractive merchandise. However, it also raises the stakes as comparable-store sales growth is expected to slow to 6-7% in Q3 and 4-5% in Q4.

If demand weakens faster than management expects, excess inventory could force heavier markdowns and place Ross’s impressive underlying margin gains under pressure.

Ross’s traffic gains could reflect more than consumers temporarily trading down towards value stores. Management previously reported double-digit customer-count growth, with particularly strong performance among 18-to-24-year-old shoppers.

Q2’s 10% comparable-store sales increase, driven by both new customers and greater engagement from existing shoppers, suggests that the customer acquisition engine remains healthy.

The company’s “Better and Best” merchandising strategy appears central to that success. Ross is adding more premium and highly desired brands, including products tied to fast-growing categories such as Korean beauty, while preserving the treasure-hunt value proposition that defines off-price retail.

Engaging younger customers could expand Ross’s long-term addressable market.

Ross reported extraordinary headline profitability, but this was largely due to the one-time benefits from tariff refunds.

The company’s operating margin expanded 610 basis points, with 405 basis points coming from $253 million in IEEPA tariff refunds. The refunds added approximately $0.60 to EPS, helping earnings rise from $1.56 to $2.66.

Even after accounting for that windfall, the outlook remains encouraging. Ross raised full-year EPS guidance to $8.61 to $8.77 and expects comparable-store sales growth of 6-7% in Q3 and 4-5% in Q4.

Growth will slow against tougher comparisons, but the guidance suggests management expects the traffic-driven strength to continue after the tariff benefit fades.

Ross Stores followed its record first quarter with another exceptionally strong performance. Fiscal Q2 sales increased 13% to $6.26 billion, while comparable-store sales rose 10%, driven primarily by higher customer traffic. Across the first half of the year, sales climbed 17%, and comps increased 13%.

The momentum is giving Ross confidence to accelerate expansion. The company opened 47 stores during Q2 and raised its full-year opening target to 115 locations.

Management also repurchased $319 million of stock, demonstrating that Ross can fund new-store growth while continuing to return capital to shareholders.

Ross Stores just reported earnings, with shares initially up 5% following the report. Here are the key numbers:

• Revenue: $6.3 billion vs. $6.15 billion expected
• EPS: $2.66, including a $0.60 benefit from IEEPA tariff refunds
• Comparable-Store Sales: Up 10% year over year
• Net Income: $851 million, up 68% year over year

Guidance:

• FY26 EPS: $8.61 to $8.77 vs. $7.78 expected
• Q3 EPS: $1.75 to $1.83 vs. $1.73 expected
• Q3 comparable-store sales: Up 6% to 7%
• Q4 EPS: $2.17 to $2.26
• Q4 comparable-store sales: Up 4% to 5%

Quick Read:

Ross delivered another strong quarter, with 10% comparable-store sales growth and revenue above expectations.

The company raised its full-year outlook well above consensus, although a $0.60 tariff-refund benefit boosted Q2 earnings and operating margin.

Analysts’ Top Questions:

1. Is the 17% Q1 comp durable without the tax-refund tailwind?
2. Quarter-to-date August traffic trend?
3. Tariff exposure given China sourcing?
4. Back-to-school cadence?
5. Buyback pace against the $2.55 billion authorization?

Key Topics, Buzzwords, and Red Flags:

• Key topics management must address: Operating margin path toward 12.8% to 13.0%, freight and fuel pressure, closeout availability, and Northeast expansion productivity.
• Buzzwords to listen for: “traffic,” “market share,” “packaway,” “first calls,” “disciplined execution,” “compelling assortments,” and Conroy’s tell: “I think it is durable.”
• Red flags: Softer customer-count growth, inventory above the 12% Q1 pace, unchanged full-year EPS range, hedged tariff commentary, or a walk-back of the 6% to 7% comp trajectory into the back half.

Why Tonight’s Guidance Matters More Than the Quarter

Ross Stores (NASDAQ:ROST) has beaten its own operating margin forecast for at least three straight quarters, including a 13.4% Q1 print versus a guided 11.8% to 12.1%. That conservative pattern sets a high bar for tonight’s forward commentary.

Investors want an updated Q3 comp guide, a raised full-year EPS range above $7.50 to $7.74, a fresh operating margin outlook, and clarity on tariff exposure. Buyback pace against the $2.55 billion two-year authorization also matters.

Bullish Scenario:

Q3 comps guided above 7%, full-year EPS lifted past $7.74, tariff impact contained.

Bearish Scenario:

Q3 comps guided below 5%, unchanged full-year range, and cautious traffic commentary.

With shares at $228.78 and a 33 P/E, management’s tone will likely drive the stock’s reaction tonight.

Bull Case: Momentum, Margins, and Market Share

• Streak intact: Ross Stores (NASDAQ:ROST) beat estimates in all 5 reported quarters, capped by a 17.41% Q1 EPS surprise.
• Margin power: Q1 operating margin hit 13.4%, well above the guided 11.8% to 12.1% range.
• Cash return: A $2.55 billion two-year buyback and 209.91% FCF growth back the story.
• Sentiment: Analysts skew 14 Buy, 4 Hold, 1 Sell.

Bear Case: Bar Set Sky High

• Tough comp: Lapping 17% comps sets a punishing setup.
• One-time tailwind: Management flagged a tax refund boost unlikely to repeat.
• Tariff exposure: Imported apparel and home goods remain vulnerable to tariff increases.
• Valuation: A 33 P/E after a 60.15% one-year run leaves little cushion for a miss on the $1.9392 consensus.

This live blog is being updated by Thomas Richmond, a 24/7 Wall St. contributor. Simply stay on this page, and new updates will appear below automatically.

We expect Ross Stores to release Q2 earnings shortly after 4:00 p.m. ET.

Ross Stores reports fiscal second-quarter results today at 4:00 PM ET, with management forecasting earnings of $1.85-$1.93 per share and comparable-store sales growth of 6-7%.

Those numbers would normally represent an impressive quarter, but Ross is coming off a record 17% comparable-sales increase in Q1.

Tonight’s report will show whether that performance marked a temporary surge or the beginning of a structural improvement under CEO Jim Conroy.

Ross has become one of Wall Street’s highest-conviction off-price retailers, with shares up 101.48% over five years and analysts carrying an average price target of $256.06.

Another quarter of strong traffic and margin expansion would strengthen the bull case. Investors will also be watching tariff pressures and any signs that weak consumer sentiment is affecting demand heading into the second half of the year.