Ross Stores Posts 10% Comp Growth for Second Consecutive Quarter, Raises Full-Year Outlook
The off-price retailer delivered double-digit comparable store sales growth driven by customer traffic, with management citing early-stage initiatives and broad-based strength across categories and regions.
Momentum Accelerates Through Quarter
Ross Stores, Inc. delivered its second consecutive quarter of double-digit comparable store sales growth, posting a 10% increase in the second quarter of fiscal 2026 on total sales of $6.3 billion, up 13% year-over-year (earnings call, 2026-08-20).
The off-price retailer saw sequential improvement throughout the quarter, with CEO James Conroy noting that "sales were strong in May and improved sequentially each month, with July delivering our strongest performance despite cycling a strong back-to-school performance last year" (earnings call, 2026-08-20). Customer traffic served as the primary driver of the comparable store sales increase.
Conroy emphasized the quality of the growth, highlighting gains from both new and lapsed customers, along with increased visit frequency and higher spending from existing customers. "Importantly, the new customers we are attracting span a broad range of income demographics and age cohorts including younger shoppers," he said (earnings call, 2026-08-20).
Margin Expansion and Earnings Beat
Gross margin improved by 625 basis points, driven primarily by 405 basis points of tariff refunds. Excluding this benefit, operating margin still increased 205 basis points compared to the prior year (earnings call, 2026-08-20). Merchandise margin increased by 110 basis points, while distribution costs were lower by 100 basis points.
Second quarter earnings per share reached $2.66, up from $1.56 in the prior year period. CFO William Sheehan noted that the results included approximately $0.60 in earnings per share from tariff refunds (earnings call, 2026-08-20).
For the first half of 2026, comparable store sales increased 13%, with earnings per share of $4.69 compared to $3.03 in the prior year period.
Inventory Position and Store Expansion
Consolidated inventories increased 18% at quarter end, with packaway inventory representing 36% of total inventory compared to 38% last year (earnings call, 2026-08-20). Management expressed confidence in leveraging this inventory position to meet elevated customer traffic while broadening merchandise offerings.
The company raised its 2026 store opening plan to 115 locations from a previous target of 110, with Conroy citing particular encouragement from "the strength of our recent openings in both existing and newer markets" (earnings call, 2026-08-20). The company opened 51 stores in the third quarter alone, including 41 Ross and 10 dd's Discounts locations.
Raised Guidance Despite Tougher Comparisons
Despite facing more challenging year-over-year comparisons in the back half, Ross raised its outlook for both the third and fourth quarters. The company now expects third quarter comparable store sales to increase 6% to 7%, with earnings per share in the range of $1.75 to $1.83. Fourth quarter comps are forecast to increase 4% to 5% on top of a 9% increase last year, with earnings per share of $2.17 to $2.26 (earnings call, 2026-08-20).
Full-year earnings per share are now forecast in the range of $8.61 to $8.77 versus $6.61 last year, including approximately $0.60 from tariff refunds.
The company repurchased approximately 1.4 million shares during the quarter for $319 million under its $2.55 billion authorization, remaining on track to buy back $1.275 billion in stock during 2026 (earnings call, 2026-08-20).
This article was generated by MarginX from the earnings call on 2026-08-20. It is not investment advice.