Ross Stores Inc. Gains in Q2

PLEASANTON, Calif. – Ross Stores Inc., the company behind the discount chains Ross Dress For Less and dd’s Discounts, reported second quarter net earnings this morning of $50.9 million (37 cents per share) a gain over the same time last year’s earnings of $45.4 million (32 cents per share).

Second quarter sales were up 10 percent to $1.445 billion, the company said.

CEO Michael Balmuth said, “The strongest sales gains during the second quarter were in the Northwest and the Mid Atlantic, while Dresses and Home were the best-performing merchandise categories. As a percent of sales, lower general and administrative and occupancy expenses more than offset higher freight, distribution and store costs, resulting in a 20 basis point improvement in operating margin for the quarter.”

However, Ross Stores is lowering its guidance for the remaining half of the year. Sales growth previously predicted the neighborhood of three to four percent has been lowered to one or two percent.

Balmuth commented: “Looking ahead, we are slightly more cautious now in our second half outlook as a result of a combination of macro economic factors, recent results and projections from other retailers, and our own sales trend that slowed versus plan beginning in mid-July.”

The company is undergoing an aggressive store expansion campaign. Until this year, the dd’s Discounts chain was confined to California. According to the Ross Stores, Inc. 2006 annual report, the company plans 27 new dd’s Discount locations and 63 new Ross Dress for Less stores across the country this year.

The expansion is made possible in part by Ross’s takeover of the leases of 40 Albertsons grocery stores in the southern half of the country.

Ross started dd’s Discounts in 2004 to capture a segment of the market untapped by its Dress for Less chain. It sells clothes, footwear, accessories, and home furnishings at lower prices.