by Stephen Garner

RossOff-price retailer Ross Stores report strong sales and earnings growth for the second quarter of fiscal 2018. The company also raised its full-year guidance.

Net earnings for the quarter grew to $389 million, compared to $317 million in the prior year. Sales rose 9 percent to $3.7 billion, with comparable store sales up 5 percent over last year. This is on top of a 4 percent increase in same store sales for the same period last year.

For the first half of the year, Ross reported that net earnings were $808 million versus $638 million in the first half of 2017. Sales for the first six months of 2018 rose 9 percent to $7.3 billion, with comparable store sales up 4 percent over last year. This compares to a same store sales gain of 4 percent for the same time period last year. Both the second quarter and year-to-date earnings results include the benefit of tax reform legislation.

“We are pleased with the above-plan growth we delivered in both sales and earnings in the second quarter,” said Barbara Rentler, chief executive officer. “Though better than expected, operating margin of 13.8 percent was down from last year as higher merchandise margin and leverage on occupancy and buying costs were more than offset by a combination of unfavorable timing of packaway-related expenses, higher freight costs, and this year’s wage investments.”

Looking ahead to the second half, Rentler said, “While we hope to do better, given our robust multi-year comparisons, we continue to forecast same store sales to grow 1 percent to 2 percent for both third and fourth quarters.”

Commenting on the company’s future expansion prospects, Rentler added, “We are excited to announce that we have raised our long-term projected store potential to 3,000 locations, up from the previous target of 2,500. This is based on our research that indicates we can now further increase penetration in both existing and new markets. As a result, we believe that Ross Dress for Less can grow to about 2,400 locations across the country, up from our prior target of 2,000, and that dd’s Discounts can ultimately become a chain of approximately 600 stores, versus our previous projection of 500. This higher store potential provides us with a considerable amount of long-term growth opportunities given our current store base of 1,453 Ross Dress for Less and 227 dd’s Discounts.”