Ross Stores’ second quarter results were well received by the market, reflecting broad-based improvements in sales trends across most product categories and regions. Management cited particular strength in cosmetics and noted that both the Ross and dd’s DISCOUNTS chains saw growth in both store traffic and basket size. CEO James Conroy emphasized, “We were pleased to see the improved trend at the end of the quarter, particularly with the early sales performance related to the back-to-school selling season.” While tariff-related costs weighed on operating margin, the company’s ability to mitigate these pressures through vendor negotiations and closeout buying contributed to the positive momentum heading into the second half of the year.
Is now the time to buy ROST? Find out in our full research report (it’s free).
Ross Stores (ROST) Q2 CY2025 Highlights:
- Revenue: $5.53 billion vs analyst estimates of $5.54 billion (4.6% year-on-year growth, in line)
- EPS (GAAP): $1.56 vs analyst estimates of $1.54 (1.4% beat)
- Adjusted EBITDA: $755 million vs analyst estimates of $762.1 million (13.7% margin, 0.9% miss)
- EPS (GAAP) guidance for the full year is $6.15 at the midpoint, roughly in line with what analysts were expecting
- Operating Margin: 11.5%, in line with the same quarter last year
- Locations: 2,233 at quarter end, up from 2,148 in the same quarter last year
- Same-Store Sales rose 2% year on year (4% in the same quarter last year)
- Market Capitalization: $49.16 billion
While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.
Our Top 5 Analyst Questions From Ross Stores’s Q2 Earnings Call
- Matthew Boss (JPMorgan) asked about the drivers of sequential sales improvement and back-to-school trends. CEO James Conroy described broad-based gains across categories, with strong July momentum, and said the 2% to 3% comp guidance reflects cautious optimism given macro uncertainty.
- Lorraine Hutchinson (Bank of America) questioned whether price increases would fully offset tariffs. Conroy replied that Ross is taking a “very cautious” approach to price changes, aiming to maintain its value proposition, and expects a new price equilibrium industry-wide next year.
- Michael Binetti (Evercore ISI) probed the drivers of updated EPS guidance and initiatives impacting stores. Management attributed the lower outlook versus initial guidance to tariff costs and noted that store refreshes and self-checkout pilots are progressing well but are early in rollout.
- Paul Lejuez (Citigroup) asked about transaction and basket trends. Group President Michael Hartshorn explained that both traffic and average basket size increased, with growth driven by slight increases in average unit retail (AUR) and units per transaction.
- Alex Straton (Morgan Stanley) queried if a higher branded merchandise mix is a permanent margin headwind. Hartshorn said the initial margin impact is expected to improve over time as vendor relationships and closeout access strengthen.
Catalysts in Upcoming Quarters
In the coming quarters, our analysts will focus on (1) Ross Stores’ ability to further mitigate tariff and cost pressures through sourcing and pricing actions, (2) the performance of newly opened stores in Puerto Rico and the Northeast as indicators of expansion potential, and (3) the impact of ongoing store refreshes and self-checkout pilots on customer experience and sales. Monitoring same-store sales trends and merchandise category mix will also be important for assessing execution.
Ross Stores currently trades at $150.29, up from $145.63 just before the earnings. Is the company at an inflection point that warrants a buy or sell? Find out in our full research report (it’s free).
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