Ross Stores (NASDAQ:ROST) on Thursday raised its annual profit forecast after posting upbeat quarterly results, buoyed by budget-conscious customers increasingly shopping at the off-price retailer and easing freight costs. The company’s first-quarter merchandise margin rose 120 basis points as ocean freight costs eased.
The company now expects 2023 profit per share of $4.77 to $4.99, compared with its earlier forecast of $4.65 to $4.95. It posted first-quarter profit per share of $1.09, topping analysts’ average estimate of $1.06 per share. Same-store sales in the first quarter rose 1%, compared with estimates of a 0.4% rise.
The company sees second-quarter earnings per share between $1.07 and $1.14, compared with estimates of $1.25. CEO Barbara Rentler said that people were searching for even more compelling bargains and inflation had driven its customers to cut discretionary spending in some categories.
Sticky inflation has led consumers to cut spending on higher-priced goods, boosting sales at retailers such as Ross Stores and Burlington Stores (NYSE:BURL) Inc that offer products at affordable pricing. Jessica Ramirez, senior analyst at Jane Hali and Associates said that Ross Stores is taking a conservative approach in forecast given a cautious consumer sentiment especially among the lower income customers.