Ross Stores, Inc. (ROST) - Q1 Fiscal 2026 Summary
Business Context and Reporting Period
This Form 10-Q covers the first quarter of fiscal 2026, ended May 2, 2026. Ross Stores, Inc. operates two off-price retail brands: Ross Dress for Less (1,917 stores) and dd's DISCOUNTS (365 stores). The company reported strong performance driven by significant comparable store sales growth and improved operating margins.
Key Financial Metrics
| Metric | Q1 2026 | Q1 2025 |
|---|---|---|
| Sales | $6,010.5 million | $4,985.0 million |
| Comparable Store Sales Growth | 17% | — |
| Operating Income | $804.0 million | $606.5 million |
| Operating Margin | 13.4% | 12.2% |
| Net Earnings | $650.0 million | $479.2 million |
| Diluted EPS | $2.02 | $1.47 |
| Cash from Operations | $836.0 million | $409.7 million |
| Cash and Equivalents (End of Period) | $4.13 billion | $3.78 billion |
| Total Debt (Long-term + Current) | $1.02 billion | $1.52 billion |
Material Changes vs. Prior Period
- Revenue Growth: Sales increased 21% year-over-year, driven by a 17% increase in comparable store sales (attributed to an 11% increase in traffic and 6% increase in basket size) and $185 million in non-comparable store sales.
- Margin Expansion: Operating margin expanded 120 basis points to 13.4%. Cost of goods sold (COGS) as a percentage of sales decreased 145 basis points, primarily due to an 85 basis point increase in merchandise margin and favorable occupancy leverage.
- Debt Reduction: Total debt decreased significantly following the repayment of $500 million in 0.875% Senior Notes at maturity in April 2026. Remaining long-term debt is approximately $1.0 billion.
- Shareholder Returns: The company repurchased 1.5 million shares for $318.7 million under a new $2.55 billion program approved in March 2026. Dividends were declared at $0.4450 per share.
Guidance, Outlook, and Risks
- Store Growth: The company remains on track to open approximately 110 new stores in fiscal 2026 (85 Ross, 25 dd's DISCOUNTS). They expect to open 47 stores in the second quarter.
- Capital Expenditures: Projected capital expenditures for fiscal 2026 are approximately $1.1 billion, funded by available cash and operating flows.
- Tariff Refunds: Following a Supreme Court decision in February 2026 regarding IEEPA tariffs, the company has submitted claims for refunds. However, no receivable or gain has been recognized as realization remains uncertain.
- Risks: Key risks include macroeconomic conditions, inflation, consumer spending trends, supply chain disruptions, and potential tariff increases on imported goods. The company also faces ongoing class-action litigation regarding wage and hour laws, though management does not expect a material adverse effect.
Investor Verification Checklist
- Sustainability of Comp Sales: Verify if the 17% comparable store sales growth is sustainable given the high traffic and basket increases.
- Inventory Levels: Monitor merchandise inventory levels ($2.98 billion) and packaway inventory (36% of total) to assess potential markdown risks or cash flow impacts.
- Tariff Refund Realization: Track the status of IEEPA tariff refund claims and potential impact on future earnings if recognized.
- Debt Maturities: Confirm the schedule for the remaining $241 million of Senior Notes maturing in 2027.
- Capital Allocation: Review the balance between the $2.2 billion remaining in the stock repurchase program and planned capital expenditures for new store openings.