by Ian Harvey
November 22, 2019
Shares of Ross Stores rose 2% in the extended session Thursday after the retailer reported third-quarter profit and same-store sales above expectations. But, the earnings conference call derails stock rise with talk of negative fourth-quarter growth in sales.
However, “Stock Options Made Easy” “Earnings Predictions” members were already up 37% potential profits before earnings. But, after the market opened today a loss of 1%, or more, occurred – depending on exit timing.
See what we are considering for future trades on Ross Stores!
Off-price retailer Ross Stores reported better-than-expected earnings and reiterated Q4 guidance late Thursday. Ross Stores stock rose a modest 2% in late trade.
But, after trading commenced today, ROST fell about 2%, based on the earnings conference call. Ross Stores said fourth-quarter sales would slow. The company sees 1% to 2% growth from a year earlier, compared with 4% growth in last year’s holiday quarter.
What’s more, executives said they remain cautious over sales prospects at the start of 2020. “What’s different going into next year is tariffs, which are very uncertain at this point,” Ross finance chief Michael Hartshorn said on the company’s earnings call.
Wedbush analyst Seth Basham said he expects tariff pressure to persist, if not rise, in the fourth quarter.
Prior to the conference call.....
Ross said it earned $371 million, or $1.03 a share, in the quarter, compared with $338 million, or 91 cents a share, in the same period last year.
Sales rose to $3.8 billion, compared with $3.5 billion a year ago. Comparable-store sales rose 5% on top of last year's gain of 3%, Ross Stores said.
Analysts had expected earnings of 98 cents on sales of $3.8 billion. The analysts had expected same-store sales 2.8% higher.
Over the last four quarters, the company has surpassed consensus EPS estimates four times.
Barbara Rentler, Chief Executive Officer, commented, “We are pleased that our third quarter results were ahead of expectations. Operating margin of 12.4% was also above-plan mainly due to better than expected sales and merchandise margin.”
Ms. Rentler continued, “During the third quarter and first nine months of fiscal 2019, we repurchased 3.0 million and 9.6 million shares of common stock, respectively, for an aggregate price of $326 million in the quarter and $966 million year-to-date. We remain on track to buy back a total of $1.275 billion in common stock during fiscal 2019.”
Shares closed up 1.22%, up $1.35, at $117.79 on the stock market yesterday.
Ross Stores shares have added about 32.7% since the beginning of the year versus the S&P 500's gain of 24%.
“Stock Options Made Easy” “Earnings Predictions” members were advised to buy Ross Stores call options on Monday, November 18, 2019, and pre-earnings were already up potential profits of 37%; but this profit was eroded as the trading began for the day.
The Recommended Trade on Ross Stores.....
"California-based off-price retail apparel and home fashion store Ross Stores, Inc. (NASDAQ:ROST) will report its third-quarter earnings after the market closes. The consensus earnings estimate is $0.97 per share; but the whisper number is a little higher at $0.98. Ross Stores earned $0.91 during the same period last year and the stock has risen 36% year to date.
The strong overall economy continues to boost consumer confidence, and the retail sector has continued to show strength. Within the retail space, discount retailer has thrived, and Ross Stores (ROST) has been a top performer with shares up 36% in 2019 alone. The strong gain has been a result of 13 straight positive earnings surprises and sales have topped estimates each of the last three quarters.
Profits are up 17% annually the last five years and are expected to rise at another 9% per annum over the next five years.
With respect to this holiday season, there may be an especially large influx of consumers into Ross Stores due to.....
consumers are still somewhat concerned about a recession and may not want to overspend, and
tariffs could make full-price stores seem extra expensive this holiday season.
Consequently, Ross Stores could be due for a strong holiday season. If so, then ROST stock could be due for big gains into the end of the year.
Of the 20 analysts who cover the stock 11 rate it Strong Buy, 1 rate it Buy, 8 rates it Hold."
Option trade to consider: Buy the ROST DEC 20 2019 115.000 CALL at approximately $2.75. (astute traders could have entered the trade at $2.30)
YOU NEED TO BE IN TO PROFIT!
As the holiday season begins Ross is "up against multiple years of strong comparable-store sales gains," and "another fiercely competitive retail landscape," Chief Executive Barbara Rentler said in a statement. "As such, while we hope to do better, we continue to project fourth quarter comparable store sales gains of 1% to 2% versus a 4% increase last year."
Ms. Rentler continued, “Given these sales assumptions, we continue to expect fourth quarter earnings per share to be in the range of $1.20 to $1.25, which now includes a one-time, non-cash benefit of $.02 per share, primarily due to the favorable resolution of a tax matter, offset by slightly higher pre-tax expenses. This forecasted guidance compares to $1.20 per share in the prior year period, which also included a one-time per share benefit of $.07 related to the favorable resolution of a tax matter.”
Ms. Rentler concluded, “Based on our year-to-date results, and our updated fourth quarter guidance, we are now planning earnings per share for fiscal 2019 to be in the range of $4.52 to $4.57, up from $4.26 in fiscal 2018.”
Join us today and see what future trades will be recommended!
The questions remain......Will Ross Stores share price climb back up?
What is the plan for members still holding options on Ross Stores?
Will we recommend another options trade on Ross Stores?
What will “Stock Options Made Easy” advise members to do?
AS ALWAYS THE DECISION IS YOURS!
An Important Note: That any suggestions for options trade considerations require investors/traders to use their own discretion as to when to enter or exit! As well, it is advisable to do further research and due diligence before executing your trade.
It is sometimes best to exit a trade, if there is already sufficient profit accrued, before an earnings report is presented. GREED can be the undoing of a nice profit!