Ross Stores, Inc. ROST used its second-quarter fiscal 2026 earnings call to emphasize sustained traffic gains, stronger merchandising and an improving store experience as the engines behind its momentum.
The retailer also raised its second-half outlook despite tougher comparisons, while executives stressed that many growth initiatives remain in early stages.
ROST Raises Back-Half Expectations
Zacks data showed earnings and revenues beat the Zacks Consensus Estimate by 6.7% and 1.9%, respectively. Chief financial officer William Sheehan said third-quarter comparable-store sales are now expected to rise 6% to 7%, with earnings per share of $1.75 to $1.83.
For the fourth quarter, Sheehan forecast comparable-store sales growth of 4% to 5% compared with a 9% increase last year, with earnings per share of $2.17 to $2.26.
Sheehan said full-year fiscal 2026 earnings per share are now projected at $8.61 to $8.77, including about $0.60 from tariff refunds recognized in the second quarter.
Ross Stores Sees Traffic as the Core Growth Driver
Chief executive officer James Conroy said the 10% comparable-store sales increase was driven mainly by transactions. Ross Stores added new customers, regained lapsed shoppers and increased shopping frequency among existing customers.
Conroy said new customers span income groups, age cohorts and ethnicities in a pattern similar to the existing customer base. He also cited higher spending among current shoppers and broad strength across merchandise categories and geographies.
Conroy described July as the strongest month of the quarter and said August trends remained encouraging. He said the customer metrics support continued momentum despite harder year-over-year comparisons.
ROST Says Growth Initiatives Remain Early
Conroy said Ross is still expanding initiatives across merchandising, stores and marketing, including new vendors and brands, improved store organization, shorter checkout lines and changes in creative messaging and media mix.
A Bank of America analyst asked which initiatives have the most runway. Conroy said numerous efforts remain short of full implementation across stores and merchandise categories.
An Evercore ISI analyst asked whether the momentum justified a higher long-term same-store sales algorithm. Group president and chief operating officer Michael Hartshorn said it was too early for a formal change, though Ross Stores expects to outperform that framework in the short term.
Ross Stores Defends Margin Flow-Through and Pricing
Sheehan said second-quarter operating margin increased 610 basis points, including 405 basis points from tariff refunds. Excluding that benefit, operating margin improved 205 basis points, while merchandise margin rose 110 basis points.
A Goldman Sachs analyst asked whether stronger growth would require faster investment or alter profit flow-through. Conroy said Ross Stores plans to work largely within its existing model, and Sheehan reaffirmed 10 to 15 basis points of margin flow-through for each point of comparable-store sales growth.
Conroy said Ross Stores also intends to preserve its price gap compared with mainstream retail. For the back half, he expects modest low-single-digit average unit retail increases and said the company would adjust if its value position weakened.
ROST Expands Store and Inventory Plans
Conroy said consolidated inventory rose 18% at quarter-end, with packaway at 36% of inventory compared with 38% a year earlier. Hartshorn said store-level turns remained strong despite the higher inventory.
Hartshorn said Ross Stores is maintaining open-to-buy flexibility to capture closeout opportunities or adjust inventory if demand softens. Conroy added that merchandise margin improved in each of the past two quarters.
Hartshorn said the company now plans 115 new locations in fiscal 2026, up from 110. He said recent openings, including in the Northeast, are running ahead of the company’s planned first-year productivity range.
Ross Stores Keeps Strategy Focused on Execution
Conroy’s closing message centered on strengthening brand relevance, merchandise assortments and the in-store experience while maintaining disciplined execution.
Hartshorn also declined to reset the long-term growth algorithm. The call framed the strategy as continued test-and-learn execution rather than a shift toward materially higher structural spending.
ROST's Zacks Signals Show Mixed Style Support
ROST currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Its Growth Score of A, Momentum Score of A and VGM Score of B indicate stronger readings across growth, price momentum and the combined style framework, while the Value Score of D is weaker.
Zacks Style Scores complement the Zacks Rank, with A and B representing stronger grades. A Zacks Rank of 3 is less favorable than the #1 and #2 ranks emphasized in the framework, and the Rank can change as earnings estimates are revised after the latest results.
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Ross Stores, Inc. (ROST): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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