Ross Stores ROST Q1 2026 Earnings Transcript

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Date

Thursday, May 21, 2026 at 4:15 p.m. ET

Call participants

• Chief Executive Officer — James G. Conroy
• Group President and Chief Operating Officer — Michael J. Hartshorn
• Executive Vice President and Chief Financial Officer — William Sheehan
• Senior Vice President, Investor Relations — Connie Kao

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Takeaways

• Total sales -- $6 billion, reflecting 21% growth driven by a 17% increase in comparable store sales.
• Comparable store sales -- Up 17%, attributed primarily to growth in transaction volume and a double-digit increase in customer count across income levels, ethnicities, and age groups.
• Operating margin -- Expanded to 13.4%, representing a 120 basis point increase from the prior-year period.
• Net income -- $650 million, up from $479 million in the same quarter last year.
• Earnings per share (EPS) -- Rose 37% to $2.02 compared to $1.47.
• Inventory -- Consolidated inventories increased 12%, with packaway inventory at 36% of the total, down from 41% in the prior year.
• Buybacks -- Repurchased 1.5 million shares for $319 million under a new two-year $2.55 billion authorization, maintaining a target to buy back $1.275 billion of stock in 2026.
• Store openings -- Opened 13 Ross and 4 dd’s DISCOUNTS stores in the quarter; planning to open approximately 110 new stores for the year, targeting 5% unit growth.
• Merchandise margin -- Improved by 85 basis points; occupancy leverage contributed 60 basis points; distribution and domestic freight costs declined by 15 and 10 basis points, respectively.
• Second quarter guidance -- Projecting comparable store sales growth of 6%-7%, total sales growth of 9%-11%, EPS between $1.85 and $1.93, and operating margin of 12.8%-13% (from 11.5% last year).
• Full year guidance raised -- Forecasted comparable store sales increase of 6%-7% and EPS in the range of $7.50‑$7.74, up 13%-17% from $6.61.
• New store productivity -- Guided for new store productivity at 70%-75% of mature locations, with early results suggesting potential to exceed that target.
• Customer acquisition -- "new customers was the primary driver" of transaction growth, with particular strength among younger (18–24) shoppers and double-digit increases in customer count.
• Cosmetics category -- Noted as a standout segment with new high kind of exploding brands and rising sales productivity per square foot, though space allocation has not materially changed.
• Marketing initiatives -- Continuing modernization of creative messaging, media mix optimization, and new event strategies aimed at expanding brand reach.
• Distribution and freight -- Expectation of elevated fuel prices pressuring freight costs in the second quarter and for the full year, with current guidance reflecting these headwinds.
• Geographical expansion -- Northeast, including New York, highlighted for new store success and exceeding underwriting pro forma expectations; 20% of new store growth in less established markets.
• Store refresh -- Store remodel program paused temporarily after completing half the chain, with evidence of improved sales and customer experience in updated locations.

Summary

Ross Stores (NASDAQ:ROST) delivered record-setting quarterly comparable store sales growth and raised full-year guidance based on broad-based performance across categories and geographies. Management confirmed that double-digit customer count increases were the primary source of transaction gains, led by robust acquisition of younger demographics and reinforced by ongoing marketing initiatives. The company outlined plans for continued unit expansion, highlighted new store outperformance in the Northeast, and stated that new store productivity is tracking above guidance. Potential tailwinds from tariff refunds were not factored into forward guidance due to timing and amount uncertainties. Elevated fuel costs, reflected in distribution guidance, may pressure freight expenses throughout the year, but overall operating margin is forecasted to improve on merchandise margin and scale efficiencies.

• Management’s comments indicated that customer count increases have sequentially improved for several quarters, with a double-digit increase in customer count on a comparable store basis recorded in the most recent period.
• The company stated that every major merchandise category posted teens-or-higher comp growth, with the Midwest as the strongest performing region.
• Ross Dress for Less and dd’s DISCOUNTS both contributed to top-line gains, with store productivity in new locations surpassing underwriting estimates, especially in the New York area.
• Incentive compensation costs were the primary driver of SG&A deleverage, but both marketing and store-related expenses leveraged due to sales outperformance.
• Management described a shift toward faster decision-making and increased entrepreneurial orientation while maintaining prudent risk controls.
• Updated store formats, including signage and cosmetic changes, produced better customer survey responses and higher sales, informing future store upgrade plans.
• The company highlighted increased access to vendor closeouts, with merchants receiving priority calls for opportunistic inventory, supporting sustained sales momentum.

Industry glossary

• Packaway inventory: Merchandise held for future sale, purchased in advance at opportunistic prices but not immediately placed on store shelves.
• Merchandise margin: Gross profit generated from the sale of products, excluding occupancy and distribution costs, reflecting pricing, markdown, and product mix effects.
• New store productivity: Sales as a percentage of a typical mature store’s sales, used to benchmark the performance of newly opened locations.

Full Conference Call Transcript

James G. Conroy: Thank you, John, and good afternoon, everyone. Joining me on our call today are Michael J. Hartshorn, Group President and Chief Operating Officer William Sheehan, Executive Vice President and Chief Financial Officer and Connie Kao, Senior Vice President, Investor Relations. Before we walk through the results, I would like to thank our associates for an exceptional first quarter. The entire organization contributed to the very strong performance.

Our marketing team drove strong customer acquisition and engagement through a combination of creative messaging and changes to our media mix, Our merchants and planners delivered compelling assortments and worked tirelessly to secure product to feed the outsized demand, Our supply chain network stepped up their efforts to keep the stores in stock in a timely manner And finally, our stores team executed extremely well in supporting the increased product flow and customer activity. It was a remarkable group effort I could not be more proud of the teamwork demonstrated across the entire organization. Thank you to the entire team. I will now turn to our first quarter results.

We delivered an outstanding quarter with total sales up 21% and earnings per share growth of 37%. The overall growth in total sales was driven by a very robust 17% increase in comparable store sales. While we attribute a portion of this growth to the increase in tax refunds, versus last year, we are quite pleased that the underlying fundamentals of our growth were extremely healthy. The comp increase was primarily driven by a growth in transactions, and we saw healthy increases in customer count on a comp store basis across income levels, ethnicities, and all age groups, including the young customer.

In terms of monthly cadence, the quarter started strongly as we transitioned well from holiday-- from the holiday selling season into spring supported by more balanced inventory levels that allowed us to drive strong demand in February, where we have historically struggled. The strength continued with solid mid-teen compss for the balance of the quarter. Performance at Ross was broad based across both merchandise areas and geographies. While ladies and cosmetics were our strongest businesses, every major merchandise category posted comp growth in the teens or higher? Similarly, we saw strength across the entire country with the Midwest performing the best. DD's DISCOUNTS also delivered solid top line sales strong performance across merchandise categories and geographic regions.

Moving to inventory, Consolidated inventories at the end of the quarter were up 12%, and packaway represented 36% of total inventory compared with 41% last year. We are pleased with the overall level and composition of our inventory entering the second quarter. Turning to store growth. We expanded into new and existing markets and opened 13 new Ross and 4 DD's DISCOUNTS locations in the first quarter. We continue to plan for 5% unit growth for approximately 110 new stores this year comprised of about 85 Ross, and 25 DD's DISCOUNTS. As usual, these numbers do not reflect our plans to close or relocate about 10 to 15 older stores.

Consistent with our performance in 2025, we continue to be encouraged by the strength of the store openings in both new and existing markets. Overall, we remain confident in our fundamental strategy to better connect merchandising, marketing, and stores to create an improved customer experience. While the initial results are quite encouraging, we believe we are still in the early stages with many of our initiatives and see opportunities to drive continued growth in sales going forward. Now Bill will provide further details on our first quarter results and additional color on our second quarter outlook.

William Sheehan: Thank you, Jim. Turning to our financial results, starting with the first quarter. As Jim mentioned earlier, total sales for the quarter grew 21% to $6 billion Comparable store sales grew a very robust 17%, primarily driven by an increase in the number of transactions. First quarter 26 operating margin expanded 120 basis points to 13.4% compared to last year's 12.2% significantly exceeded our expectations. Cost of goods sold was 145 basis points lower in the quarter, Merchandise margin improved by 85 basis points, while occupancy leveraged by 60 basis points on the strong sales results.

Distribution and domestic freight costs declined by 15 and 10 basis points, respectively, Partially offsetting these benefits were buying costs that rose 25 basis points due to higher incentives given the earnings upside. SG&A for the period rose 25 basis points due to higher incentives given the outperformance. Both marketing and store related costs leveraged during the quarter. First quarter net income of $650 million, compared to $479 million last year. And earnings per share rose 37% to $2.02 from $1.47 the prior period. Now to our shareholder return activity. As noted in today's release, repurchased 1.5 million shares during the quarter.

For an aggregate total cost of $319 million under the new 2-year $2.55 billion authorization approved by our board of directors in March of this year. We remain on track to buy back a total of $1.275 billion in stock during 2026. Before turning to our forward outlook, I would like to briefly address tariff refunds. Like other companies, have submitted refund claims for tariffs. Given ongoing uncertainties related to the timing and ultimate amount of the reimbursement, we have excluded potential refunds from our forward guidance. Now turning to our outlook for the second quarter. As Jim noted earlier, we exited spring with solid momentum.

As a result, we are projecting comparable store sales for the 13 weeks ending 08/01/2026 to be up 6% to 7% and earnings per share to be in the range of $1.85 to $1.93. The operating statement assumptions that support our second quarter guidance include the following: Total sales are projected to increase 9% to 11% versus last year. The same store sales performed in line with our forecast, operating margin for the second quarter is expected to be in the range of 12.8% to 13%, compared to 11.5% last year. The expected improvement reflects an increase in merchandise margin, as well as lower distribution costs.

As we anniversary the opening of the new distribution center and tariff related ticketing costs in the second quarter of 25. We plan to add 47 new stores consisting of 35 Ross, and 12 DD's DISCOUNTS during the period. Net interest income is estimated to be $24 million. Our tax rate is expected to be approximately 25%. And weighted average diluted shares outstanding are forecasted to be about 320 million. Now turning to the full year. We are raising our fiscal 26 sales and earnings guidance to reflect the exceptional first quarter results and the solid second quarter guidance. In addition, our assumptions for the second half remain unchanged.

As a result, comparable store sales growth for fiscal 26 are forecasted to increase 6% to 7%. On top of a 5% gain last year. Earnings per share for the full year are now projected to be in the range of $7.5 to $7.74 up 13 to 17% when compared to $6.61 last year. Now I will turn the call back to Jim for closing comments. Thank you, Bill.

James G. Conroy: We are very encouraged by the strong momentum to start the year. I would like to take 1 more moment and recognize the entire team across the company. We were able to grow sales in the quarter by more than $1 billion and posted the highest same store sales growth in the company's 40-year history. Thank you all. For all of your hard work and for the fantastic execution on our new growth initiatives. At this point, would like to open the call and respond to any questions that you may have. John?

Operator: Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press 1 on your telephone keypad. A confirmation tone will indicate that your line is in the question queue. You may press 2 if you would like to remove your question from the queue. We ask that you please limit yourself to 1 question and 1 follow-up. Thank you. 1 moment, please, while we poll for questions. And the first question comes from the line of Matthew Robert Boss with JPMorgan. Please proceed.

Analyst (Matthew Boss): Great, and congrats on a really great quarter. Thank you, Meta. So Jim, I guess the question is, could you help us to bottoms up build this whether the 17% comp in the first quarter or 9% comp if I look at trends over the past year. And maybe just relative to the consistent 4% comp that the business generated pre pandemic, What I am trying to get at is how durable you believe that the drivers that is putting together these kind of comps are today. And anything that you believe the business would need to give back as we think multiyear?

James G. Conroy: Sure. Great question. The company performed extremely well for years before I got here. I think if we made any changes, it is really a shift towards more focus on customer acquisition. So if you think of the health of our comp, and I do not think all comp sales growth is created equally. So the health of our comp has been driven by transactions. For the third consecutive quarter, and it is even more driven by transactions this quarter than even in the fourth quarter and the third quarter. In terms of the transactions as a component of their overall count. In terms of the durability, those transactions are driven by more customers.

So we are seeing a double digit increase in customer count on a comp store basis. We are seeing that very strong growth across all ethnicities, all age groups, including the young customer, all income levels, And then if you think about the flywheel concept of bringing more customers, through marketing initiatives, great in store environment, great merchandise, selection, getting them in the store, converting shoppers into buyers with just compelling assortments, and tidier stores and better in store merchandise and that just drives more hours for ourselves. It gets you more store labor and more marketing. And we talked about this on the last call. But we are we have just gotten started on many of these initiatives.

So I think it is I think it is durable. We probably had 2 unique cases in the first quarter. 1 was idiosyncratic to Ross, which was the first quarter historically had been 1 where we were very conservative. So we probably had a little bit more pent up demand to go after. The second 1 was across all of retail. Least all of retail at our kind of price tier. Which is we do believe that some portion of the sort of outsized comp could be attributed to higher tax rebates versus last year?

But even if you strip those 2 things out, that we just had a very, very strong quarter and are quite pleased. it is a really great team effort with every function in the business contributing.

Analyst (Matthew Boss): Great. Great color. Jim, you cited exiting the quarter with continued momentum, and I know you do not lay out a 6% to 7% forecast lightly. Have you seen any change in customer behavior so far in the second quarter or just any change in trends maybe if we are thinking about by category?

Michael J. Hartshorn: Matthew, I would not comment on the second quarter, but maybe it would be helpful if I talked about the trends during the first quarter. The quarter started particularly strong in February. Jim talked about this a little bit, but we transitioned very well from holiday to spring selling, a place where we have struggled for a number of years. We have always been very, very conservative to start the year. And the merchant and planning team did a fabulous job of planning and executing against that transition. We continue to see mid-teen comps for the balance of the quarter Some of that was likely aided somewhat by the tax refunds. Jim also mentioned that.

And then the Easter calendar shift did move some demand. And, again, that is demand versus last year. Earlier in the quarter. So all in, we started very strong and had good momentum throughout the quarter.

Analyst (Matthew Boss): Great color. Best of luck. Thanks, Matthew.

Operator: Thank you. And the next question comes from the line of Lorraine Hutchinson with Bank of America. Please proceed.

Analyst (Lorraine Hutchinson): Thank you. Good afternoon. The 17 was an unprecedented comp, and probably was the result of unprecedented amounts of Chase inventory. So can you just talk about how comfortable you are with your inventory reserve levels and quality and ability to continue to chase into this 6% to 7% comp.

James G. Conroy: Sure. I think we are very comfortable. The availability of closeouts in the marketplace is still outstanding. I think you will hear that from each of the players in the industry. I think our buyers are and our merchants have been very aggressive. You know, the whole we did really have to react to a pretty sharp spike in sales. And we are able to feed demand The other great thing is I think the market is now recognizing that our growth rate is a bit outsized, and we are getting a lot of first calls now.

And, And, again, hats off to both of our chief merchants, Karen and Karen, their teams for really hustling to make sure we had product available and seasonally appropriate product to transition us from holiday to spring through Easter into Mother's Day. it is just been a fantastic execution. But I would not be worried about availability of product.

Analyst (Lorraine Hutchinson): Thank you. Thank you.

Operator: And the next question comes from the line of Paul Lejuez with Citigroup. Please proceed with your question.

Analyst (Tracy Kogan): Thanks. it is Tracy Kogan filling in for Paul. I think you guys said domestic freight leverage this quarter, and I was wondering what the driver was there and what you are building in for the year. And then I think Ocean is a smaller piece for you, but wondering if you could give some color on what you are seeing on that piece of freight as well. And then I have 1. Thanks.

Michael J. Hartshorn: As you mentioned, cost did delever 10 bps year over year, but higher expected fuel prices did limit some of that leverage that we typically get from that sales outperformance. Then going forward, we are kind of finalizing freight contracts as we speak, and our guidance does reflect the assumption that will have elevated fuel prices that will pressure freight costs, both ocean and domestic, in the second quarter and the full year.

Analyst (Tracy Kogan): Thank you. And you guys mentioned traffic being the driver this quarter. I was hoping you could talk about some of the other metrics, like average basket, AUR, units, conversion? Thank you.

Michael J. Hartshorn: Sure, Tracy. So as we said, the primary driver was traffic. The average basket also grew, but by a significant lower proportion of the sales growth. And the units the units sold were flat. You said flat? Units per transaction were flat. Were flat? I am sorry. I am just clarifying. Flat. Yeah. Students per transaction were flat. Thank you. Thanks.

Operator: And the next question comes from the line of Corey Tarlowe with Jefferies. Please proceed with your question.

Analyst (Corey Tarlowe): Great. Thanks. I guess Jim, as you think about how broad based this really strong comp has been Can you talk about if you saw any inflections by category, whether it is ladies, home, footwear, or even juniors perhaps within ladies? And is there anything specific you think that is driving that mix shift? Because there is very clearly been quite a strong acceleration in trends quarter over quarter.

James G. Conroy: Yes. Thank you. The strength was broad based, and the sequential improvement was pretty broad based also. Some of the categories that tend to get more focused, the ladies business had a very nice sequential improvement from the first quarter. And actually, outperformed the balance of the businesses We called out cosmetics, Also, it is a nice sequential improvement. And outperformed But within ladies, lots of strength there, the junior's business, was very strong.

Just, you know, as we look down the categories, we, in an effort to try to give a little bit more transparency and a little bit more color than I think is typical, but we wanted to comment that every category was positive in the teens or higher. So we were obviously very, very pleased with the performance across the board. And every buying office should be just thrilled with what they were able to achieve.

Analyst (Corey Tarlowe): James sense. And that is also very helpful. I have a follow-up for Bill. Just as we think about the flow-through on comp versus plan. Could you just remind us how to think about that and maybe what you saw in the quarter? Thanks so much.

William Sheehan: For the quarter, the earnings flow through on the robust sales was actually above our expectations. but right in line, with the model. So that felt pretty good. And then and then going forward, from our guidance perspective, and as we talked about, we would be Q1 by about 35%, sorry, and are flowing about $0.38 for the full year. Based on the higher Q2 guide. So we feel like we are right in line where we should be.

Michael J. Hartshorn: On the flow-through, so we typically say every point of comp is worth about 10 to 15 basis points. We were within that range at the high end of the range in the first quarter. Some movement between categories. We were slightly better on merchandise margin than our normal flow-through, but we did spend more store payroll to support the increased product flow.

Analyst (Corey Tarlowe): that is really helpful. Thanks so much, and best of luck. Thanks, Corey.

Operator: And the next question comes from the line of Michael Charles Binetti with Evercore ISI. Please proceed with your question.

Analyst (Michael Binetti): Hey, guys. Thanks for taking my question. Congrats on the quarter. I guess as we let me think about that The last answer there is we delevered SG&A on a 17% comp. It sounds like there are some potential investment in incentive comp. Certainly, incentivized employees can help grow top line. So like a good investment. But does SG&A average on the 6% or 7% comp in the second quarter? Or the 2% to 3% comp that is baked in the back half? Or if we come in above that, do we start looking for other buckets to invest in to support the top line?

Michael J. Hartshorn: Michael, maybe I will give some more color on the first quarter. As you said and as we said in the commentary, we delevered by 25 basis points That was all due to higher incentives. Without the incentives, both marketing and store related costs leveraged during the quarter. We had in our guidance plan selling costs up slightly and that was due to wage growth and with some investments in improvements in the store experience to drive top line growth.

William Sheehan: So with the strong comp that we believe was somewhat helped by those investments, we got leverage there. And then and then on the go-forward, right, from a guidance perspective, right, the largest driver right, is going to be merch margin. And we would expect to see some benefit in DC costs, as we anniversary the opening of our Arizona distribution center. Okay. And then if I could follow that. But we do, again, anticipate merch margins to remain a benefit in Q3 and Q4.

Analyst (Michael Binetti): On new stores, you gave us kind of a higher new store productivity assumption last year or last quarter, Michael, as far as modeling out. Relative to the 65% you gave us historically. But you are delivering numbers well above that new guidance. I think it was 75%. I think something with a 9% handle this quarter. Can you just give us a little idea of the financial into what looks to be a pretty different new store opening profile?

Michael J. Hartshorn: Sure. As we said, we have 110 openings, and we are in I would say, possibly the best shape we have been in terms of getting lease done. So this year was very, very good. And then our pipeline into next year also looks very good to maintain that 5% unit growth. You asked about new store productivity. Last year, our new store productivity was above that level, so there is a number of stores that have not come yet. Those stores continue to do very, very well. We gave you guidance for 70% to 75% of a mature sore for the new stores this year. I would say it is very early, but we hope to beat that number.

Analyst (Michael Binetti): Okay. Thanks a lot, guys. Thank you.

Operator: And the next question comes from the line of Chuck Grom with Gordon Haskett. Please proceed with your question.

Analyst (Chuck Grom): Hey, thanks very much. Just a follow-up on Michael's question on new stores in a really strong. How are you thinking about units going? Do you still want to target the 5%? Do you think about densifying in the Northeast more? Just a little bit of thought on unit growth maybe over the next several years given strong as you are opening up stores right now?

James G. Conroy: Yeah. I think our what we are modeling internally is the 5% unit growth over the longer term. If we happen to get a big deal through bankruptcy or get ahead of that store opening, I do not think we would hesitate to increase that target. Okay.

Analyst (Chuck Grom): And I think geographically you would think about differently?

James G. Conroy: Well, the Northeast is certainly open. it is-- that is certainly built into our 5-year plan in New York. We have a store alone, and, obviously, we will go further into the Northeast. But we exited 2025 with 12 stores in the New York area and have 2 locations in the first quarter. And those stores are doing very well for us.

Analyst (Chuck Grom): Gotcha. Great. And then as you look as you think about the second half, right, in the comparison about the lab, how do you think about the drivers to help you comp the comp? The implicit comp is a 2% to 3%. What gives you the confidence there in terms of the marketing in store changes, the product assortment? I guess, how would you force rank what gives you the confidence to lap that positively?

James G. Conroy: I would circle back to some of my earlier comments. On this call and on the prior call. There are there are 2 schools of thought. 1 is you are up against strong comps and you are possibly going to get put numbers on top of that. But the second is you are in the early stages of transforming a company. Starting to build momentum. The comp is driven by more customers. That customer count increase continues to get stronger with each quarter. And we also have a lot of merchandising initiatives. Right? The merchants are constantly opening up new brands.

We found the confidence now to introduce brands that are more in the better investment price points and add those to the great stable brands that we already have. And so that may give us some more comp increase The stores have proven that they can contribute to the comp growth, but they are in the very early stages of changing visual merchandising and store labor models and shifting hours, reallocating store labor hours to sales driving activities, And Aaron and the team have just done incredible work but we are still learning. Right? We are in the very, very early stages of many of these initiatives.

So you know, I hear you that people will wonder if you can comp a 7%, 9% or a 17%. Given the momentum that we are seeing and given the underlying KPIs in the growth in customer count customer count across geographies, the trend the strength in the transactions at the risk of laying out new second half guidance right now, I think we have plenty of more opportunity for continuing very solid comp. Maybe not a 17, but very solid comps for the balance of the year. Got it. Thanks for that answer.

Analyst (Chuck Grom): Thank you.

Operator: And the next question comes from the line of Brooke Siler Roach with Goldman Sachs. Please proceed with your question.

Analyst (Brooke Roach): Good afternoon. Thank you for taking our question. Jim, I was hoping you could reflect on what is working very well in marketing today and what we should expect might change as we look into the back of the year as you annualize some of these initiatives?

James G. Conroy: Sure. I think you will see more of what we have been doing. You know, we are we are really trying to modernize the creative message. We are mixing up our media mix. We are doing more events. All of those things are adding to the proverbial top of funnel. We have got some pretty exciting things upcoming. You know, it is in a competitive industry like off price. Sometimes it is hard to give more color because you then see if end up in 1 of your competitors and what they are doing.

But suffice it to say, I think that we are in the very, very early stages of focusing on the Ross and Dee's brands, contemporizing them, and having them be get their own sort of followership. And you can see it. Right? You can you can follow us on social media. You can see our television spots. And it is I think it is a very refreshed view of how to go to market in retailing and certainly in off price retailing. So stay tuned. there is a lot more there is a lot more coming over the next few months from a marketing standpoint.

Analyst (Brooke Roach): Great. And then just a quick follow-up. I was hoping you could put finer point on your expectations for fuel surcharges for the year. Can you quantify the headwind that you are expecting in the back half? And what oil price is embedded within the guide?

William Sheehan: We try to estimate based on what the DOE and others estimate. And so like we said, we do expect some pressure in the second half, but again, if fuel prices differ materially from where they are now, then we would see some additional pressure. So that is something we are monitoring closely and get the best estimates that we that we can.

Analyst (Brooke Roach): Great. Thanks so much. I will pass it on.

Operator: Thank you. And the next question comes from the line of Mark Altschwager with Baird. Please proceed with your question.

Analyst (Mark Altschwager): Good afternoon. Thanks for taking the question. Seems a little silly to ask about consumer headwinds when you reported 17% comp and you are guiding 6% to 7%. But just wondering if you are seeing any indications of shifts in consumer behavior as the inflationary pressures have picked up You said strength broad based across regions, but any color on California specifically where gas prices, are even higher?

Michael J. Hartshorn: Just 2. On your on your first, first question, on both customer count and comp growth. We did not we did not see a variation across income levels. Actually, all income levels were very strong. California, performed in line with the chain during the quarter. I would say on fuel costs, generally, historically, it is been hard for us to see any immediate direct correlation between fuel prices and our sales performance. That said, obviously, the potential impact can vary based on the magnitude and how long the increased fuel prices last.

I would also add the silver lining for off prices that any uncertainty in the macro environment could lead to customers taking more value when shopping and create closeout opportunities from for us for the for the supply set.

Analyst (Mark Altschwager): And a follow-up for Jim. If you could give us an update on the branded apparel rollout How broad is the strategy beyond ladies at this point? And with the acceleration you are seeing in new customer acquisition and overall growth, how are you thinking about that balance between the good, better, best and what is resonating most with that newer customer you are bringing in. Thanks again.

James G. Conroy: So the brand strategy in ladies and across the entire business is now very much in place and has been I think we have lapped it a few quarters ago. It was a great adjustment to kinda correct the time when perhaps the business certainly, before I got here, had evolved away from some of the really compelling brands and the company was able to correct that also before I got here. So there is a lot of people that are working really hard to put that in place. And we can see it in the strength and now the pervasive strength in the ladies business mostly But perhaps it is also a part of the strategy across the board.

In terms of good, better, best, you know, we are we are hyper focused on that right now because you are right to call out the potential softness and pressure in consumer and it is all over the news. it is what other retailers are calling out, etcetera. So we have to ensure that we are we are in stock with sort of the best bargains across price points, but certainly the good price points But then when we look at our data, our customer KPIs are unbelievably Right?

More customers shopping more frequently and spending more on each trip So we are now we are trying to find if there is even some more opportunities to stretch our prices not on same goods, but on new brands and new goods. And really just deliver even a broader assortment for our customer out there. So we are we are just know, we are we are really we are really thrilled with sort of the health of the business, and we are very cognizant of what is happening in the macro environment.

We wanna deliver the absolute best bargains and best values for customers, particularly those under pressure from the price of oil or gas prices, etcetera, But we also have this sort of growing customer base that seems to be responding across good, better, and best.

Operator: Thank you. And the next question thank you. And the next question I had done. Corey about that. The next question comes from Dana Lauren Telsey with Telsey Advisory Group. Please proceed with your question.

Analyst (Dana Telsey): Hi. Good afternoon, and congratulations on the very nice results. Given the new customer acquisition, that seems to have accelerated and the flywheel of marketing driving new customers, As you think about the sales gains that you had, the new customer acquisition, any different demographic profile younger, maybe wealthier with a trade down, anything you are seeing there, And then how do you think of the cadence of marketing spend as you go through the balance of the year? Is 1 quarter more allocated than another? And then just lastly, on the New York stores, the 12 that you mentioned, how much higher are they than your plan? What are you seeing that is new or different?

And how do you think of Northeast openings as a percentage of the total mix? Going forward? Thank you.

James G. Conroy: All right, Dana. Thanks for the questions. I will get I think Michael will take the storage question. In terms of, like, customer group, it is it is 1 of those report cards that you just you almost cannot believe it. We have had customer growth across every ethnicity, every age group, and every income level I think the part that and we can we are using the of third party available credit card data. I think the 2 things that would make our customer count unique relative to the rest of retail right now is certainly the magnitude.

I think the number of customers that we are capturing and year over year increase based on what we can see for us and for other players is higher And then notably, the younger customer, that sort of very difficult to attract 18 to 24 year old customer, we are just outperforming, you know, virtually every other retailer that we can track.

So those 2 pieces, if you are looking for nuances, that younger customer has really gravitated towards us, which is has been part of the strategy and is really starting to take root In terms of the cadence of the spend, Firstly, what we are at a rate of sales, where we did not spend any more in the first quarter than we did. In fact, we got a little bit of leverage there. We continuously get questions as, well. Should we be investing more? Maybe over time, we will. But right now, we are we are certainly driving healthy traffic and comps with the marketing spend that we have.

As we look at it by quarter, there might be some small investments here or there in the balance of the year. Nothing that will move the needle in a material way. And, clearly, we spent more money in holiday quarter in absolute dollars, but not necessarily as a rate So that is that is sort of our view right now from a marketing standpoint. And then from the from a store's perspective, Michael will take that Dana, obviously, we are very excited about further expansion into the Northeast. I do not want to forget about our existing markets right now.

Michael J. Hartshorn: Our new store growth only about 20% of our new store growth is in the newer markets. What I can tell you about the New York stores As you know, not every store is created equal, but I can give you a benchmark versus our underwriting pro forma, and we have far exceeded our expectations of what we thought were needed from a an underwriting standpoint. So we are very excited about the expansion. We see we can be very successful. Obviously, the population density in the Northeast is very similar. Actually, more population density than even our oldest market of California.

So the Northeast real estate department has done a nice job of beginning to run leases there, and we will have more to say as we expand our rollout in 2027.

Analyst (Dana Telsey): Thank you.

Operator: And the next question comes from the line of Simeon Siegel with Guggenheim. Please proceed with your question.

Analyst (Simeon Siegel): Thanks. Hey. Good afternoon, everyone. Really nice job. I am going to try to sneak 3 quick ones in, if I can. What percent of the growth in transactions at this point are coming from new acquisition versus that greater frequency of existing that you mentioned, Jim? And then how are you thinking about the timing of CapEx this year? I think Q1 was somewhat similar to last year, but you do have the lift guided for the full year. And then just taking a quick step back, just any help on long term EBIT margin opportunity recognizing that kind of the ongoing strength we are hearing from you?

Maybe how are you thinking about benchmarking that or analyzing that opportunity? Thanks, guys.

James G. Conroy: All right, Simeon. That was impressive. Very, very quick. In getting all 3 of those questions. I will take the first 1. And then Michael will be able to take the others. But we do not parsing out the components of the comps too finally, I would say and we are record already saying transactions was the primary driver of the comp. And of the transactions, new customers was the primary driver of that.

Michael J. Hartshorn: On the on the CapEx side, we typically do not give parsing it out by quarter. it is not it is not you know, skewed particularly at all. We are slightly up this year, but I do not think it is it is very divergent by quarter. In total, we are still estimating about $1.1 billion in capital versus $819 million last year. I think your last question is on long-term operating margin. I our model has not changed at this point. You know, we have said double digit EPS growth, about 5% unit growth. At 60 to 70% productivity drives 3% to 4% EPS growth.

Long term gains at 3% to 4% on comp, then I will come back to that in a second. And 2% to 3% from share repurchase program. If we can comp higher than the 3% to 4%, we would expect outsized EBIT growth.

Analyst (Simeon Siegel): Makes total sense. Thanks, guys. Great job. Best of luck for the rest of the year. Thanks so much.

Operator: And the next question comes from the line of Krisztina Katai with Deutsche Bank. Please proceed with your question.

Analyst (Krisztina Katai): Hey, guys. Great quarter. Congrats on so I wanted to ask on cosmetics. Obviously, it was a standout in the quarter. Is that primarily branded availability? Is it consumer trade into prestige? Just getting the trend right or increased space allocation? And how durable is that?

James G. Conroy: Well, I think it is several things. I think 1, the team, Michael Kay and Stephen, have just done an unbelievable job of driving that business, and that is been a standout for from a category perspective for several quarters now. Secondly, they have they have done a really nice job of bringing in new brands You can see them in the store, but there is some new high kind of exploding brands that are now selling to us which have been fantastic. And then thirdly, there is a little bit of just a underlying consumer trend there, Korean beauty products is 1 of them, and they really just done a great job of being on top of that.

So in terms of space allocation, we have not really changed the space allocation for cosmetics in any meaningful way. So I think they have that their sales productivity on a per-square-foot basis has just gone up quite nicely.

Analyst (Krisztina Katai): Great. And if I can just ask-- and if I just ask a follow-up just very quickly. Like, you mentioned gaining priority access to deals. Just can you talk about how that is showing up at buying cost, IMU, speed to floor conversion rates? And then just considering your strong top line, can that advantage expand further? Thank you. Sure.

James G. Conroy: Sure. I think, you know, the sentiment in the market and look, they are-- we are 1 of 3 big competitors out there. The relationships that the merchants have with the off price market is critical. And the relationships that Ross merchandising team has is just remarkable. I marvel as a as a new entry into this world of how relationship based it is. Having said that, yeah, I think the market is starting to see the transformation of Ross going from a very good company and accelerating from there And, you know, it is it is getting noticed.

And I think now when someone has a good deal or more closeouts, we are getting calls And it is partly because we can we can take the goods You know, we have seen some cancellations in the market some from mainstream retail and some from other off pricers. That we are able to pick up. So I think the last thing I would say is I think our merchants not only have great relationships but tend to be very easy to work with in the market, and that is that is a philosophy that I inherited from my predecessor, and we absolutely wanna continue to do that.

We want to be partner-like and low friction But we have we have seen opened up new vendors, and we have seen a lot of sort of early calls on opportunistic goods.

Operator: And the next question comes from Aneesha Sherman with Bernstein. Please proceed with your question.

Analyst (Aneesha Sherman): Thank you, and congrats on the quarter. I have 2, please. Jim, you mentioned the word transformation earlier on in your comments. I wanted to ask, you know, over the last year, the company has pursued a lot of new initiatives that mark assortment, stores, etcetera. Do you think there is been a cultural shift in how decisions are being made? That is driving this broader set of ideas and initiatives across the company? And then I have a follow-up as well.

James G. Conroy: Look. I inherited a well run company with a great culture. I think if there is been any sort of shift in how we operate, it was a little bit of harkening back to the earlier days in Ross when it was very entrepreneurial. And we sort of challenged ourselves to spark more growth, empower people to make quick decisions, be entrepreneurial, balance our pretty heavy focused on risk aversion with a little bit more of a growth orientation. And I think internally, the team has been very welcoming of that.

So, yeah, I would say if you think of a continuum between playing defense and offense, we have shifted the whole company and the culture a little bit more towards offense, but still always being prudent and not taking undue risk. But, again, I just wanna say it 1 more time. I was very lucky to be able to inherit a company that was already very well run and already successful and we have just been able to layer on some initiatives to augment that growth.

Analyst (Aneesha Sherman): Thank you. And then a follow-up on an earlier comment on double digit growth in customer accounts. Can you give us some color on what that looked like the last 2 quarters? the last couple of quarters, Q3 and Q4? I want to get a sense of has that run rate increased just to help us think through the back half of the year and the comp year over year growth in the back half?

James G. Conroy: So it is been building. We definitely did not get a double digit growth in customers and then comp lower than double digits. Fortunately. But it has if you if you were to think of it in the way we think of retail same store sales, you would say we have had sequential improvement in customer count growth on a comp store basis in each of the last few quarters.

Analyst (Aneesha Sherman): Okay. that is helpful. Thank you. Welcome.

Operator: Thank you. And the next question comes from the line of Marni Shapiro with Retail Tracker. Please proceed with your question.

Analyst (Marni Shapiro): Hey, guys. Thanks and congratulations. And, Jim, I love how you sound so pleasantly surprised that the market loves the Ross buyers. that is always been the case. I knew them. A long, long time ago, and everyone loved them. So congratulations on that. Could you talk about updating and renovating some of the stores. You know, some of it was just a light touch. If you can just you know, modernizing them, if you can give an update on how that is going and are those stores outperforming. And then could you just also give us an update I am assuming this is true that you will continue with your buyback through the rest of the year.

Michael J. Hartshorn: Hi, Marni. it is Michael. As you said, we have been working on refreshing our stores in the chain. And, again, it was to try to give a more modern look and feel for our customer and the refresh was mainly new perimeter signing and wave finding signage, along with addressing cosmetic repairs. We got through about half of the chain last year. We decided to pause for 2 reasons. First, we wanted to be able to measure the sales impact and we did see a sales impact in those stores. We saw improvement in customer surveys. On the shopping experience.

We decided this year to pause as we are looking to see what kind of things we wanna do to the store. And when I say that, it does not mean we are going to go back and refresh every single store in the chain, come up with a new pro forma and have a big capital outlay, But we wanted to pause and see if there is other changes we wanna make in the in the next half of the stores. And then also look at new store prototypes if there is anything we wanna change from look and feel or how we are merchandising the store. So that is where we are at this point.

And then regarding the buyback, no change there. We remain on track. To buy the total of $1.275 billion in stock during 2006. 2026. Corey. So that is unchanged.

Analyst (Marni Shapiro): Fantastic. Thank you, guys. Good morning.

Operator: And the next question comes from the line of John Kernan with William Blair. Please proceed with your question.

Analyst: Thank you. I am curious, Jim, to the questions on in and around new customers. Do you feel that between access to brands some of the new marketing you are doing, that you are kind of meaningfully, structurally expanding your market or is it just sort of recapturing share within your existing market? You are going up or down market. You mentioned kind of younger customers. Is this a more meaningful change go forward. Thanks.

James G. Conroy: it is a very insightful question. At the risk of tipping our hand too much, that is absolutely part of the strategy. You know, it is we have a bull's eye of a core customer and we have to ensure that we are constantly focused on that customer that has sort of built this business But how do we concentric circles around that core, how do we add new customer segments? So that is part of the strategy. it is very early in our evolution in doing that.

By the early read is that we have been able to introduce the Ross brand into different pockets of consumer shoppers and it is again, it is a very insightful strategic question, Dylan. Appreciate it. And happy to hear you are on the right track there. Awesome. Thanks, Jim. Nice work.

Operator: Ladies and gentlemen, there are no further questions at this time. I would like to turn the call back over to Jim Conroy for any closing comments.

James G. Conroy: Well, thank you, everyone, for joining us today, and we look forward to speaking with you on our next earnings call. Take care.

Operator: Ladies and gentlemen, thank you for your participation. That does conclude today's teleconference. Please disconnect your lines, and have a wonderful day.

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