Yahoo Finance How Did Ross Stores’ Valuation Change after Fiscal 1Q16 Results?
Ross Stores Updates Guidance after Fiscal 1Q16 Earnings
Current valuation
On May 20, off-price retailer Ross Stores (ROST) was trading at a 12-month forward PE (price-to-earnings) ratio of 18.7x, down 5.4% from the previous day. The decline was in reaction to the company’s fiscal 1Q16 results and lower-than-expected guidance. As discussed in the second part of this series, Ross Stores missed analysts’ consensus sales estimate for fiscal 1Q16.
Comparison with peers
Ross Stores is currently trading at a lower valuation multiple compared to its off-price peers TJX Companies (TJX) and Burlington Stores (BURL). On May 20, TJX and BURL were trading at forward PE ratios of 21.2x and 18.9x, respectively.
Nordstrom (JWN), which derived 32.5% of its fiscal 1Q16 sales from its off-price business, was trading at a forward PE ratio of 13.7x on May 20.
Analysts expect Ross Stores’ sales in fiscal 2016, which ends on January 28, 2017, to rise by 5.9% to $12.6 billion. The company’s adjusted EPS (earnings per share) in fiscal 2016 are expected to increase by 8% to $2.71. The SPDR S&P 500 ETF (SPY) has 0.1% exposure to Ross Stores.
For the comparable fiscal year, TJX Companies’ sales and adjusted EPS are expected to rise by 6.9% and 4.5%, respectively. Currently, analysts expect Burlington Stores’ sales and adjusted EPS to rise by 6.4% and 17.8%, respectively, in fiscal 2016. Nordstrom’s sales are expected to rise by 1.9% in fiscal 2016. However, the company’s adjusted EPS are expected to fall by 21.4% in fiscal 2016 due to the impact of growth investments.
Store growth plans
Ross Stores opened 22 new Ross Dress for Less stores and six dd’s DISCOUNTS stores in fiscal 1Q16. In fiscal 2016, the company expects to open a total of 90 new stores, including 70 Ross Dress for Less stores and 20 dd’s DISCOUNTS stores. These numbers exclude the company’s plans to close or relocate about ten older stores during the year.
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