Earnings Up 4% at Ross as Sales Jump

Discount clothing retailer Ross Stores Inc. said Wednesday that fiscal first-quarter profit rose 4%, the first such increase in more than a year.

Net income climbed to $50.1 million, or 34 cents a share, from a restated $48.1 million, or 31 cents, a year earlier. Sales in the period ended April 30 increased 13% to $1.12 billion.

The Pleasanton, Calif.-based company said its bestselling items were clothing for young adults, accessories and shoes. Higher markdowns and distribution center costs narrowed the company’s profit margins.

Same-store sales, or sales at locations open at least a year, increased 3% in the quarter from a year earlier.

The company had been expected to make 34 cents a share, the average estimate of 17 analysts surveyed by Thomson First Call. In a call with analysts and investors, Chief Executive Michael Balmuth reiterated the company’s second-quarter profit forecast of 30 to 32 cents a share and $1.40 to $1.48 for the full year.

Shares of Ross rose 80 cents, or 3%, to $27.54 on Nasdaq.

In response to a modest sales slowdown in April, Ross was more aggressive in discounting spring merchandise, said Balmuth, who in February assumed the additional title of president after James Peters resigned in the wake of three consecutive quarters of profit declines.

“Spring clearance inventory levels were higher than planned as we entered the second quarter,” and this will affect margins in the period, he said.

Gross margin, the percentage of sales left after subtracting the cost of goods sold, narrowed to 23.5% of sales from 24.3%.

Ross operated 663 Ross outlets and 10 dd’s Discounts locations as of April 30.