Ross Stores (NASDAQ:ROST) reported fourth-quarter fiscal 2025 results that management said significantly exceeded internal expectations, citing accelerating momentum through the holiday season, higher customer engagement tied to new marketing campaigns, and in-store initiatives aimed at improving the shopping experience.
Fourth-quarter results: sales up 12%, comps up 9%
For the fourth quarter, total sales rose 12% to $6.6 billion. Comparable store sales increased 9%, which management said was driven mainly by higher transactions and customer counts, with only a modest increase in basket size. The company noted that weather reduced comparable sales by about one percentage point, primarily due to January storms in multiple parts of the U.S.
On profitability, fourth-quarter operating margin was 12.3% versus 12.4% a year ago. CFO Bill Sheehan noted the prior-year quarter included a 105-basis-point benefit from the sale of a packaway facility; excluding that benefit, operating margin increased 95 basis points year over year. Cost of goods sold improved by 65 basis points, occupancy leveraged 30 basis points, and distribution and domestic freight costs declined 20 and 15 basis points, respectively. Merchandise margin improved 10 basis points, while buying costs rose 10 basis points, which the company attributed mainly to higher incentives tied to earnings outperformance. SG&A rose 75 basis points due to last year’s facility sale; excluding that, SG&A was 30 basis points lower.
Net income was $646 million and earnings per share were $2.00, compared with $587 million and $1.79 in the prior-year quarter, which included an approximately $0.14 per share gain related to the packaway facility sale. Excluding that benefit, the company said EPS for the quarter grew 21%.
Full-year fiscal 2025: record sales, steady net income
For the full year, Ross reported sales increased 8% to a record $22.8 billion, up from $21.1 billion. Comparable store sales grew 5% on top of a 3% increase in fiscal 2024. Net income was $2.1 billion, “similar to last year,” while EPS rose to $6.61 from $6.32.
Adjusting for items discussed on the call—an approximately $0.14 per share gain from the facility sale in the prior year and an approximate $0.16 per share impact from tariff-related costs in fiscal 2025—the company said earnings per share grew 10%.
Inventory and store growth: new markets and higher productivity
Consolidated inventories ended the year up 8%, with packaway representing 37% of total inventory versus 41% last year. Management said it was pleased with inventory levels at year-end and indicated it saw opportunities to increase inventory “in front of the customer” during the holiday period, which it believes supported fourth-quarter growth and helped the transition into the first quarter while maintaining solid margins and turns.
Ross added 80 new Ross Dress for Less stores and 10 dd’s DISCOUNTS stores during fiscal 2025. The company highlighted expansion into new markets, including its first stores in the New York Metro area and Puerto Rico. Including nine closures, Ross ended the year with 2,267 stores: 1,904 Ross Dress for Less and 363 dd’s DISCOUNTS locations.
In Q&A, management said new store productivity was strong across regions, including established markets such as California, Florida, and Texas, and that results in more populated, higher-rent markets have been encouraging. Executives declined to provide specific detail on Northeast productivity beyond describing it as “very strong,” but said it increased confidence in expanding in the region and elsewhere.
Merchandising, marketing, and store initiatives
CEO Jim Conroy credited improved assortments, marketing, and store execution for the company’s second-half acceleration. He highlighted strength in the ladies business, continued strength in men’s, and what he called the most sequential improvement in “center core” categories—specifically cosmetics and shoes. He also pointed to improvement in the home category, which he said faced heavy pressure from tariffs earlier in the year, and noted strong holiday performance in toys.
On merchandise margin, management said the fourth-quarter improvement was driven mostly by “better buying,” and added that fiscal 2026 expectations are also primarily supported by better buying, along with some benefit from recapturing tariff pressure from earlier in fiscal 2025.
Marketing was another area of emphasis, with executives describing higher levels of customer awareness and engagement from campaigns that began impacting results around back-to-school. Conroy said marketing spend as a rate of sales has not changed, though he noted it could be a lever to experiment with modest increases. When asked about demographic shifts, Conroy said the company was seeing broad-based customer growth across income and age groups, including among 18- to 34-year-old shoppers, while noting the data becomes more complex at granular levels.
Operationally, the company said it targeted payroll investments in the back half of the year to improve store recovery and register throughput in high-volume locations. Management also said it plans to expand self-checkout to more stores after positive pilot results.
Capital return and fiscal 2026 outlook
Ross repurchased 1.5 million shares during the fourth quarter, completing a two-year, $2.1 billion program announced in March 2024. The board approved a new two-year, $2.55 billion share repurchase authorization for fiscal 2026 and 2027, which the company said represents a 21% increase versus the completed program. The company also approved a 10% increase in its quarterly cash dividend to $0.445 per share.
For the first quarter of fiscal 2026 (13 weeks ending May 2, 2026), Ross projected comparable store sales growth of 7% to 8% and EPS of $1.60 to $1.67, with total sales expected to rise 10% to 12%. Operating margin is expected to be 11.8% to 12.1% versus 12.2% last year, reflecting higher distribution center costs tied to a new DC opened last year, unfavorable timing of packaway-related expenses, and higher incentive costs versus the prior year. The company said it expects higher merchandise margin to partially offset those pressures. Ross plans to open 17 new stores in the quarter (13 Ross and four dd’s), and guided to net interest income of $27 million and a tax rate of about 23% to 24%.
For the full fiscal year ending Jan. 30, 2027, the company forecast comparable store sales growth of 3% to 4% and EPS of $7.02 to $7.36, with total sales expected to increase 5% to 7%. Operating margin is projected to be 12.0% to 12.3% versus 11.9% in fiscal 2025, reflecting higher merchandise margin and lower distribution costs for the year. Ross said it plans roughly 110 new openings—about 85 Ross and 25 dd’s—representing about 5% store growth, excluding expected closures or relocations of about 10 to 15 older stores. The company guided to net interest income of $92 million, depreciation and amortization of about $740 million, a tax rate of about 24% to 25%, and capital expenditures of approximately $1.1 billion, including investments in store growth, supply chain (including continued build-out of its next distribution center and initial outlay for another), and improvements to the existing store base.
Conroy said the company is “optimistic” entering the new year, citing a strong start to the first quarter and confidence that efforts to improve connection with customers are taking hold, while also noting macro uncertainty and emphasizing the company’s conservative approach to guidance.
About Ross Stores (NASDAQ:ROST)
Ross Stores, Inc (NASDAQ: ROST) is an American off‑price retailer headquartered in Dublin, California, that operates the Ross Dress for Less and dd’s DISCOUNTS store formats. The company sells a broad assortment of apparel, footwear, home fashions, accessories and other soft goods, positioning itself as a value-oriented destination for brand‑name and fashion merchandise at reduced prices.
Ross’s business model centers on opportunistic buying of excess inventory, closeouts, cancelled orders and overstocks from manufacturers, department stores and other suppliers.
