Ross Stores Earnings Call Insights: Guidance and Chicago Expansion

On Thursday, Ross Stores, Inc. (NASDAQ:ROST) reported its first quarter earnings and discussed the following topics in its earnings conference call. Take a look.


Kimberly Greenberger – Morgan Stanley: Michael, I’m wondering what analysis if you could share with us you performed to assess the real potential of Ross Stores (NASDAQ:ROST) and obviously we can look at the map and the geographical exposure and see there are so much more potential here in the United States, but maybe you could just share with us a bit of the analysis behind how you determine the long-term potential for your store base and what was that that in particular drive the update to guidance today, that would be great.

A Closer Look: Ross Stores Earnings Cheat Sheet>>

Michael B. O’Sullivan – President and COO: Kimberly, its Michael O’Sullivan, I’ll answer that question. There are really two sets of things that we did. The first was we looked at the market density that we currently operate in, in terms of number of stores per population and looked to broader demographics in terms of our target customer and how many of our target customers are within each market and then we tried to make an assessment of the real estate opportunities would be in each market and then we build it out to sort of bottom-up market by market to come up with sort of the updated estimate, which as Michael described went from 1,500 stores to 2,000. The other point I’d make there is we also – we’ve taken a look at the success that we’ve had over the last several years in some of our newer markets like the Southeast and the Mid-Atlantic and again that gave us confidence in terms of some of the (density) estimates that we’ve used to come up with the assessment.

Chicago Expansion

Paul Lejuez – Nomura: I’m just wondering when you look at Chicago market and the 12 stores you opened in Illinois, how many are hitting plan versus above plan and I guess I’m just wondering given that market tends to be a little bit more weather sensitive than some of your other regions how do you feel you guys did in terms of getting that that right product in those stores at the right time?

Michael B. O’Sullivan – President and COO: Paul as Michael mentioned we opened 14 stores in October in new markets, 12 of those were in Chicago and then we opened another four in new markets this past March and so far – I mean I’d caution you it’s still pretty early, I mean those stores have been opened six or seven months, but so far we are pretty happy with how the openings have gone and I am basing that not just in terms of sales but also obviously customer research that we’ve done and feedback that we’ve had from the customer. So, we are pretty happy with how those stores have gone so far. I think the more important point is everything we see in terms of what we’ve learnt in that market so reinforces for us that we are going to be successful in those new markets long term, so we are feeling pretty good. The final aspect of your question, have we learnt anything or seen anything in terms of where (indiscernible) happens our assortment issues, nothing out of the ordinary. I think we planned the markets pretty well. We feel pretty happy about our plans. Now there are some tweaks we are going to make to the assortments, but nothing different to what we would do with most new stores. But we are pretty happy with how things are going.

Michael Balmuth – VC and CEO: In terms of grade, as you asked about how we assess our assortments, I would like to us a (indiscernible). We see a lot of opportunity to keep improving there, based on the learnings that we’ve got so far both statistically and visually.

Paul Lejuez – Nomura: How many of the 500 incremental Ross Stores (NASDAQ:ROST) should we look at as being fill-in and more a part of a cluster strategy as opposed to new markets?

Michael Balmuth – VC and CEO: I think, we need to go back and look at that. Right now all are in terms of which are in existing markets versus which are new. So let us a take a look at that.