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Call sheet · Q1'26

Ross Stores (ROST)

Q1'26 earnings call · held May 22, 2025 · compared with the Q4'25 call · management-credibility review
6/12
Disclosure score
1 high, 4 medium, 2 low flags
Financial quality
Bottom line
The sleeper story everyone will miss: Ross withdrew full-year guidance after just 90 days - this is unprecedented for a company known for conservative, consistent forecasting and signals major internal uncertainty that goes far beyond tariff concerns. The tariff narrative is convenient cover for what appears to be fundamental execution issues. The binding constraint isn't tariffs - it's management's lost confidence in their ability to forecast their own business, evidenced by flat comps despite claims of sequential improvement and inventory growing faster than sales. Jim Conroy's most revealing quote: 'There are simply too many unknown variables that are limiting our visibility' - this from a CEO who provided confident full-year guidance 90 days ago. My view changes if they can deliver Q2 comps at the high end of their flat to +3% guide and provide a credible path back to annual guidance by Q3.

The 30-second version

  • SLEEPER STORY: Ross quietly withdrew full-year guidance after just one quarter of providing it - this is unprecedented and signals major internal uncertainty despite surface-level confidence
  • The tariff narrative is masking execution issues - flat comps despite sequential improvement story suggests underlying business momentum is weaker than portrayed
  • Inventory management has shifted from defensive to speculative - packaway down 400bps vs last year but total inventory up 8%, suggesting they're betting heavily on closeout availability

What changed this quarter

MetricQ4'25Q1'26Change
Total Sales$6.6B (+12% YoY)$5.0B (+3% YoY)Decelerated 900bps to slowest growth in recent memory
Comparable Store Sales+9%0%Collapsed 900bps from robust growth to flat
EPS$2.00 (+21% excluding facility sale)$1.47 (+1% YoY)Growth decelerated 2000bps
Operating Margin12.3% (+95bps ex-facility)12.2% (flat YoY)Gave back all prior quarter gains
Net Income$646M (+10% ex-facility)$479M (-2% YoY)Turned negative after strong Q4
Merchandise Margin+10bps improvement-45bps decline55bps deterioration quarter-over-quarter
Total Inventory+8%+8%Maintained elevated levels vs sales growth
Packaway % of Inventory37%41%Up 400bps but down from historical 41%
New Store Openings90 planned (80 Ross, 10 dd's)16 Ross, 3 dd's opened Q1On track but down from Q4's expansion acceleration
Stock Repurchases$1.275B annually$263M in Q1On track for $1.05B annual target

Accountability tracked

7 new promises made5 narrative shifts flagged6 prior promises scored
Inside the full report
The complete write-up covers the full promise ledger with kept/missed calls, disclosure-quality scoring, the metrics-vanished check, verification items, and the questions to ask next quarter.
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Scores, kept-promise rates, and flags on this site reflect the author's opinion, applying a stated methodology to statements management made on public earnings calls. Informational and educational purposes only - not investment advice, a recommendation, or an offer to buy or sell any security. Sources believed reliable but not guaranteed; the author may hold positions in the securities discussed.

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