(Reuters) – Off-price retailer Ross Stores raised its annual profit forecast on Thursday, as lower freight and supply-chain costs helped soften the impact of slowing sales at its stores, sending its shares up 7% after the bell.
The company has also been trying to sell a wider product assortment at different price points to increasingly cautious lower-income consumers.
Still, it tempered its fourth-quarter profit forecast and its third-quarter net sales missed market expectations as consumers delayed big spending on apparel and other non-essential items.
“Although our low-to-moderate income customers continue to face persistently high costs on necessities pressuring their discretionary spending, we believe we should have better executed some of our merchandising initiatives,” CEO Barbara Rentler said.
Demand for discounted apparel had led Ross’ rival and Marshalls parent, TJX Cos, to raise its annual profit forecast earlier this week.
Retail giant Walmart also raised its annual profit and sales targets this month, betting on consumers to head to its superstores for steep discounts during the holidays.
However, Target’s holiday-quarter forecast for profit and sales was below market expectations, as the retailer cautioned a promotion-heavy period.
Ross expects fourth-quarter comparable sales to increase between 2% to 3%, compared with analysts’ expectations of a 2.6% rise, according to analysts polled by LSEG.
The company, which named retail veteran and former Boot Barn top boss James Conroy as its next CEO from Feb. 2, expects fourth-quarter earnings per share of $1.57 to $1.64, compared with expectations of $1.67.
Ross Stores reported third-quarter sales of $5.1 billion, compared with estimates of $5.15 billion. It expects annual earnings per share of $6.10 to $6.17, compared with prior forecast of $6.00 to $6.13.
(Reporting by Juveria Tabassum; Editing by Shilpi Majumdar)
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