ROSS STORES, INC. (ROST)·Q2 2026 Earnings Summary

Executive Summary

• Q2 FY2026 delivered modest top-line growth and an EPS beat: revenue $5.53B (+5% YoY) and diluted EPS $1.56; operating margin fell 95 bps to 11.5% on tariff-related costs; comps +2% . Versus S&P Global consensus, EPS modestly beat while revenue was roughly in line/slightly below (EPS cons. $1.538*, Revenue cons. $5.541B*) [Values retrieved from S&P Global].
• Management reinstated forward outlook: comps +2–3% for both Q3 and Q4; EPS guide Q3 $1.31–$1.37 and Q4 $1.74–$1.81; FY EPS now $6.08–$6.21 (down from $6.32 prior year), with tariff headwinds of ~$0.22–$0.25 per share for FY25 .
• Strategic drivers exiting the quarter: improving July/back-to-school trend, dd’s DISCOUNTS comps ahead of Ross, inventory up 5% with packaway at 38%, store growth (31 openings in Q2) and ongoing self-checkout pilots (~80 stores) .
• Key near-term catalyst/risk: evolving tariff timetable and cost pass-through; management expects retail pricing to rise into fall, potentially steering value-seeking traffic toward off-price, but margin remains sensitive to tariff and packaway timing as well as distribution center deleverage .

What Went Well and What Went Wrong

• What Went Well

  • EPS beat despite tariff drag; “earnings modestly exceeded the high end of our guidance range, mainly due to lower-than-expected tariff-related costs” .
  • Sequential sales momentum with strong July/back-to-school; “sales in May were strong and softened in June, before rebounding sharply in July” (CEO) .
  • dd’s DISCOUNTS outperformed Ross on comps; both chains saw growth in traffic and basket, improving exit rate into H2 .

• What Went Wrong

  • Margin pressure persisted: operating margin down 95 bps YoY to 11.5% primarily from tariffs .
  • Tariff-driven uncertainty kept tone cautious and trimmed FY EPS plan to $6.08–$6.21, below last year’s $6.32, despite reinstated H2 guidance .
  • Q3 outlook embeds further headwinds from tariffs (50–60 bps to op margin) and unfavorable packaway timing plus DC deleverage, tempering near-term margin recovery .

Financial Results

Note: Management disclosed Q2 operating margin of 11.5% (-95 bps YoY) due primarily to tariffs; Q1 operating margin was 12.2%; Q4 operating margin not disclosed in press release narrative .

Consensus vs. Actual (Q2 FY2026)

• EPS: Consensus $1.5376* vs Actual $1.56 .
• Revenue: Consensus $5,540.7M* vs Actual $5,529.2M .
• Estimate count: EPS (12); Revenue (14).
  Values retrieved from S&P Global.

KPIs and Operating Metrics

Segment breakdown: Ross does not provide segment revenue disclosure between Ross and dd’s in quarterly press releases/transcripts cited above .

Guidance Changes

Earnings Call Themes & Trends

Management Commentary

• “We ended the period with second quarter sales in line with our expectations, while earnings modestly exceeded the high end of our guidance range, mainly due to lower-than-expected tariff-related costs.” — Jim Conroy, CEO .
• “For both the third and fourth quarters, we are planning comparable store sales growth of up 2% to 3%.” — Jim Conroy, CEO .
• “Overall comp store sales at dd’s DISCOUNTS were solid and ahead of Ross… both chains saw growth in both traffic and basket size with strong momentum exiting the quarter.” — Jim Conroy, CEO (call) .
• “Operating margin for the third quarter is planned to be in the 10.1% to 10.5% range, which includes a 50–60 bps negative impact from tariff related costs… and unfavorable timing of packaway-related costs and continued deleverage from the opening of a new distribution center.” — Adam Orvos, CFO (call) .
• “We have been piloting self-checkout… in about 80 stores… successful… reduce line lengths and control shortage.” — Michael Hartshorn, COO (call) .

Q&A Highlights

• Tariffs and cadence: Discussion of grace periods and how holiday inventory could be under prior tariff rates; management continues mitigation while acknowledging elevated levels (analyst Adrienne Yih Q&A) .
• Margin composition: Q3 OM 10.1–10.5% reflects 50–60 bps tariff drag plus packaway timing and DC start-up deleverage; mitigations are ongoing (CFO) .
• Store fleet and customer experience: Self-checkout pilot (~80 stores) improving throughput and shrink control; signage refresh and cosmetic upgrades underway, targeting half the chain this year (COO) .
• Growth: Opened 31 stores in Q2 including first Puerto Rico stores; on track for ~90 gross openings in 2025 (CEO) .

Estimates Context

• S&P Global consensus for Q2 FY2026: EPS $1.5376* (12 ests*) vs actual $1.56; Revenue $5,540.7M* (14 ests*) vs actual $5,529.2M — implying a modest EPS beat and revenue roughly in line/slightly below. Values retrieved from S&P Global.

Key Takeaways for Investors

• EPS beat despite tariff headwinds signals strong expense management and some tariff cost mitigation; however, operating margin compression (-95 bps) underscores sensitivity to external cost shocks .
• Reintroduced H2 guidance and narrowed FY EPS to $6.08–$6.21 frames near-term expectations; watch for tariff trajectory and pricing power into holiday as key swing factors .
• Positive traffic and basket trends, with dd’s DISCOUNTS outperforming, suggest continued value-seeking demand; back-to-school momentum supports Q3 setup .
• Q3 margin guide (10.1–10.5%) embeds tariff and packaway/DC headwinds; upside would likely require better-than-planned tariff relief or improved markdown efficiency .
• Execution on operational initiatives (self-checkout, signage refresh, labor model tests) can enhance throughput and shrink control, providing medium-term margin support as programs scale .
• Footprint expansion (31 Q2 openings, ~90 target for 2025) remains intact, reinforcing long runway; early entries into Puerto Rico expand addressable market .
• Monitoring list: tariff policy timing, packaway mix/timing, DC ramp impacts, holiday price elasticity, and sustained comps at dd’s vs Ross to gauge mix and profitability cadence .