Q4 2025 Earnings Summary
- Management expressed uncertainty about whether the current softness in sales is transitory or indicative of a longer-term negative trend, stating they are "not sure if what we're seeing now is shock value with all the volatility in the market or in fact, the underlying trend will improve."
- Recent comparable sales trends have been impacted by declining customer traffic, which management attributes to "external volatility" and macro pressures impacting consumer confidence.
- The company provided a wider-than-normal comparable sales guidance range due to reduced visibility and uncertainty in forecasting, admitting that the range "is absolutely driven by visibility entering the year" and that they "lowered the guidance based on what we saw very early in the year."
| Metric | YoY Change | Reason |
|---|---|---|
Total Revenue | -2.3% (from $6,022M in Q4 2024 to $5,883.5M in Q4 2025) | The decline in revenue suggests a softer performance in Q4 2025 compared to the previous period, possibly reflecting weaker same‐store sales or market headwinds that reversed the higher revenue levels seen in Q4 2024. |
Net Earnings | -3.8% (from $609.68M in Q4 2024 to $586.78M in Q4 2025) | The drop in net earnings likely results from a combination of lower topline sales and pressure on operating margins, signaling that cost increases or lower efficiency may have offset some prior gains. |
Operating Cash Flow | -7.4% (from $948.76M in Q4 2024 to $882.56M in Q4 2025) | A sharper decline in cash flow relative to earnings and sales suggests additional stress in working capital management or inventory buildup, highlighting underlying operational challenges that emerged compared to the previous period. |
Total Stockholders' Equity | +13% (from $4,871.3M in Q4 2024 to $5,509.2M in Q4 2025) | Despite softer sales and earnings, the significant increase in equity indicates robust retained earnings from prior strong performance and effective capital management strategies, reinforcing an improved balance sheet relative to Q4 2024. |
Dividends Paid | +7.7% (from $112.68M in Q4 2024 to $121.23M in Q4 2025) | The higher dividend payout reflects the company’s continued commitment to enhancing shareholder returns, likely buoyed by liquidity derived from prior successes, even as current operational performance has declined somewhat. |
| Metric | Period | Previous Guidance | Current Guidance | Change |
|---|---|---|---|---|
Comparable Store Sales | Q1 2025 | increase 2% to 3% | down 3% to flat | lowered |
EPS | Q1 2025 | $1.57 to $1.64 | $1.33 to $1.47 | lowered |
Total Sales | Q1 2025 | decline 1% to 3% | down 1% to up 3% | raised |
Operating Margin | Q1 2025 | 11.2% to 11.5% | 11.4% to 12.1% | raised |
Net Interest Income | Q1 2025 | $35 million | $35 million | no change |
Tax Rate | Q1 2025 | 24% | 24% to 25% | raised |
Weighted Average Diluted Shares | Q1 2025 | about 329 million | about 328 million | lowered |
Merchandise Margin | Q1 2025 | no prior guidance | Expected to be down slightly | no prior guidance |
New Stores | Q1 2025 | no prior guidance | Plan to add 19 new stores | no prior guidance |
EPS | FY 2025 | $6.10 to $6.17 | $5.95 to $6.55 | raised |
Comparable Store Sales | FY 2025 | no prior guidance | down 1% to up 2% | no prior guidance |
Total Sales | FY 2025 | no prior guidance | up 1% to up 5% | no prior guidance |
Operating Margin | FY 2025 | no prior guidance | 11.5% to 12.2% | no prior guidance |
Merchandise Margin | FY 2025 | no prior guidance | relatively neutral | no prior guidance |
New Store Openings | FY 2025 | no prior guidance | approximately 90 new locations | no prior guidance |
Net Interest Income | FY 2025 | no prior guidance | $127 million | no prior guidance |
Depreciation & Amortization | FY 2025 | no prior guidance | about $690 million | no prior guidance |
Tax Rate | FY 2025 | no prior guidance | about 24% to 25% | no prior guidance |
Weighted Average Diluted Shares | FY 2025 | no prior guidance | around 325 million | no prior guidance |
Capital Expenditures | FY 2025 | no prior guidance | approximately $855 million | no prior guidance |
| Metric | Period | Guidance | Actual | Performance |
|---|---|---|---|---|
Total Sales | Q4 2025 | Projected to decline 1% to 3% in Q4 2025 | 5,883.5 million in Q4 2025 versus 6,022 million in Q4 2024, a decline of about 2.3% | Met |
| Topic | Previous Mentions | Current Period | Trend |
|---|---|---|---|
dd's DISCOUNTS Performance and Expansion | In Q1–Q3, dd's DISCOUNTS was noted for outperforming the Ross banner, with steady sales gains, improved value and fashion offerings, and a consistent pace in new store openings (7 new stores in Q1; 3 in Q2; 4 in Q3). | Q4 saw healthy sales gains above Ross with an expanded focus on rebuilding the pipeline in newer markets and plans to open 10 new stores alongside strong performance in value and fashion offerings. | Consistent strong performance with a renewed emphasis on strategically rebuilding its expansion pipeline. |
Merchandise Margin Dynamics | Across Q1–Q3, margins were under pressure due to the push for branded merchandise – a mild decline in Q1 (15 bps), a more significant 80 bps drop in Q2, and a 60 bps decline in Q3, partially offset by a one-time shrink benefit. | In Q4, the guidance remains for neutral merchandise margins as the company balances the branded strategy, tariff impacts, and shrink, with expectations of further Q4 pressure but an optimistic long‐term outlook. | Persistent margin pressure due to the branded strategy, with short-term challenges offset by a long-term improvement narrative. |
Macroeconomic Uncertainty and Inflation Impact | In Q1–Q3, executives consistently noted that persistent inflation and broader macroeconomic uncertainty were squeezing low- to moderate-income customers, resulting in cautious forecasting and constrained discretionary spending. | Q4 discussions pinpoint macro pressures causing a softening of business, with reduced traffic linked to unseasonable weather and broader geopolitical volatility; however, there’s cautious optimism that these effects are transitory. | Consistent challenges in consumer spending under inflation, with a cautious yet optimistic view that adverse effects are temporary. |
Closeout Opportunities and Opportunistic Buying | Q1 briefly mentioned early signs of vendor-driven closeout opportunities without urgency, while Q2 and Q3 did not specifically address this topic. | Q4 executives emphasized strong opportunistic buying opportunities driven by market softness, store closures, and supply-chain disruptions, presenting a more robust focus on capitalizing on dislocations in the retail market. | Emerging as a more prominent and opportunistic theme in Q4, driven by external supply challenges, compared to minimal mention in earlier quarters. |
Store Expansion and Domestic Growth Potential | In Q1–Q3, store expansion was consistently highlighted through steady new openings (11 new Ross stores and 7 dd’s in Q1; 21 new Ross and 3 dd’s in Q2; 43 new Ross and 4 dd’s in Q3) and plans for a full-year target of around 90 new locations, alongside cautious approaches in newer markets for dd’s. | Q4 reaffirmed the expansion strategy with updates on opening approximately 90 new locations (80 Ross and 10 dd’s) and announced a planned rebuild of the dd’s DISCOUNTS pipeline, signaling confidence in the domestic growth model despite the market’s macro challenges. | Consistent expansion with steady store addition, coupled with a strategic recalibration for dd’s channels to drive future domestic growth. |
Operational Execution and Merchandising Challenges | In Q1, challenges were noted in execution—particularly in the apparel segment and overall merchandise mix—with early-stage strategic changes; Q2 mentioned efficiencies in freight and some offsetting factors; Q3 detailed execution missteps, inventory decisions, and missed responsiveness in the product mix. | Q4 executives acknowledged that operational execution continues to face challenges from macro factors impacting consumer confidence, though they remain committed to the current merchandising and brand strategies with a focus on iterative improvements. | Recurring execution and merchandising challenges that persist across periods, though management continues to refine strategies and drive improvements. |
Real Estate Market Constraints | Q1 discussions noted a cautious pause in new-market growth until sustained trends emerge, while Q3 highlighted tight real estate availability and increased competition for preferred sites; Q2 did not mention this topic explicitly. | Q4 mentioned that dd’s DISCOUNTS had previously slowed its real estate program, but with improved performance, the company is now actively rebuilding the expansion pipeline, signaling a shift even as external constraints persist. | A persistent constraint that is now paired with renewed optimism and strategic efforts to reaccelerate the pipeline for dd’s growth. |
Efficiency Initiatives and Vendor/Vendor Relationship Enhancements | Q1 mentioned some benefits from DC cost efficiencies and early vendor behaviors; Q2 provided detailed updates on automation initiatives (robots, self-checkout, automated pallet systems) and efforts to expand vendor relationships; Q3 reinforced these themes with a focus on long-term margin improvement through better vendor dealings. | Q4 did not specifically address efficiency initiatives or vendor relationship enhancements, suggesting a continuity of earlier efforts without new commentary [N/A]. | These initiatives remain a consistent background priority, although not highlighted in Q4, indicating steady ongoing focus. |
Consumer Traffic and Demographic Shifts | Q1 saw increased traffic driving comp growth with stable, broad-based demographics; Q2 noted favorable traffic and value-driven behavior; Q3 mentioned that comparable sales were primarily driven by traffic with no major demographic shifts. | In Q4, there was a decline in traffic—attributed to unseasonable weather and macro volatility—and rising focus on specific demographics (e.g. sensitivity of the Hispanic segment to immigration policy), indicating heightened external impacts. | Traffic remains a key driver, though recent external factors have led to a dip and emerging demographic concerns, particularly affecting Hispanic consumers. |
Off-Price Business Model Resilience | Q1 provided indirect references to a value-focus model; Q2 elaborated on the strategy with emphasis on quality branded bargains, customer value amid inflation, and automation supporting the model; Q3 indirectly illustrated the model’s strong value proposition through solid dd’s performance. | Q4 explicitly underscored the resilience of the off-price model, citing its historical performance during tough economic periods, opportunistic closeout buying, and a flexible approach that delivers consumer value despite external headwinds. | A consistently resilient model that is now emphatically highlighted as a competitive advantage, particularly under current macroeconomic challenges. |
-
Comp Sales Guidance
Q: How are you thinking about comp trends for FY '25?
A: Ross Stores lowered its comp guidance to down 1% to up 2% for FY '25 due to early-year trends. Comps are expected to be fairly neutral in Q2 through Q4 to achieve this range. -
Recent Sales Slowdown
Q: What factors are causing the recent sales slowdown?
A: The slowdown is attributed to weather impacts and consumer confidence, both considered transitory shocks. Weather-impacted areas saw declines, but trends improved sequentially throughout February as consumers began to reengage. -
Merchandise Margins and Branded Strategy
Q: How will merchandise margins be affected by the branded strategy in 2025?
A: Merchandise margins are expected to be relatively neutral in 2025. The company increased the penetration of branded goods and now plans to listen to customer feedback. There's potential to buy better as they become more important to brands. -
Impact of Tariffs
Q: How are tariffs expected to impact the business?
A: The direct exposure to tariffs is minimal. The company focuses on maintaining price advantages and believes disruptions could bring more closeout opportunities. -
dd's DISCOUNTS Performance
Q: How is dd's DISCOUNTS performing and what are future plans?
A: dd's DISCOUNTS posted healthy sales gains above Ross in Q4 and throughout 2024. The company plans to rebuild the pipeline for expanded growth, expecting increased growth into '26. -
Marketing and Store Investment
Q: Do you foresee increased investment in marketing and store environment?
A: The company may invest more in both areas, aiming to be prudent or require demonstrated ROI. They expect to find funds to enhance marketing and continue upgrading the store fleet. -
Inventory Levels and Promotions
Q: How are inventory levels, and could promotions increase?
A: Inventory levels are up about 2%, which was planned to support growth. The company feels good about current levels and is prepared for potential promotional activity. -
SG&A Leverage
Q: Where do you see opportunities to leverage SG&A?
A: The increase in SG&A is primarily due to store-related costs from minimum wage increases. They seek efficiencies without impacting customer experience, needing about a 3% comp to leverage SG&A. -
Store Opening Strategy
Q: Any changes to store formats or expansion plans?
A: The company sees ample growth with existing store formats. New stores in newer markets are performing as expected, with productivity at 60% to 65% of an average store. -
Closeout Opportunities
Q: Are you seeing better buying opportunities post-holiday?
A: Yes, the company is capitalizing on increased closeout opportunities due to softness in mainstream retailers and supply chain disruptions. This is expected to add excitement to stores and improve margins.
Research analysts covering ROSS STORES.