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Ross Stores Inc. (ROST) rang up a 5% increase in sales to $5.53 billion for the second quarter ended Aug. 2, though net income declined 3.6% to $508 million and EPS dipped 1.9% to $1.56. Tariffs reduced EPS by an estimated $0.11.

Same-store sales increased 2% on increased traffic and other drivers. Sales were strong in cosmetics and regionally in the Southeast and Midwest. Operating margin decreased 95 basis points from last year to 11.5%, primarily reflecting tariff-related costs that were mitigated via vendor negotiations, sourcing shifts, pricing, and expanded close-out inventory. 

Ross Stores Inc. (ROST)
 

During the second quarter, sales in May were strong, softer in June, but stronger again in July. Management was encouraged by the improved trend at the end of the quarter, particularly the back-to-school selling season.

During the first six months of the fiscal year, Ross Stores generated $669 million in free cash flow, up 6.6% from last year. The company returned $790.7 million to shareholders through dividends of $265.6 million and share repurchases of $525 million.

Ross Stores remains on track to buy back a total of $1.05 billion in stock during 2025, thereby completing the $2.1 billion share repurchase authorization approved in March 2024. Ross Stores ended the quarter with $3.85 billion in cash, $1 billion in long-term debt, and $7.7 billion in shareholders’ equity on its dressy balance sheet.

Recommended Action: Buy ROST.

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