KSS Kohls Corporation

Specialty retailer Ross Stores Inc. (ROST) announced its financial results for the first quarter of fiscal 2011.

Street analysts had more than a week to ponder on the news. In the paragraphs that follow, we cover the recent earnings announcement, subsequent analysts’ estimate revisions as well as the Zacks Rank and long-term recommendation for the stock.

Earnings Review

Ross Stores reported earnings of $1.48 per share for first-quarter 2011, in line with the Zacks Consensus Estimate. Earnings grew 28.0% from the prior-year figure of $1.16 primarily due to the company's aptitude in providing attractive brand name bargains to customers who value both quality and price.

Net sales for the quarter increased 7.0% to $2,075.0 million from $1,934.8 million in the prior-year quarter, beating the Zacks Consensus Estimate of $2,020.0 million. This robust increase in net sales was primarily because of initiatives taken by the company to keep merchandise fresh by reducing the stock in stores. Comparable store sales increased 3% compared with a 10% growth in the prior-year period.

(Read our full coverage on this earnings report: Ross Profits Rise, Outlook Bright)

Agreement of Estimate Revisions

The first-quarter 2011 performance has left 10 out of 16 analysts to revise their estimate in the downward direction over the past one week, with just 1 upward estimate revision for the second quarter of fiscal 2011. For fiscal 2011, 3 analysts have revised their estimates in the upward direction while 5 moved in the opposite direction in the last 7 days.

Analysts have tweaked their estimates so as to align the same with   a conservative second quarter guidance.

Magnitude of Estimate Revisions

As a result of the downward movement in estimates seen over the past one week, the Zacks Consensus Estimate, for the second quarter of fiscal 2011, decreased by 3 cents to $1.22. For fiscal 2011, the estimate has remained stagnant at earnings of $5.31per share.

Our Recommendation

Ross is well positioned in the current economic scenario to take advantage of consumers’ need for value. And its good execution and strong impetus poise Ross for overall growth going forward. The company is also favored for its strong financials and solid management team. However, peak margins and tough comparisons could put a bar on share outperformance.

The company faces intense competition from other well-established players in the industry, such as Kohl's Corporation (KSS) and Wal-Mart Stores Inc. (WMT).

Currently, Ross Stores maintains a Zacks #3 Rank, which translates into a short-term 'Hold' rating. Moreover, we retain a long-term 'Neutral' recommendation on the stock.

About Earnings Estimate Scorecard

Len Zacks, PhD in mathematics from MIT, proved over 30 years ago that earnings estimate revisions are the most powerful force impacting stock prices. He turned this ground breaking discovery into two of the most celebrating stock rating systems in use today. The Zacks Rank for stock trading in a 1 to 3 month time horizon and the Zacks Recommendation for long-term investing (6+ months). These “Earnings Estimate Scorecard” articles help analyze the important aspects of estimate revisions for each stock after their quarterly earnings announcements. Learn more about earnings estimates and our proven stock ratings at: http://www.zacks.com/education/

 
KOHLS CORP (KSS): Free Stock Analysis Report
 
ROSS STORES (ROST): Free Stock Analysis Report
 
WAL-MART STORES (WMT): Free Stock Analysis Report
 
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