Ross Stores, Inc.

Blowout Q1 performance (strong demand + operating leverage): Total sales +21% to $6.0B and EPS +37% to $2.02 (vs. $1.47). Comparable store sales +17%, driven mainly by transaction growth and double-digit comp-store customer-count growth across income levels, ethnicities, and all age groups (including young customers). Operating margin expanded +120 bps to 13.4% (vs. 12.2%), with COGS down 145 bps, merchandise margin +85 bps, and occupancy +60 bps.

What’s driving the comp (and how durable management thinks it is): Management emphasized comps are increasingly transaction- and customer-driven (not just basket/AUR). They argue the growth is durable because marketing + merchandise + store execution are improving the “flywheel” (acquire customers → convert with assortment/availability → more repeat shopping). They did note two “unique” factors that may have inflated Q1: (1) Ross was seasonally more conservative vs history in Q1 (pent-up demand), and (2) some portion may reflect tax refunds (also referenced as a retail-wide dynamic).

Inventory + ability to “feed demand” (addressing investor concern on chase risk): Consolidated inventory +12%; packaway is 36% of inventory vs. 41% last year. Management said they’re comfortable with inventory reserves/quality and highlighted continued strong closeout availability in the marketplace (i.e., they don’t see a supply problem that would force markdowns or hurt reserve discipline).