Customer Traffic Drives Ross Stores Growth as Outlook Moves Higher

Traffic Growth Strengthens the Ross Stores Story

Ross Stores (ROST) delivered a strong second quarter, with revenue rising 13% to $6.26 billion and comparable-store sales increasing 10%. The comp gain was driven primarily by customer traffic, including both new and returning shoppers, while sales momentum improved throughout the quarter.

Earnings reached $2.66 per share, including an approximately $0.60 benefit from tariff refunds. But the underlying results were also stronger: operating margin expanded 205 basis points excluding the refund, and Ross raised its second-half sales expectations, full-year earnings outlook and store-opening plan.

Key Points

• Ross Stores' second-quarter revenue increased 13% to $6.26 billion, while comparable-store sales jumped 10%, primarily driven by higher customer traffic.
• EPS rose to $2.66 from $1.56, including a roughly $0.60 tariff-refund benefit, while operating margin still expanded 205 basis points excluding that benefit.
• Ross raised its full-year EPS outlook to $8.61-$8.77 and increased its fiscal 2026 store-opening target to 115 locations.

Customer Traffic Powers Double-Digit Comparable Sales Growth

The most important part of Ross Stores' earnings report was the strength of its comparable-store sales.

Comparable sales increased 10%, well ahead of the company's 6%-7% plan and following a 2% increase in the year-ago quarter. It was also the company's second consecutive quarter of double-digit comparable-sales growth.

More importantly, management said the increase was primarily transaction-driven rather than dependent on customers simply spending more per visit. Ross attracted new and returning customers while existing shoppers visited more frequently.

The gains were broad across income levels and age groups. Management also said sales were strong in May and improved sequentially throughout the quarter, with July producing the strongest performance despite comparison with a strong back-to-school period a year earlier.

Ross attributed the improvement to several initiatives. The company expanded vendor relationships and merchandise assortment, invested in marketing, and worked to improve the shopping experience through better store organization, shorter lines and faster inventory recovery.

Home and cosmetics were among the stronger merchandise categories, with home performing above the company average.

The traffic gains stand out against an uneven retail backdrop. Walmart (WMT) reported weaker comparable-sales trends, while Target (TGT) showed improvement but reported particularly limited growth in apparel. TJX Companies (TJX) also reported only 1% comparable-store sales growth at its main TJ Maxx division.

Ross' 10% increase therefore reflected both the broader appeal of off-price retail and company-specific improvements in traffic and execution.

How Much of the Earnings Growth Came From Tariff Refunds?

Tariff refunds provided a significant boost, making it important to separate that benefit from Ross Stores' underlying performance.

Net income increased to $851 million from $508 million a year earlier, while diluted EPS climbed to $2.66 from $1.56.

The quarter included approximately $253 million in refunds related to tariffs imposed under the International Emergency Economic Powers Act. Those refunds contributed approximately $0.60 per share to earnings and 405 basis points to operating-margin expansion.

Operating profit increased to approximately $1.1 billion, while operating margin expanded 610 basis points year over year to 17.6%.

However, the improvement was not solely the result of the tariff refund.

Excluding the benefit, operating margin still expanded 205 basis points, exceeding Ross' previous target for 130 to 150 basis points of improvement. Merchandise margin improved by 110 basis points, while lower distribution costs also contributed.

That distinction helps explain the positive earnings reaction. The tariff refund amplified the headline numbers, but sales growth and underlying profitability also exceeded the company's expectations.

Ross shares rose more than 8% in late and premarket trading following the report.

Raised Guidance and Store Expansion Signal Continued Momentum

Ross also increased its expectations for the remainder of fiscal 2026.

Full-year EPS is now expected to range from $8.61 to $8.77, compared with the previous forecast of $7.50 to $7.74. The updated guidance includes the approximately $0.60-per-share tariff refund recognized during the second quarter.

For the third quarter, Ross expects comparable-store sales growth of 6% to 7%, compared with the 3.1% Wall Street consensus cited in the provided material. EPS is projected between $1.75 and $1.83.

Fourth-quarter comparable sales are expected to increase 4% to 5%, despite comparison with 9% growth in the prior-year period. Fourth-quarter EPS is projected at $2.17 to $2.26.

Management also increased its fiscal 2026 store-opening target to 115 locations from 110. The plan includes approximately 90 Ross Dress for Less stores and 25 dd's DISCOUNTS locations.

Ross opened 47 stores during the second quarter alone, including 35 Ross locations and 12 dd's DISCOUNTS stores. Recent openings have performed ahead of plan, according to the provided material.

For the first six months of fiscal 2026, revenue increased 17% to approximately $12.3 billion, comparable-store sales rose 13%, and net income reached $1.5 billion, up from $987 million a year earlier.

Ross is also returning capital to shareholders. The company repurchased 1.4 million shares for $319 million during the quarter and remains on track to repurchase $1.275 billion of stock during fiscal 2026.

Jefferies responded to the results by raising its Ross Stores price target to $285 from $265.

What It Means for Investors

The second-quarter results provide several signals beyond the headline earnings beat.

First, Ross' growth was driven primarily by customer traffic. That matters because the company is generating more transactions through a combination of new customers, returning shoppers and increased engagement from existing customers.

Second, the tariff refund needs to be separated from the underlying business performance. The $253 million benefit significantly increased reported earnings and margins, but Ross still produced 205 basis points of operating-margin expansion without it.

Third, management is raising expectations despite increasingly difficult year-over-year comparisons. The company now expects 6%-7% comparable-sales growth in the third quarter and 4%-5% growth in the fourth quarter.

The results also highlight how differently retailers are performing in the current consumer environment. Ross' double-digit comparable-sales growth contrasts with weaker results elsewhere in retail, suggesting that individual company execution and value positioning are playing an important role alongside broader consumer trends.

The principal areas to watch are whether customer traffic remains strong, whether new stores continue performing ahead of plan, and how Ross manages higher freight and fuel costs as the temporary tariff-refund benefit moves through the financial results.

Conclusion

Ross Stores' second-quarter performance was stronger than the headline tariff benefit alone would suggest.

Revenue rose 13%, comparable-store sales increased 10%, and customer traffic remained the primary growth driver. The company attracted customers across income and age groups while improving merchandise selection, marketing and store execution.

The $253 million tariff refund materially boosted reported earnings, but underlying operating margin still expanded 205 basis points, exceeding the company's previous expectations.

Ross is now carrying that momentum into the second half. Management raised its earnings and comparable-sales outlook while increasing its store-opening target to 115 locations.

The next test will be whether Ross can sustain its traffic-driven growth as comparisons become more difficult and freight costs create additional margin pressure. For now, the second-quarter results show that the company's growth is coming from more than a one-time tariff benefit.

FAQs

Why did Ross Stores stock rise after earnings?

Ross Stores reported 13% revenue growth and a 10% increase in comparable-store sales, primarily driven by higher customer traffic. The company also raised its full-year earnings outlook and second-half comparable-sales expectations.

How much did tariff refunds contribute to Ross Stores' earnings?

Ross received approximately $253 million in tariff refunds during the second quarter. The benefit added roughly $0.60 per share to earnings and contributed approximately 405 basis points to operating-margin expansion.

Did Ross Stores' margins improve without the tariff refund?

Yes. Excluding the tariff-refund benefit, Ross Stores' operating margin expanded 205 basis points year over year, exceeding its previous target for improvement of 130 to 150 basis points.

What is Ross Stores forecasting for the second half of fiscal 2026?

Ross expects third-quarter comparable-store sales to increase 6% to 7%, with EPS of $1.75 to $1.83. Fourth-quarter comparable sales are expected to rise 4% to 5%, with EPS of $2.17 to $2.26.

How many stores does Ross Stores plan to open in fiscal 2026?

Ross increased its fiscal 2026 expansion plan to 115 stores from 110, including approximately 90 Ross Dress for Less locations and 25 dd's DISCOUNTS stores.

This article was created with AI assistance and reviewed by an editor. For details, please refer to our Terms of Use.

Go Beyond the Market Brief with Market Edge

Follow SharperTrades’ complete approach to trading and investing, combining active trade opportunities through Block Orders, long-term research through Stock Investor, and structured market education through the Swing Trading Masterclass. Try Market Edge for $19 your first month →

Explore Research with Stock Investor

Stock Investor is SharperTrades’ platform for long-term investing research and portfolio management. Members receive research reports, portfolio updates, conviction tracking, and in-depth analysis designed to support disciplined investment decisions.

Explore Active Trading & Income Strategies

Block Orders tracks institutional activity and highlights active trade setups and price behavior across long and short opportunities.

For options-focused traders, Essential Option Income provides a structured approach to options income strategies, while Pro Option Trader offers a broader range of options strategies and trade opportunities.

Think More Clearly with SteadyCapital

SteadyCapital is SharperTrades’ decision-support system for long-term investors, built around the SteadyCapital Method™. Review investment ideas, challenge assumptions, evaluate valuation and risk, compare companies, and think through important buy, hold, add, trim, or sell decisions before you act.

Risk Disclosure

All content is provided for educational purposes only and does not constitute investment advice. Trading involves risk, and past performance is not indicative of future results. Please review our full Risk Disclosure for additional information.