Ross Stores (ROST) , which operates Ross Dress for Less and DD’s Discounts, is remaining cautious amid a startling shift in consumer behavior.
In the company’s fourth-quarter earnings report for 2024, it revealed that its comparable store sales increased by 3% year-over-year during the holiday season. However, its operating income, a company’s profit after expenses, decreased by 1.7%.
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According to recent data from Placer.ai, visits at Ross Dress for Less only increased by 0.7% in 2024, compared to 2023, which is significantly lower than the number of visits its top competitors Burlington, TJ Maxx and Marshalls generated for the year.
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During an earnings call on March 5, Ross Stores Chief Financial Officer Adam Orvos said that despite ringing in higher sales during the holiday season, the company is starting to see a "softening" in consumer demand.
“While we were pleased with our 2024 results, including the holiday selling period, sales trends began softening later in January and into February,” said Orvos. “We believe that a combination of unseasonable weather and heightened volatility in the macroeconomic and geopolitical environment has negatively impacted customer traffic. Given the lack of visibility we have on these external factors, we believe it is prudent to take a cautious approach in forecasting our business, especially as we start the year.”
Ross Stores unveils grim outlook on future sales
Ross Stores is expecting to see its comparable store sales either shrink 3% year-over-year or remain flat during the first quarter of this year. For all of 2025, it expects same-store sales to either decline by 1% or increase up to 2%.
“While there are always opportunities for us to improve our execution, we believe the softness we are currently seeing is primarily due to macro pressures, impacting consumer confidence, resulting in a pullback in discretionary spending,” said Ross Stores CEO Jim Conroy during the call.
The cautious outlook from Ross Stores comes after consumer spending in the U.S. dropped for the first time in two years. In January, economic activity declined by 0.2% after it increased by 0.8% in December, according to the U.S. Department of Commerce’s Bureau of Economic Analysis.
Many Americans have also recently been adjusting their shopping habits as they prepare to feel the impact of President Donald Trump’s tariffs. Tariffs are taxes companies pay to import goods from overseas, and the extra cost is often passed down to consumers in the form of price increases.
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A recent survey from Bid-on-Equipment found that 2 in 3 Americans are planning to shop more cautiously this year as they anticipate facing higher prices caused by tariffs.
The top five changes Americans are making to their shopping habits include, "comparing prices more carefully, decreasing spending on imported goods, shopping at more local or small businesses, limiting international purchases, and shopping at thrift or secondhand stores," according to the survey.
Ross Stores braces for impact tariffs
Ross Stores is closely monitoring the impact of Trump’s tariffs. On March 4, Trump increased his previous 10% tariff on all goods imported from China to 20%. He also imposed 25% tariffs on all goods imported from Mexico and Canada.
“Obviously, we’re continuing to monitor the day-to-day changes in the tariff policy,” said Ross Stores Chief Operating Officer Michael Hartshorn during the call. “Mexico and Canada are very small portion, very de minimis part of our overall business.”
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Hartshorn said that Ross Stores has weathered through tariffs in the past by negotiating costs and raising prices, levers the company is not afraid to pull this year if it needs to.
He also said that the company does pretty well withstanding tough economic conditions since it creates an opportunity for the company to obtain more excess inventory from brands.
“The good news in off-price is we can operate well in a number of environments as others around us struggle in a tough macroeconomic environment,” said Hartshorn. “That means more closeouts for us, which means our ability to get them and pass that on to the consumer with better values to go back in history, even in tough macroeconomic times, you have to go back to the 2008, 2009 levels, we’ve been able to navigate in the off-price environment fairly well.
Despite recent headwinds, Ross Stores is planning to open 80 new Ross Dress for Less stores and 10 new DD’s Discounts this year alone.
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