ROST
#Thank you, <UNK>
Let’s start with our second quarter results
Our 4% comparable store sales gain was driven by increases in both traffic and the size of the average basket
As mentioned earlier second quarter operating margin outperformed our projections increasing 50 basis points to 14.9% compared to 14.4% last year
Cost of goods sold for the second quarter improved 25 basis points driven by better than expected 35 basis point increase in merchandise margin, 20 basis points in lower occupancy costs and distribution expenses that were lower by 10 basis points
These gains were partially offset by a 25 basis point increase in freight costs along with 15 basis points of higher buying costs
Selling, general and administrative expenses during the period were lower by 25 basis points
This improvement includes a non-recurring benefit of approximately 20 basis points from legal related costs
During the quarter we repurchased 3.6 million shares of common stock for a total purchase price of $215 million
Year-to-date, we have bought back a total of 6.9 million shares for an aggregate price of $430 million
As planned we expect to buy back a total of $875 million in stock for the year under the 2-year $1.75 billion stock repurchase program approved by our Board of Directors in February of this year
Let’s turn now to our second half guidance
For the third quarter ending October 28, 2017, same-store sales are forecast to increase 1% to 2% on top of a robust 7% gain last year
With earnings per share projected to be in the range of $0.64 to $0.67 versus $0.62 in last year’s third quarter
For the fourth quarter ending February 3, 2018, we are also planning same-store sales to be up 1% to 2% on top of a solid 4% gain last year with earnings per share projected to be $0.88 to $0.92 compared to $0.77 last year
This includes an approximate benefit of $0.08 due to the 53rd week
Now I will provide some additional operating statement assumptions for the third quarter EPS target
Total sales are projected to grow 4% to 5%
We are planning to add 30 new Ross and 10 dd’s DISCOUNTS locations during the period
Operating margin is projected to be in the range of 12.4% to 12.6% versus 12.6% in the prior year
Net interest expense is estimated to be about $2.5 million
Our tax rate is planned at approximately 37% to 38% and we expect average diluted shares outstanding to be about 384 million
As noted in today’s press release based on our results for the first six months as well as our second half forecast, we now are projecting earnings per share for the full year on a 53 week basis to increase 12% to 14% to $3.16 to $3.23 on top of a 13% gain in fiscal 2016. Now I will turn the call back to <UNK> for closing comments
For the second quarter, as we mentioned merchandise margin was up 35 basis points
It was really driven by a combination of better buying, but also when we are able to exceed our initial sales plan, there is markdown leverage and it helps us move to drive the business with closeout
So, that was beneficial in the second quarter
As we think about the third quarter, our current guidance assumes that merchandise margins are slightly lower, but that’s because we are up against a 50 basis point increase from Q3 of last year
Mike, we track and analyze the performance in our stores based upon various different demographic factors and obviously that includes looking at Hispanic markets and the answer is no
We have not seen an issue in those markets
Sure, <UNK>
As we mentioned in our prepared remarks, the 4% comp was driven by higher traffic and an increase in the size of the average basket
Proportionally, traffic contributed more than the basket
The higher basket was driven by an increase in more units
AUR was down just slightly due to the mix of business
Yes, we wouldn’t – <UNK> on the breakout between Ross and dd’s we wouldn’t break that out separately
On a total basis, it’s upper 20% of the business is home for us, 25%
Yes, we will comment more at the end of the year on our specific plans for 2018, but I think for planning purposes, you can assume that our store openings will be much pretty much in line with where they have been the last couple of years, 80 to 90 new stores, approximately 20 to 25 of those being dd’s and the rest being Ross
I wouldn’t expect a significant change in that over the next couple of years
Sure, <UNK>
While we do face our most challenging prior year comparisons in Q3, it’s clear to us that the consumer continues to favor retailers that offer compelling value
And we think that bodes well for us going into the third quarter
<UNK>, on the inventory question, so we have gone through a period of 7, 8 years of inventory reduction, the total inventory is down over 40% over the last number of years
So, as we look at it going forward, we are comfortable operating at our current levels that those reductions obviously have contributed to significant margin improvements, but we are in the very late innings of those reductions and are comfortable at the current levels
In terms of the specific guidance in Q3 and Q4, the only guidance that we gave was my comment on merch margins and the comparison versus last year, so we wouldn’t get any further detail in that back half margin
And <UNK> on your question about these dd’s, as <UNK> mentioned in her remarks we were pleased with dd’s strong performance in terms of sales and operating profit in the second quarter
dd’s sort of basically continued as it has over the last several quarters its good results
In terms of what’s driving that, frankly it’s similar to many of the other things that we talked about on this call so far, in particular, for dd’s customer is responding well to the values that we are offering
Sure
On your question on credit, it’s about a third of our business <UNK>
And then on the SG&A leverage as we mentioned in the call, we had 25 basis points of leverage on a 4% comp, 20 of that 25 was related to a non-recurring legal matter
So, baseline 5 basis points of leverage
As I mentioned on wages in the back half, we should expect less leverage so at a 1% to 2% comp, there maybe some de-leverage, but at 3% we should get leverage
Sure
So as we have mentioned it in the past, the new store productivity has come down since we entered the Midwest in 2011. And also, our growth of the dd’s change has impacted overall productivity
I would say though in the last couple of years, it’s been very steady at or above our expectations
Overall, Ross new stores about 60% to 65% on the chain average and then tends to comp faster in the first couple of years
I will start with the last one, because that’s probably the easiest, <UNK>
On freight, we expect there to be a headwind for the rest the year
Contracts vary, we have pretty good viewpoint for the rest of the year and we expect it to continue to be a headwind and then going into next year we will talk more about that on the year end conference call
