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Ross Stores Q1 2023 Earnings Call Transcript


Listen to Conference Call

Participants

Presentation

Operator

Good afternoon, and welcome to the Ross Stores First Quarter 2023 Earnings Release Conference Call. The call will begin with prepared comments by management followed by a question-and-answer session. [Operator Instructions].

Before we get started, on behalf of Ross Stores, I would like to note that the comments made on this call will contain forward-looking statements regarding expectations about future growth and financial results including sales and earnings forecasts, new store openings, and other matters that are based on the company's current forecast of aspects of its future business. These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from historical performance or current expectations. Risk factors are included in today's press release, and the company's fiscal 2022 Form 10-K and fiscal 2023 Form 8-Ks are on file with the SEC.

And now I'd like to turn the call over to Barbara Rentler, Chief Executive Officer. Please go-ahead.

Barbara Rentler
Vice Chair and Chief Executive Officer at Ross Stores

Good afternoon. Joining me on our call today are Michael Hartshorn, Group President and Chief Operating Officer; Adam Orvos, Executive Vice-President and Chief Financial Officer; and Connie Kao, Group Vice-President, Investor Relations.

We'll begin our call today with a review of our first quarter 2023 performance, followed by our outlook for the second quarter and fiscal year. Afterwards, we'll be happy to respond to any questions you may have.

As noted in today's press release, despite continued inflationary pressures impacting our low to moderate-income customers, first quarter sales were relatively in line with our expectations. Total sales of $4.5 billion, up from $4.3 billion last year for comparable-store sales rose 1%. Earnings per share for the 13 weeks ended April 29, 2023 was $1.9 on-net income of $371 million. These results compare to $0.97 per share on net earnings of $338 million for the 13 weeks ended April 30, 2022. Cosmetics and Medicine accessories were the strongest merchandise areas during the quarter, while the Midwest was the top-performing region.

Dd's DISCOUNTS performance in the first quarter continued to trail Ross, reflecting the aforementioned inflationary pressures that continues to have a larger impact on our lower-income households. At quarter-end, total consolidated inventories were down 16% versus last year. Average store inventories were up 2% at the end of the quarter. Packaway merchandise represented 42% of total inventories versus 43% last year.

Turning to store growth. We opened 11 new Ross and dd's DISCOUNTS locations in the first quarter. We continue to plan for approximately 100 new stores this year comprising of about 75 Ross and 25 dd's. As usual, these numbers do not reflect our plans to close or relocate about 10 stores.

Now, Adam will provide further details on our first-quarter results an additional color on our outlook for the remainder of fiscal 2023.

Adam Orvos
Executive Vice President and Chief Financial Officer at Ross Stores

Thank you, Barbara. As previously mentioned, our comparable-store sales were up 1% for the quarter, driven by an increase in transactions. First quarter operating margin of 10.1% was down from 10.8% in 2022. As expected, this decline primarily reflects higher incentive compensation versus last year when we underperformed our expectations. Cost of goods sold improved by 50 basis points due to a combination of factors. Merchandise margin was up 120 basis points, primarily due to lower ocean freight costs, while domestic freight costs declined by 60 basis points. Partially offsetting these two favorable items were higher distribution expenses of 65 basis points driven primarily by unfavorable packaway-related costs and deleverage from the opening of our Houston distribution center.

Buying increased by 60 basis points due to higher incentive compensation and occupancy deleveraged five basis points. SG&A for the period was 115 basis points, mainly due to higher incentive compensation and store wages versus last year. During the first quarter, we repurchased 2.2 million shares of common stock for an aggregate cost of $234 million. We remain on track to buy-back a total of $950 million in stock for the year.

Now let's discuss our outlook for the remainder of 2023. For the 13 weeks ending July 29, 2023 comparable sales are forecast to be relatively flat. Second quarter 2023 earnings per share are projected to be $1.7 to $1.14 versus $1.11 for the 13 weeks ended July 30, 2022.

Our guidance assumptions for the second quarter of 2023 include the following. Total sales are forecast to increase 1% to 4% versus the prior year. We plan to open 27 locations in the second quarter, including 18 Ross and nine dd's DISCOUNTS locations. Operating margin for the second quarter is planned to be in the 9.8% to 10.1% range, down from 11.3% in 2022 as higher merchandise margin from lower ocean freight costs is forecasted to be offset by an increase in expenses primarily related to incentive compensation and store wages. We expect net interest income to be approximately $31 million. The tax rate is projected to be about 25% and diluted shares outstanding are expected to be approximately $339 million.

Now turning to the full year. Based on our first quarter results and guidance for the second quarter. Comparable-store sales for the 52 weeks ending January 27, 2024 are still planned to be relatively flat. We now project earnings per share for the 53 weeks ending February 3, 2024 to be $4.77 to $4.99 compared to $4.38 for the 52 weeks ended January 28, 2023. This guidance includes an estimated benefit to full-year 2023 earnings per share of approximately $0.15 from the 53rd week.

Now. I will turn the call back to Barbara Rentler for closing comments.

Barbara Rentler
Vice Chair and Chief Executive Officer at Ross Stores

Thank you, Adam. As noted on our last earnings call, we had expected fiscal 2023 to be another challenging year. This was especially true given the continued uncertainty in the macroeconomic, geopolitical, and retail environment. As a result of today's uncertain external landscape, especially the prolonged inflationary pressures negatively impacting our customers' discretionary spend, shoppers are seeking even stronger values when visiting our stores.

In response, we remain focused on delivering the most compelling bargains possible while diligently managing expenses and inventory to maximize our opportunities for growth. At this point, we'd like to open up the call and respond to any questions you may have.


Questions and Answers

Operator

Thank you. We will now be conducting a question-and-answer session. [Operator Instructions]. And the first question comes from the line of Matthew Boss with JPMorgan. Please proceed with your question.

Matthew Boss
Analyst at JP Morgan Cazenove

Great, thanks. So, Barbara maybe given the pressure on your low-to-middle-income low to moderate income customer base that you cited. How do you feel today about your merchandise assortments across categories from that value perspective? And then how are you managing buys in the marketplace, just given the current level of disruption across the apparel landscape today?

Barbara Rentler
Vice Chair and Chief Executive Officer at Ross Stores

The merchandise from a value perspective. First, let me lead with, we weren't really satisfied with our results. So, as I look across the different businesses. We had some businesses where the business didn't perform as well as we had expected and we are addressing those issues. So let me start with that. As I look at value across the store that has been a main focus for the merchants for the last few months. So I'd say that we made progress across the board, but I still think that that is a major focus for us offering the customer the best-branded bargains possible as the best possible values we can put out there. So, I would say we're on a journey, and everyone is really, the merchant team is highly focused on this and I really think that that's an important part, especially for mid to lower-income customers. And then in terms of managing you're saying in terms of managing supply in the marketplace. Is that how I interpret that question?

Matthew Boss
Analyst at JP Morgan Cazenove

Yeah, just how you're managing buys, given how much disruption there is in the overall apparel landscape, how much you're leaving thinking about current open-to-buy and relative to maybe things opportunistic from a packaway perspective.

Barbara Rentler
Vice Chair and Chief Executive Officer at Ross Stores

Okay. Well, we have enough open-to-buy for both packaway and to chase the business. So right now the plan is posture that we would chase the business as we're coming across, and we're monitoring the spirit of spending and the hotel, same scenario hotel inventories are basically at the same rate as they were last year, and so the merchants are out in the market seeking out deals and based on those deals, we make those decisions. So if a deal comes in one business and that wasn't really even plan for that business, we might take that plan out. So we're really looking for with the overarching idea what we want to do is get the best possible values on the floor. So the merchants go to the market and then there is discussions about what's out there.

I know we know that there is pretty broad-based availability out there, maybe across most businesses anyway in most brands in the market because as you know, supply fluctuates by type of products and vendor, but you have to kind of be out there and be in it to really see what's out there and then come back and then decide where do we want to take the deal so that is our focus in both companies delivering the best-branded bargains that we possibly can.

Matthew Boss
Analyst at JP Morgan Cazenove

Great. Best of luck.

Operator

And the next question comes from the line of Mark Altschwager with Baird. Please proceed with your question.

Mark Altschwager
Analyst at Robert W. Baird

Good afternoon, and thank you for taking my question. So you're holding your comp guide for the year, though you noted that can consumer is looking for a deeper value and your merchants are focused on that. So, I guess I'm wondering how the expected makeup of that flat comp is -- has changed versus your expectations at the start of the year and to the extent that there is perhaps some lower ticket involved. Are there any margin implications we should be aware of? Thank you.

Michael Hartshorn
Group President and Chief Operating Officer at Ross Stores

Hi, Mark, it's Michael Hartshorn. Let me start by just talking a little bit about the first quarter. The comp in the first quarter was driven by a number of transactions and that was for us, that's our proxy for traffic. It was up versus a year ago. So that's a good sign on customer traffic returning. The average basket was flat and it was flat on units per transaction up on lower AUR.

As far as how we're looking at the year, our outlook has not changed. We'll continue to manage the business with a conservative posture and be in a position to chase trends, chase the business and manage expense and inventory very conservatively. On a stacked basis as we move through the quarter and as weather became more favorable, we did see trends. Improve on a multiyear basis. So what that says to us is obviously healthy traffic and a trend that in our mind hasn't changed, it hasn't changed our outlook for the year.

Mark Altschwager
Analyst at Robert W. Baird

That's great. Thanks for the color.

Operator

And the next question comes from the line of Paul Lejuez with Citigroup. Please proceed with your question.

Paul Lejuez
Analyst at Smith Barney Citigroup

Hey guys, thanks. Curious about geographic dispersion, maybe if you could talk about some of your big state performance in those states, specifically California how the trends look from the beginning of the quarter to the end of the quarter, and maybe you could talk about apparel versus home performance. Thanks.

Michael Hartshorn
Group President and Chief Operating Officer at Ross Stores

Sure, Paul, on trends during the quarter as I just mentioned on a stacked basis, we did see on a stacked basis versus pre-COVID, we did see trends improve as we move through the quarter with April being the strongest geographically. We mentioned the Midwest was the top-performing region for our larger markets. Texas was above the chain average. Florida was in line and California underperformed the chain average given the difficult weather throughout the quarter in the West. Merchandisewise, accessories and cosmetics were the best-performing businesses as we said in the script. Overall shoes performed above the chain average, while home was in line and apparel trail.

Paul Lejuez
Analyst at Smith Barney Citigroup

Thanks, Michael. Can you just a little bit more on California, any quantification of how much of was below the chain, and did that gap close that between California and the rest of the chain by the end of the quarter?

Michael Hartshorn
Group President and Chief Operating Officer at Ross Stores

It did close. It was we wouldn't get into the specifics, but it did underperform the chain average and it improved as the weather improved.

Paul Lejuez
Analyst at Smith Barney Citigroup

Thank you. Good luck.

Operator

And the next question is from the line of Lorraine Hutchinson -- Hutchinson with Bank of America. Please proceed with your question.

Lorraine Hutchinson
Analyst at Bank of America

Thanks, good afternoon. As you move through the quarter, did you see any signs of customers trading down into Ross or any other notable changes in consumer behavior?

Michael Hartshorn
Group President and Chief Operating Officer at Ross Stores

I'd say overall, Lorraine, it's hard. There's so many factors that go into sales. Obviously, the low-end customer continues to be pressured, whether it's the ongoing inflation, reduction in SNAP benefits, lower tax refunds but it was hard to see whether there's a trade-down customer and that data.

Lorraine Hutchinson
Analyst at Bank of America

And the lower AUR in the quarter was that all moving towards sharper price points or is there a mix component to that that we should factor in?

Barbara Rentler
Vice Chair and Chief Executive Officer at Ross Stores

No, that's really off of sharper price points. It wasn't generated by mix.

Lorraine Hutchinson
Analyst at Bank of America

Thank you.

Operator

And the next question is from the line of Chuck Grom with Gordon Haskett. Please proceed with your question.

Chuck Grom
Analyst at Gordon Haskett

Hi, good afternoon. The merchandise margin had a nice uptick here in the first quarter relative to last quarter. Can you talk about the drivers, I think you called out freight and then how you're thinking about that line item over the balance of the year?

Adam Orvos
Executive Vice President and Chief Financial Officer at Ross Stores

Yeah, Chuck. This is Adam. So I mentioned the merchandise margin grew by 120 basis points in Q1, ocean freight was clearly the most impactful component here driving the improvement. Our performance in merch margin was in line with what we embedded in our guidance for Q1 and assuming rates stay where they are, expect that to continue as we move through the year.

Chuck Grom
Analyst at Gordon Haskett

Thank you.

Operator

And the next question is from the line of Adrienne Yih with Barclays. Please proceed with your question.

Adrienne Yih
Analyst at Barclays

Great, thank you very much. Barbara, I wanted to ask you about packaway, 42% this year versus 43%. First and foremost, it sounds like you believe that you're assortment, is on trend, and then typically when there are these kinds of late weather breaks to kind of warmer weather across retail, it gives you the opportunity to chase into sort of no winters. Do you feel better about the assortment heading into the second quarter? And then, Adam or Barbara with frontline still being very promotional. Does that somehow impede the ability to drive maybe higher AURs because the value is not as evident as it may be when frontlines a little bit less promotional? Thank you very much.

Barbara Rentler
Vice Chair and Chief Executive Officer at Ross Stores

Okay, Adrienne, let's start with packaway. I think the first question is about packaway, the content of packaway.

Adrienne Yih
Analyst at Barclays

Yeah, it was about packaway.

Barbara Rentler
Vice Chair and Chief Executive Officer at Ross Stores

So we, so the fact we feel good about that content to packaway success here. At this particular moment in time when we started to bring in goods, because of all the carrier issue carrying on with everything speeded up, we took goods and put them into packaway as we've told all of you that we use later on in the year, really our direct imports. So the packaway that we have in there now is really close out great deals that we feel very good about. So the percent opening at the same, but the content is different. So that's the first one. The second one, in terms of the late weather break, I'm not sure, I, 100% understand what do you mean by that.

Adrienne Yih
Analyst at Barclays

So oftentimes when it's been called in the Northeast and many people were sort of retailers were sort of missing plan. First, just because it was colder than for longer. And in the past, it seems like those types of poor weather transitions have given you the opportunity, I think you just answered it in your first one.

Barbara Rentler
Vice Chair and Chief Executive Officer at Ross Stores

Yeah, you're saying were there were additional great deals out there.

Adrienne Yih
Analyst at Barclays

Yeah. Yeah.

Barbara Rentler
Vice Chair and Chief Executive Officer at Ross Stores

That's kind of ongoing at the merchants. Yes, in the market looking for closeouts facing the business and all and all of that. So that's very different by type of business. Yes, there are, but that's part of the supply availability that's out there.

Adrienne Yih
Analyst at Barclays

And the spread kind of why the spread from frontline to your pricing.

Barbara Rentler
Vice Chair and Chief Executive Officer at Ross Stores

I think you're just saying that they are promoting now, it's more promotional than it's been. And then, what's our relationship to the promotional environment?

Adrienne Yih
Analyst at Barclays

Yeah, does it make it harder to create that value notion, when the frontline retailers are sort of every day sitting on 50.

Barbara Rentler
Vice Chair and Chief Executive Officer at Ross Stores

Yeah, and then Willis look I think the promotional environment is still competitive. It's still a competitive market. We ask people get more promotional in these last few months. I don't think that that's going away. I think what has happened is, and what is happening is that the buyers have to be in the market constantly working with vendors to understand two things, one, not only just brand availability but also pricing because they need, they know that they need to get, they need to have their values be sharper. So they are competitive shopping seeing what's going on in stores and then they are in the market and vendors are giving them the lay of the land, availability, I have, but you are talking about the excess goods closeouts and also kind of where the pricing is, they're keeping that in mind because they're studying that. So for a while, the world got very different than there was much more regular-price selling, particularly in department stores. We are watching as you're watching that erode and it's becoming more promotional.

So those have been best practices for the company for years and so that's what the merchants are doing to ensure that they're watching it and then making some assumptions about what they believe could happen in front of them, which would be, but traditionally has done prior to all the things that have gone on since COVID has started and more regular price selling and all of that.

Adrienne Yih
Analyst at Barclays

Fantastic, that's very helpful. Thanks, Barbara. Best of luck.

Barbara Rentler
Vice Chair and Chief Executive Officer at Ross Stores

Thank you.

Operator

And the next question comes from the line of Ike Boruchow with Wells Fargo. Please proceed with your question.

Unidentified Participant
at Ross Stores

Yes, hi, this is Kate on for Ike. Thanks for taking our question. I guess just to hone in on the gross margin piece, you guys had a decent amount of volatility in both distribution and buying buckets last year within COGS. Can you walk us through how you think those line items progresses through the rest of the year, maybe direction or magnitude? Thank you.

Adam Orvos
Executive Vice President and Chief Financial Officer at Ross Stores

Yeah, hi, Kate, this is Adam. So, we will take them individually. So, ocean freight costs significant tailwind in Q1. Again, given all the volatility we've seen every time, don't want to get too far ahead of ourselves, but kind of what's embedded in the guidance is we will continue to see that as a tailwind as we go through the balance of the year. Domestic freight, we called out the 60 basis points of improvement year-over-year. Again, highly dependent here on fuel prices, and obviously there is wage increases embedded in those costs, but assuming those things stay stable, we would continue to expect that to be a tailwind for us as we go forward. The biggest piece that we've called out for some time offsetting those benefits are incentive costs. So we gave you the details of that approximately in the call comments. I would also say, in the second quarter when we look at it will probably be the most impactful quarter for us from an incentive costs increase this year versus last year. We also commented on distribution expenses. So again driven by timing of packaway, and then the planned deleverage from our new distribution center in Houston.

Ike Boruchow
Analyst at Wells Fargo & Company

Very helpful. Thank you.

Adam Orvos
Executive Vice President and Chief Financial Officer at Ross Stores

Thanks.

Operator

And the next question comes from the line of Alex Stratton with Morgan Stanley. Please proceed with your question.

Alex Stratton
Analyst at Morgan Stanley

Great, thanks all for taking the question. So it feels like this is kind of an ongoing narrative for the last year that you are not super happy with the value we're offering the customer, though historically I think you've proven super consistent and successful there. So I'm just wondering, has anything changed in the buying organization or what do you think the buying team is getting wrong now and maybe how you're thinking about correcting this or putting initiatives in place to perhaps get this back on track? Thanks a lot.

Barbara Rentler
Vice Chair and Chief Executive Officer at Ross Stores

Sure. Look, I think the value equation we've been working on for the last few months, over the last year moving towards getting to that value points. I think we're kind of at a different place now than where we were a few months ago both in brands and in values on the floor. So, I don't see it kind of as the merchants are doing their job. I kind of see it as an evolution, and so we are very-very highly focused now on delivering compelling value as we watch for our customers in both companies struggle with all the inflation and all the things that are going on around them. We've gotten pretty, Barry admited that this is a very highly focused on delivering those value. So where we were, let's say, six months ago and we're how we're thinking about it now. It continues to evolve and so we want to make sure that we have a really wide assortment.

Fresh proceed, branded merchandise and where it's appropriate that we're sharpening our branded values to strengthen the offerings because it's a competitive retail environment, So I don't feel like it's not necessarily working, I feel like it's evolving and I think our business last year evolve this, we went as we went along. It's important for us to make sure that we deliver really sharp values for our customers, particularly in this timeframe frame and now that the world is getting even more competitive and more promotional, we have to look through that lens also.

So, I think that we need to stay focused on it and do a better job on this and making sure that we really understand where it's appropriate that we are sharpening our brand value. And so, I don't think it's not working. I think it's much more of an evolution in all of -- in all of our businesses.

Alex Stratton
Analyst at Morgan Stanley

Thank you.

Operator

And our next question comes from the line of Simeon Siegel with BMO Capital Markets. Please proceed with your question.

Simeon Siegel
Analyst at BMO Capital Markets

Thanks. Hey, good afternoon. Any change in the percent of sales being driven by top vendors versus last year, and then just versus historical trends. Just wondering if concentration of the largest vendors has changed at all. And then just because it's coming up fairly frequently, any updated thoughts on shrink? Thank you.

Michael Hartshorn
Group President and Chief Operating Officer at Ross Stores

I'll start, it's Michael, Simeon on shrink. We -- the shrink was a little bit higher for us last year, it wasn't meaningfully higher, we've assumed that it will stay at/or slightly above those levels in our estimates, but no updates will we typically update the financial impact of that when we take two of our physical inventory in the third quarter.

Barbara Rentler
Vice Chair and Chief Executive Officer at Ross Stores

And the percentage of our top vendors versus historical, I mean that moves based off of supply, right? So, one year, we could have a great deal of merchandise from one vendor, top vendor, and then the next year, a little bit less, but a little bit more from someone else. So, I think that kind of moves around. I don't think it's changed that much. I don't know we're defining as top vendors, but it hasn't changed that much, it changes more by the vendor itself and the availability that's out there.

Simeon Siegel
Analyst at BMO Capital Markets

Great, thanks a lot, guys. Best of luck for the rest of the year.

Operator

[Operator Instructions] Our next question comes from the line of Dana Telsey with the Telsey Advisory Group. Please proceed with your question.

Dana Telsey
Analyst at Telsey Advisory Group

Hi, good afternoon, everyone. As you think about the performance of dd's and what's happening in the environment. Was there any differential in dd's performance in the fourth quarter to the first quarter and what you saw? And then just lastly on the Bed Bath and Beyond locations that are available if you were to get any, would that be in addition to the current run-rate of store openings this year or would it be part of it? Thank you.

Adam Orvos
Executive Vice President and Chief Financial Officer at Ross Stores

Hi, Dana, on dds, the sales trends continued to trail Ross results during the first quarter. I wouldn't comment on the differential between fourth and first, obviously, their customer base is even more macro headwinds relative to us, which is I think reflected in their underperformance. I would also say though similar to Ross, we are sharply focused on offering better values to help drive improved sales performance there. On Bed Bath and Beyond, it will no doubt provide opportunities for new store locations. We'll have to review each potential new site on a case-by-case basis to see if it's appropriate for us, but I would say, it's not going to impact our 100 store opening plan for this year.

Dana Telsey
Analyst at Telsey Advisory Group

Thank you.

Operator

And our next question comes from the line of Bob Drbul with Guggenheim. Please proceed with your question.

Bob Drbul
Analyst at Guggenheim

Hi, good afternoon. I guess just a question for me is, as you think about what's happening in the macro, when you look at your good-better-best mix, are you migrating your offering to the lower end of the spectrum, I'm just curious just in terms of the buys or how you're thinking about the merchandising piece of it? Thanks.

Barbara Rentler
Vice Chair and Chief Executive Officer at Ross Stores

So we have a good-better-best strategy and that is really driven by the assortment that we put on the floor and the values we put out there. So we want to a tiered strategy because you can attract much more broader set of customers, but that can move based on supply, based on availability, based on our purchases. So it fluctuates as you go.

Bob Drbul
Analyst at Guggenheim

And as you think about the rest of the year, you're not really buying for sort of more of a good environment versus a better versus best in your offering?

Barbara Rentler
Vice Chair and Chief Executive Officer at Ross Stores

I think that depends by business. I can tell you that is a company-wide strategy. I think that moves by business based on what the businesses and clearly the dd customer, in particular, very price-sensitive. So really paying attention to the values we are putting on the floor, the pricing we're putting on the floor, both. So but even at dds, I think it moves around. So we are obviously conscious, particularly with that customer.

Bob Drbul
Analyst at Guggenheim

Great, thank you.

Operator

And the next question comes from the line of Brooke Roach with Goldman Sachs. Please proceed with your question.

Brooke Roach
Analyst at The Goldman Sachs Group

Good afternoon. Thank you for taking our question. Given the ongoing inflationary pressures in the macro, I'm wondering if you can provide updated thoughts on the longer-term path to recapturing pre-COVID operating margins. Are there any initiatives that you're contemplating to help drive that recovery outside of sharpening values and driving additional market-share capture? Thank you.

Adam Orvos
Executive Vice President and Chief Financial Officer at Ross Stores

Hi, Brooke, this is Adam. Thanks for the question. So our long-term operating margin improvements there to be highly dependent on us delivering strong sales over a sustained period of time. And then the question on how long do inflationary pressures process, but over the longer-term, we believe we can achieve gradual improvement in profitability. I think if given to like are there any structural questions related to that, we're seeing tangible benefit in freight costs, but we're still these costs still are not at pre-pandemic levels and then we're seeing some wage pressures in the stores. When you talk about, we've guided, capex of $810 million. So, a big component of that in addition to distribution center capacity, in addition to investing in the 100 new stores, a big chunk of that is technology investments that will drive further efficiencies within the stores and in our distribution centers. So more automation in our distribution centers and same store initiatives that we've touched on in the past.

Brooke Roach
Analyst at The Goldman Sachs Group

Thank you.

Operator

And the next question comes from the line of Laura Champine with Loop Capital. Please proceed with your question.

Brooke Roach
Analyst at The Goldman Sachs Group

Thanks for taking my question. It's about the weather's impact on your comp in Q1, is that something you can quantify, or maybe if, if that's a tough one maybe give us the discrepancy roughly between California and the rest of the chain?

Michael Hartshorn
Group President and Chief Operating Officer at Ross Stores

Hi, Laura, it's hard to calculate. I mean, I think it's suffice it to say, it didn't didn't help our business. I would say, California was slightly under the 12 to 15 average and it did improve as weather improved that's what like what we'd say.

Laura Champine
Analyst at Loop Capital.

Got it, thank you.

Operator

And the next question comes from the line of Marni Shapiro with Retail Tracker. Please proceed with your question.

Marni Shapiro
Analyst at Retail Tracker

Hey, guys. I just wanted to clarify. I think you said the 53rd week adds about $0.15, could we expect between like $350 million to $400 million in sales, is that a decent number to use for that week, or is it a little less because it's a January week, just curious.

Adam Orvos
Executive Vice President and Chief Financial Officer at Ross Stores

Yeah, not for probably a little bit less than that, Marni given that it's, as you said, given that it's January or February.

Marni Shapiro
Analyst at Retail Tracker

That's a figure and then this came up on other calls, it looks like your traffic is good that people are looking for sharper deals but you obviously called out accessories and cosmetics, beauty, which tends to have a lower AUR. Are people gravitating towards the lower-price items or as you've seen the weather improve, have you seen apparel come back in slightly higher AURs, but they looking for the apparel items that are on sale or just at the better prices, I'm curious, sure what the dynamic is there.

Barbara Rentler
Vice Chair and Chief Executive Officer at Ross Stores

So, apparel. Apparel struggled in Q1. So I don't necessarily think it was driven off the prices. I think that the assortments were not necessarily where we wanted them to be. So depending upon the business that's been that could have been the price that has been the product because it is a variety of factors in there, so, I don't think I can take it down to a common denominator price or say, was it driven by markdowns or what it driven. It really. It really, I would say it was driven by the assortment, when and certainly the weather didn't help only but I don't think the weather is a big enough impact but I could sit here and say that. I think our assortments were necessarily driven where we wanted them to be and so we're working on that and we're going to continue to work on that, but it's not really based off of a price or one thing or we have our work cut out for us in the merchants are working on that now.

Michael Hartshorn
Group President and Chief Operating Officer at Ross Stores

And Marni, it wasn't driven by mix, it was driven being sharper price across the.

Marni Shapiro
Analyst at Retail Tracker

So it was across, you saw the softness across the assortment in apparel.

Michael Hartshorn
Group President and Chief Operating Officer at Ross Stores

No.

Marni Shapiro
Analyst at Retail Tracker

It wasn't a specific right in AUR.

Michael Hartshorn
Group President and Chief Operating Officer at Ross Stores

You asked was AUR driven by mix in the business that was not driven by mix.

Marni Shapiro
Analyst at Retail Tracker

But on the apparel side was the softness across the board, whether it was men's polo shirts or women's dresses or kids every department across the board was soft, or were there certain spots, even without disclosing. And if you don't want to with the certain spots that we're that really need a lot of work and other spots that were okay.

Barbara Rentler
Vice Chair and Chief Executive Officer at Ross Stores

Well, obviously we're not going to get into details, but within all the apparel businesses like human common sense would tell you that some businesses are better than others, right? So, with that we wouldn't get into specifics, but there's no, you're asking is there like your ratings in one particular area, I know it's due to a variety to get there, I mean, did you.

Marni Shapiro
Analyst at Retail Tracker

I was kind of thinking on the positive, was there something that you're saying.

Barbara Rentler
Vice Chair and Chief Executive Officer at Ross Stores

Decide where you were going with that. Every business has businesses that perform -- performance, some businesses citizens. So we're not going to get into specifics on that, what I would say is that the merchants are very diligently working on the assortments, whether it's delivering the right products, whether it's the values, I mean, they're very really focused, highly focused on that right now.

Marni Shapiro
Analyst at Retail Tracker

Okay, great, thank you so much.

Operator

And the next question comes from the line of Corey Tarlowe with Jefferies. Please proceed with your question.

Corey Tarlowe
Analyst at Jefferies Financial Group

Hi, good afternoon, and thank you for taking my questions. So, Barbara, just on the availability across your good, better, best spectrum that you have. Is there any better availability within any one of those three segments as you speak to your merchants?

Barbara Rentler
Vice Chair and Chief Executive Officer at Ross Stores

Are you just saying where does the supply, the supply is pretty broad-based, I mean you supply, they supply in most businesses, there's always more than one vendor then the other on one product, and then the other. I mean, it fluctuates. Overall, there is still lot of supply, I wouldn't say it's both bucketed in one of those three buckets. No, I would still say it's pretty broad-based.

Corey Tarlowe
Analyst at Jefferies Financial Group

Got it. And then just on the lower AUR comment being driven by sharper price points. I guess within the context of the guide for the full-year for flat comps is the expectation that the AURs likely to be lower throughout the rest of the year as well.

Barbara Rentler
Vice Chair and Chief Executive Officer at Ross Stores

Picking up better values doesn't necessarily mean that your AURs is going down, but what we're focused on is we're focused on delivering really sharp value. So, depending upon what you're using your example of the good, better, best, depending upon what that mix looks like. That doesn't necessarily mean the AUR is going down. We're really trying to do is really trying to focus on sharpening our branded values for the customer and so we think that's our path to driving sales and we think that's our path, ultimately to gaining market share. So if those two don't necessarily go hand-in-hand.

Corey Tarlowe
Analyst at Jefferies Financial Group

Understood. That's very helpful. Thank you very much and best of luck.

Operator

And the next question comes from the line of Jay Sole with UBS. Please proceed with your question.

Jay Sole
Analyst at UBS Group

Great, thank you so much. It looks like you beat the low-end of your, the guidance you gave for EPS in first-quarter by about $0.10, but you are raising the low-end of the full-year guidance by about $0.12, can you tell us, where the extra $0.02 is where that's coming from. Thank you.

Adam Orvos
Executive Vice President and Chief Financial Officer at Ross Stores

Yeah, I think the better way to look at it is what we did on the top-end, we'd beat the top-end by four, you lose the quarter in that and we raised the full-year by $0.04.

Jay Sole
Analyst at UBS Group

Got it, okay. Thank you so much.

Operator

And the next question comes from the line of Aneesha Sherman with Bernstein. Please proceed with your question.

Aneesha Sherman
Analyst at Sanford C. Bernstein

Thanks for taking my question. So your guidance implies, your two-year stack comp for this quarter was minus six in your guidance implies a deceleration of that stack to about minus seven for Q2 and then a pickup in the back half to get kind of closer to zero to year stack. Can you talk about how you're thinking about the progression through the year? And why are you more cautious about Q2 and then a little bit more optimistic for the back half of the year?

Adam Orvos
Executive Vice President and Chief Financial Officer at Ross Stores

Sure, Aneesha. I think it's, it's hard to look at these on a two-year stack with all the fiscal stimulus and COVID. So, we're really looking at, at pre-COVID what's changed on a four-year stack and how that's progressed over time and we went into the year and had a plan in the first quarter, what we saw is that for your stack improved as we move through the quarter and weather improved in a place that would support that step for the year.

Aneesha Sherman
Analyst at Sanford C. Bernstein

Okay, so just to clarify, you are embedding an improvement in the four-year stack through the course of the year.

Adam Orvos
Executive Vice President and Chief Financial Officer at Ross Stores

Correct, yes.

Aneesha Sherman
Analyst at Sanford C. Bernstein

Okay. Thank you.

Operator

And the next question comes from the line of Chris Zuper with TD Cowen. Please proceed with your question.

Unidentified Participant
at Ross Stores

Hi, it's Christian on for John. Just a quick question on inventory, you've had several Q4 at least two quarters here of fairly sizable declines. Just wondering how you're thinking about it through the balance of this year and should we continue to expect declines on a quarterly basis through the end of the year or do you think at some point, you sort of pull in line with your sales growth expectations? Thank you.

Michael Hartshorn
Group President and Chief Operating Officer at Ross Stores

Sure, it's if you look at the first quarter, for instance, we were down 16%, but we were up against elevated inventories last year when supply-chain lead times eased and we had a surplus of early receipts. So what you'd expect as we move through the year with that elevated inventory last year, it started to recede in the third and fourth quarter and you get more comparable, but we should be lower given the excess inventory we had last year in the first half of the year.

Operator

And at this time, I'm seeing no further questions I'll pass back over to Barbara Rentler for any closing comments.

Barbara Rentler
Vice Chair and Chief Executive Officer at Ross Stores

Thanks for joining us today and for your interest in Ross Stores.

Operator

[Operator Closing Remarks].

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