Ross Stores (ROST) Q2 FY2026 Earnings Call: Q&A Summary

Q: Matthew Boss from JPMorgan asked for elaboration on the top-line momentum and exit rate strength seen across the second quarter.

A: Jim Conroy stated that the 10% comp growth was driven primarily by transaction volume from new, lapsed, and existing customers. He noted that July was the strongest month and that momentum has continued into August.

Q: Lorraine Maikis from Bank of America asked which initiatives have the most runway to drive comp strength.

A: Jim Conroy explained that initiatives in merchandising, stores, and marketing are all in early stages. He highlighted the focus on building better merchandise stories, improving store organization, and effective marketing.

Q: Corey Tarlowe from Jefferies asked how marketing is fueling new customer acquisition and what the profile of these customers is.

A: Jim Conroy noted that new customers mirror the existing base across all income, age, and ethnicity demographics. He added that marketing is effectively driving traffic and the company is still learning how to optimize this.

Q: Paul Lejuez from Citigroup asked for quantification of new customers and vendor counts.

A: Jim Conroy stated it is difficult to quantify new customers specifically, but growth is coming from new, returning, and existing customers. He noted that vendor counts are not the best metric, as the focus is on the quality and strength of the brands carried.

Q: Charles Grom from Gordon Haskett asked how success has translated into a stronger vendor flywheel and how to size the lapsed customer opportunity.

A: Jim Conroy said the vendor partnership is strong due to growth and improved store presentation. He noted that lapsed customers are tracked via third-party credit card data, and the goal is to provide a great experience to encourage repeat visits.

Q: Michael Binetti from Evercore ISI asked if the quality of vendor offerings is improving and if buying is more competitive.

A: Jim Conroy confirmed that access to better brands is improving. He noted that competition for goods exists, but supply remains strong.

Q: Michael Binetti from Evercore ISI asked if the business will settle back to a 3% to 4% comp algorithm or if it can stay higher.

A: Michael Hartshorn stated the company is pleased with current trends but is not updating the long-term algorithm at this time.

Q: Alex Straton from Morgan Stanley asked if initiatives require a structurally higher level of investment.

A: Michael Hartshorn explained that investments are made through the P&L and capital structure, with unit growth being the primary capital investment. He added that the company leverages SG&A and payroll while testing initiatives.

Q: Brooke Roach from Goldman Sachs asked if the company should lean in more on investments and if there is a change in flow-through expectations.

A: Jim Conroy and Bill Sheehan stated the company is working within the current economic model and flow-through assumptions of 10 to 15 basis points per 1% of comp.

Q: Mark Altschwager from Baird asked if the back half margin guidance implies higher flow-through.

A: Bill Sheehan said guidance is in line with the comp raise, reflecting higher merchandise margins and lower distribution costs.

Q: Mark Altschwager from Baird asked how the company plans to protect the value gap given competitive price investments.

A: Jim Conroy stated the company aims to stay under mainstream retail pricing. He added that AUR increases will remain in the low single digits.

Q: Ike Boruchow from Wells Fargo asked about the outlook for gross margin and freight in the back half.

A: Bill Sheehan said merchandise margin is a tailwind, but domestic freight is expected to deleverage due to higher fuel costs.

Q: Jay Sole from UBS asked if marketing and merchandise initiatives are driving traffic or conversion.

A: Jim Conroy explained that all initiatives work together, with marketing driving traffic while assortment and store experience convert that traffic into buyers.

Q: Jay Sole from UBS asked how brand relevance ties to getting better brands.

A: Jim Conroy stated the company wants to maintain its value proposition while elevating brand relevance through storytelling and creative marketing.

Q: Dana Telsey from Telsey Advisory Group asked for an update on categories and new store openings.

A: Jim Conroy and Michael Hartshorn noted that cosmetics and home were strong, while ladies apparel was solid. New store openings are on track for 5% unit growth, with expansion in the Northeast.

Q: Adrienne Yih from Barclays asked about shifts in inventory availability and categories where the company is underpenetrated.

A: Jim Conroy said closeout opportunities are strong. He noted there are categories where the company is underpenetrated, but did not disclose specific details.

Q: Adrienne Yih from Barclays asked about the impact of AI on off-price.

A: Jim Conroy stated that AI is being integrated into existing processes rather than being a separate functional area.

Q: Krisztina Katai from Deutsche Bank asked for metrics on the new customer cohort and the percentage of stores under the new playbook.

A: Jim Conroy said customer metrics are strong across capture, retention, and frequency. He explained that initiatives are rolled out based on test-and-learn results, so there is no single new playbook store.

Q: Aneesha Sherman from Bernstein asked about the risk of a higher inventory strategy.

A: Michael Hartshorn said inventory turns remain strong and the company maintains flexibility in open-to-buy.

Q: Aneesha Sherman from Bernstein asked about share shift within off-price.

A: Jim Conroy noted that the company has outgrown competitors, but it is difficult to attribute share shift specifically to them.

Q: Marni Shapiro from Retail Tracker asked for data on Instagram driving younger consumers and if marketing spend will increase.

A: Jim Conroy said marketing efforts are driving traffic, including younger customers. He added that marketing spend is planned as a rate of sales.

Q: Marni Shapiro from Retail Tracker asked if the company will lean into holidays and events.

A: Jim Conroy said the company is doubling down on events, but weekly comps remain consistent rather than spiking around holidays.

Q: Bob Drbul from BTIG asked if the good, better, best mix is shifting and for an outlook on the dd's business.

A: Jim Conroy stated the company is maintaining its value price point. He added that dd's had a strong quarter and is performing well.