羅斯百貨 (ROST) 2026 財年第二季法說會：同店銷售成長 10%，調升財測

重點總覽

• Ross Stores 公布 2026 財年第二季銷售額為 63 億美元，年增 13%，同店銷售額成長 10%，主要受惠於交易量增加。
• 淨利自 5.08 億美元增至 8.51 億美元。稀釋 EPS 自 1.56 美元增至 2.66 美元，其中包含每股約 0.60 美元的關稅退款。
• 毛利率擴增 625 個基點，其中包括來自關稅退款的 405 個基點挹注。扣除該挹注後，營運利潤率提升 205 個基點。
• 管理層上調第三季與第四季的財務展望。2026 全年 EPS 現預估為 8.61 美元至 8.77 美元，其中包括來自關稅退款的約 0.60 美元。
• 在既有與新市場近期新開門市優異表現的支持下，Ross Stores 將 2026 年展店計畫從 110 家上調至 115 家。
• 管理層表示，顧客成長廣泛涵蓋不同收入、年齡與族群，除了吸引新顧客與流失顧客回流外，既有顧客的到店頻率與消費金額亦有所提升。

關鍵財務數據

2026 財年前六個月，銷售額自 105 億美元成長 17% 至 123 億美元。同店銷售額成長 13%，EPS 則自 3.03 美元增至 4.69 美元。

公司在第二季以 3.19 億美元買回約 140 萬股股票。在為期兩年、總額 25.5 億美元的庫藏股授權下，管理層持續以 2026 年買回 12.75 億美元股票為目標。

業務與營運表現

同店銷售額在整季呈現逐月改善，儘管去年基期偏高，7 月仍創下最強勁的表現。管理層亦表示 8 月的趨勢令人振奮。

成長廣泛涵蓋各商品類別與區域。家居和化妝品表現最強，地區方面則由中西部領跑。女性服飾業務維持強勁，其中少女服飾動能尤為突出。dd’s DISCOUNTS 也實現了穩健且廣泛的銷售成長。

管理層將客流量增加歸功於顧客獲取與行銷策略。Ross 與 dd’s 吸引了新顧客、找回流失消費者，並提高了既有顧客的購買頻率。新獲取顧客的輪廓在收入水準、年齡層與族群分佈上，普遍與既有顧客群相似。

商品企劃策略包括增加供應商與品牌、擴大時尚款式選擇，以及改善商品陳列。管理層表示清倉貨源保持充沛，部分主流零售商需求疲軟也有助於帶來額外的商品貨源。

門市端存貨水準提高支持了增加的需求與更豐富的商品選擇。管理層表示存貨週轉率維持強勁，出清折扣保持低位，商品毛利率有所改善，同時保留了靈活的採購配額（open-to-buy）。

Ross Stores 目前計劃在 2026 年開設 115 家門市（高於原先預估的 110 家），並伴隨約 5 至 10 家門市的遷址與關閉。公司預計第三季將新開 51 家門市，包含 41 家 Ross 及 10 家 dd’s 門市。長期而言，管理層持續以每年約 5% 的門市數量成長為目標。

管理層財務預測

第三季展望假設淨利息收入約為 3,000 萬美元，稅率接近 25%，稀釋後流通在外股數約為 3.19 億股。

管理層預計商品毛利率在下半年將繼續構成利多，物流中心成本也將帶來部分好處。主要由燃油價格上漲推動的國內貨運成本上升，預計將抵銷部分增益。全年 EPS 財務預測包含來自關稅退款的每股約 0.60 美元。

風險與關注事項

• Ross Stores 在 2026 財年下半年面臨更為嚴峻的同店銷售額去年同期高基期挑戰。
• 燃油價格上漲預計將對貨運成本造成壓力。由於公司並未進行燃油避險，業績對油價的進一步變動較為敏感。
• 在消費者面臨通膨和汽油成本上漲之際，管理層強調維持相較於主流零售商的價格優勢。平均零售單價（AUR）的漲幅預計將維持在低單一位數區間。
• 存貨水準提高以支持更強勁的需求，不過管理層表示週轉率依然強勁，且若消費者趨勢轉弱，公司仍保有調整採購的靈活性。
• 公司尚未改變其長期同店銷售額算式模型（algorithm）。管理層表示希望在進行更新前，從正在進行的各項措施中獲取更多數據佐證。

分析師問答亮點

管理層將商品企劃、行銷與門市執行力描述為互相強化且生生不息的「飛輪」。行銷有助於吸引客流，而更豐富的商品組合、更短的結帳排隊時間以及更有條理的門市佈局，則能提高轉換率與重複光顧率。然而，Ross 並未安裝客流計數器，因此限制了其將交易量成長精確歸因於這些推動因素的能力。

公司表示許多成長措施仍處於早期測試或部分推廣階段。Ross 在將新計畫推廣至其約 2,300 家門市網路之前，會先透過試點門市進行「測試與學習」分析。管理層目前不認為這些計畫需要結構上截然不同的成本模型，並重申同店銷售額每成長一個百分點，通常應能帶來 10 至 15 個基點的利潤率邊際提振（flow-through）。

隨著銷售成長、門市陳列改善以及品牌定位煥然一新，Ross 與 dd’s 成為更有吸引力的合作夥伴，供應商關係因而有所加強。管理層表示公司正獲得更多熱門與強勢品牌的貨源，但並非要大幅轉向更高的價格帶。維持平易近人的入門價格點（opening price points）仍是其核心策略。

管理層亦表示，過去四個季度中，Ross 的成長速度快於另外兩家主要折扣零售競爭對手，從數據上看提高了其在折扣零售領域的市占率。管理層並未將此成長歸因於奪取特定競爭對手的生意，並指出折扣零售商也正在從其他零售領域搶占市占率。

法說會完整逐字稿

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完整財報電話會議逐字稿

管理層陳述

Operator

Good afternoon, and welcome to the Ross Stores Second Quarter 2026 Earnings Release Conference Call. [Operator Instructions] As a reminder, this conference is being recorded.

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 in the company's fiscal 2025 Form 10-K and fiscal 2026 Form 10-Q and 8-Ks on file with the SEC.

Now I'd like to turn the call over to Jim Conroy, Chief Executive Officer.

James Conroy

Thank you, Diego, and good afternoon, everyone. Joining me on our call today are Michael Hartshorn, Group President and Chief Operating Officer; Bill Sheehan, Executive Vice President and Chief Financial Officer; and Connie Kao, Senior Vice President, Investor Relations.

Before discussing our results, I want to recognize the outstanding team across the company and throughout the country. The robust sales and earnings growth in the quarter are a direct reflection of your hard work and commitment to the Ross organization. Thank you.

Now turning to our results. We are extremely pleased with the 10% comparable store sales growth we delivered in the second quarter, marking the second quarter in a row with double-digit comp growth. Sales were strong in May and improved sequentially each month, with July delivering our strongest performance despite cycling a strong back-to-school performance last year. Customer traffic once again served as the primary driver of our comparable store sales increase, which underscores the durability of our growth and the momentum we are building. We believe the increased traffic reflects the effectiveness of our customer acquisition efforts.

During the quarter, we saw gains from new and lapsed customers, along with more frequent trips and higher spending from existing customers, reflecting deeper engagement with both of our teams. Importantly, the new customers we are attracting span a broad range of income demographics and age cohorts including younger shoppers, which we believe reflects the broad appeal of our brand and the success of our marketing efforts in reaching and engaging a diverse customer base.

Once in our stores, both new and existing customers are responding to our compelling values and a broader selection of fashion and brands. The merchants and planners have done a terrific job of opening new vendors and satisfying the demands of a wide variety of customers.

Finally, our stores organization has done an excellent job enhancing the in-store shopping experience and managing the elevated sales volumes. We feel great about the early success of our growth strategies and have confidence in our ability to continue to gain market share. Consistent with the trends we saw in recent quarters, the strong performance at Ross was broad-based across both merchandise categories and geographies. In the second quarter, home and cosmetics were our strongest businesses. By geography, we saw strength across all markets with the Midwest performing the best. Dd's discounts also delivered solid sales and saw similar broad-based performance across merchandise areas and geographic regions.

Turning to inventory. Consolidated inventories at quarter end increased 18%. Packaway represented 36% of total inventory compared with 38% last year. We are leveraging our inventory position to not only meet the demand of higher customer traffic in our stores, but also to broaden our merchandise offerings on the selling floor across our store base. These efforts are leading to higher sales, and improved merchandise margins while maintaining fast inventory terms. We are pleased with both the level and composition of our inventory and continue to have plenty of flexibility to capitalize on closeout opportunities as we enter the fall season.

Turning to store growth. We are now planning to open 115 locations in 2026, up from 110 in our prior guidance. We are particularly encouraged by the strength of our recent openings in both existing and newer markets, giving us added confidence in our ability to continue to grow our store base over time. Our plans also contemplate approximately 5 to 10 store relocations and closures.

Overall, we remain confident that the actions we are taking across merchandising, marketing and stores are handling the customer experience and driving strong performance. While the results to date are encouraging, we believe we are only beginning to realize the full potential of many of our initiatives. Our sustained sales performance reinforces our confidence that our more growth-oriented approach is resonating with customers. The team is energized by the opportunities ahead and we see significant runway to build on the current momentum and drive continued sales gains over time.

Now Bill will provide further details on our second quarter results and additional color on our outlook for the remainder of the year.

William Sheehan

Thank you, Jim. Building on our success from the first quarter, we reported very strong sales and earnings results for the second quarter. Total sales for the period grew 13% to $6.3 billion, with comparable store sales increasing 10%. As Jim mentioned earlier, the double-digit comp growth was primarily driven by an increase in the number of transactions.

Gross margin improved by 625 basis points driven primarily by 405 basis points of tariff refunds. Merchandise margin increased by 110 basis points, while distribution costs were lower by 100 basis points given favorable timing of packaway-related expenses, higher productivity and as we anniversaried last year's tariff-related processing costs.

In addition, occupancy costs leveraged by 25 basis points. Partially offsetting these benefits were buying costs, which deleveraged by 5 basis points from higher incentives and an increase in freight cost of 10 basis points due to higher fuel prices. SG&A for the period deleveraged by 15 basis points due to higher incentives given the earnings outperformance. Second quarter operating margin increased 610 basis points which included the aforementioned 405 basis points from tariff refunds. Excluding this benefit, operating margin increased 205 basis points compared to the prior year.

Second quarter net income was $851 million compared to $508 million last year, and earnings per share were $2.66 compared to $1.56 in the prior year period. Sales for the first 6 months of 2026 grew 17% to $12.3 billion, up from $10.5 billion in the prior year. Comparable store sales for the first half of 2026 were up 13% and earnings per share were $4.69 compared to $3.03 for the first half of 2025. As a reminder, both the second quarter and first 6 months results in 2026 include $253 million or approximately $0.60 in earnings per share of tariff refunds.

Now to our shareholder return activity. As noted in today's release, we repurchased approximately 1.4 million shares during the quarter for an aggregate total cost of $319 million under the 2-year $2.55 billion authorization approved by our Board of Directors in March of this year. We remain on track to buy back a total of $1.275 billion in stock during 2026.

Now let's discuss our outlook for the remainder of 2026. As noted in today's press release, we exited the quarter with building momentum, and we are excited about the plans we have in place as we enter the fall season. Despite facing significantly more challenging year-over-year comparisons in the back half of the year, we are raising our outlook for both the third and fourth quarters. Comparable store sales are now forecasted to increase 6% to 7% in the third quarter, with earnings per share expected to be in the range of $1.75 to $1.83 versus $1.58 last year. Our guidance assumptions for the third quarter of 2026 reflect total sales are forecast to increase 9% to 11% versus the prior year. If same-store sales performed in line with our forecast, operating margin for the third quarter is planned to be in the range of 11.7% to 12.0% compared to 11.6% last year.

Our forecast reflects leverage from the expected comp store sales increase as well as slightly higher merchandise margins. Partially offsetting these benefits are higher freight costs given the increase in fuel prices. As mentioned earlier, we raised our new store opening plans for the year and now expect to open 51 stores during the third quarter, including 41 Ross and 10 dd's locations. Net interest income is estimated to be approximately $30 million. The tax rate is projected to be about 25% and diluted shares outstanding are expected to be approximately $319 million.

Moving to the fourth quarter. Comparable store sales are now expected to increase 4% to 5% on top of a robust 9% increase last year. Earnings per share are planned to be in the range of $2.17 to $2.26 compared to $2 for the same period in 2025. At the second half of 2026 performs in line with these projections, earnings per share for the full year are now forecast to be in the range of $8.61, $8.77 versus $6.61 last year. Included in this year's forecast is approximately $0.60 of earnings per share from tariff refunds.

Now I'll turn the call back to Jim for closing comments.

James Conroy

Thank you, Bill. We delivered robust first half results and remain encouraged by the positive trends we are seeing across the business. While we are pleased with the progress we have made over the last several quarters, we remain focused on building on that momentum. The work underway across the organization is centered on continuing to strengthen our brand relevance, delivering world-class merchandise assortments and further improving the in-store experience. We believe we have only begun to tap into the full growth potential of the business.

At this point, we would like to open the call and respond to any questions that you may have. Diego?

Operator

[Operator Instructions] And our first question comes from Matthew Boss with JPMorgan.

分析師問答

Matthew Boss

So Jim, could you elaborate on the build and top line momentum that you saw across the second quarter and drivers of this exit rate strength. And just despite the tougher comparisons, could you speak to the opportunity you see remaining in the back half of the year and beyond across the assortment, marketing and in-store execution?

James Conroy

Sure, happy to. The quarter was really solid. And we're thrilled by not only the underlying growth number, the 10 comp, but the quality of the comp, it's really driven mostly by more transactions. Those transactions are driven by customer capture, both new and regaining lapsed customers. We're seeing existing customers shop more frequently. We're seeing all customers spend more. So from a -- the customer KPIs are just extremely solid. The merchandise KPIs are also solid. So we've seen broad-based strength across all merchandise categories in both chains, Ross and dd's. The geographic metrics are equally strong, we've seen broad-based strength across the country.

As we went through the quarter, we had a little bit of -- we felt World Cup a little bit in June. We saw a really strong July. And if you recall on our last year call, we talked about July had a very nice acceleration from June. So putting a strong July, a very strong July, which you could surmise had to be more than 10%, if it was the strongest month of the quarter, up against a very strong July last year. The exit velocity was very, very good. We got into August, where we continue to be very encouraged by the current business and the momentum that's been building.

Last year, August was the strongest month of the quarter. So we continue to believe that we shouldn't be concerned about cycling strong comps. And on prior calls, we've talked about sort of two schools of thought. Can you comp the comp versus are you building momentum? And can the flywheel continue to grow the business?

Hopefully, after the fourth quarter of really strong comps and laying out the next 2 quarters of, we believe, pretty solid guidance, we can extinguish that concern because the underlying metrics that we see are just extremely positive across the board. If you come all the way back to some of the initiatives that we started last year, they're all still in the early innings, and some of them have been implemented across chain, but some are only in some stores. Some of them have been implemented across all merchandise categories and others are still waiting to be further implemented.

And of course, we've also launched new initiatives. So I can't underscore enough that our outlook for the balance of the year continues to be extremely positive with a number of opportunities to continue the growth that we're seeing.

Operator

Your next question comes from Lorraine Hutchinson with Bank of America.

Lorraine Maikis

Jim, you just had a 10 comp and you're still talking about a lot of these initiatives being early stage. So can you talk a little bit about which of these initiatives you see having the most runway to continue to drive to this guided comp strength?

James Conroy

Sure. I'll talk at a relatively high level. One of the things I've learned is my natural propensity to provide more detail just exposes us to other retailers sort of picking up what we're doing and trying to emulate them very quickly. But in with some desire to provide some transparency, let's anchor back to sort of merchandising stores and marketing, and I could list probably a dozen initiatives under each of those. The merchant team has really done a great job of continuing to build great assortments, opening up new vendors and new brands, starting to tell better merchandise stories across categories.

The stores team has -- if I'd encourage everybody on the call to go to a store and you'll see very well organized stores, inventory being recovered quickly, queue lines are shorter. So the stores team has really been able to rise to the challenge of a pretty sharp acceleration in sales over the last year or so. And then from a marketing standpoint, again, you can see what we're doing from a marketing standpoint. You can see our slides. You can follow us on social media.

We're getting a tremendous amount of engagement with our new creative messaging. We've tweaked our media mix. But if I went through each of those points that I just made and the other dozen or so points that I haven't explicitly called out, there's no way you could believe that we fully executed and implemented all of them. So we sit and look at the business and just wake up every day with more ideas to continue to drive more growth.

Operator

Your next question comes from Corey Tarlowe with Jefferies.

Corey Tarlowe

Jim, the comp momentum continues to be very impressive. And a lot of the work that we've done around marketing continues to show really strong momentum there. I'm just curious how you think about how the marketing is fueling new customer acquisition. And whether or not these newer customers that you're acquiring are higher income in nature and the types of products that these customers are purchasing as well relative to some of the products that you had in your prior assortments?

James Conroy

Sure. The marketing team, both the creative team and the analytics team and the folks that are buying our media, I think are doing a tremendous job and I'd circle back to you, but we're still learning where we still think there's some more opportunity for us to improve. We've absolutely seen brand-new customers come into to Ross and dd's that hadn't shopped with us in the past as well as recapturing customers that perhaps used to shop with us and they're returning.

The -- in terms of what the new cohort of customers look like, I couldn't describe a better report card, if I'm honest, what we've seen -- the quick answer is our new customer and the profile of them as a group were very similar to the composition of our current customers which would imply that we're seeing growth across every single household income group that we track, every single age group that we track and every single ethnicity. So it's been just a broad-based increase in customer capture across all dimensions, which is handy because that means that the proposition that we have in the stores that we already know work for our current customer will work for sort of a new cohort of customer. Does that answer your question?

Operator

Your next question comes from Chuck Grom with Gordon Haskett.

Charles Grom

Jim, could you talk about your success over the past year and how it's translated into stronger -- a stronger vendor flywheel, both in terms of new suppliers entering the mix, but also deeper relationships with existing vendors? And then my follow-up question is just on the lapsed customer opportunity. I don't think you brought that up in the past. Can you maybe just size that up for us?

James Conroy

Having only been here for a little over 18 months now, I continue to marvel at the strength and partnership that we have with the vendor community. And it's -- they're true partners and they're the lifeblood of our growth.

The team, and this absolutely predates me, I'm learning off price. The team under Karen and [ Karani ] each of the divisions absolutely aimed to be genuine partners and easy to work with our vendors, and I hear that all the time. The partnership with our current vendors and bringing on new vendors, I think ties to the same two or three things that are happening within the business.

Number one, just our growth, right? We're continuing to post nice growth. I think any vendor appreciate that and maybe a rising tide rises lifts all boats.

The second piece is some vendors that perhaps had been resistant to sell to off-price or maybe specifically to Ross in the past, now go to the stores and see that their product will be showcased and merchandised in a sort of neat and tidy way. And the -- what the stores team has done in enhancing the shopping experience in store has probably further helped the experience with our vendors because they know that the product will be treated sort of with great care.

And then finally, I do hear oftentimes from our vendors as they see the change in the brand positioning that they believe it's a fun and exciting brand now, and they want to participate in it. So when you put all those three things together, I think the partnership with our existing vendors continues to be quite strong. And the merchants and their persistence in trying to open up more and more brands has continued to become more successful.

I'm not convinced I answered both of your questions. Did I cover everything?

Charles Grom

You definitely answered the first one. I was curious, you talked about a lot of the traffic being from new customers, but also from lapsed customers. So just was wondering if there was a way to size up that opportunity and maybe how the team is going after those lapsed customers maybe a little bit more aggressively.

James Conroy

Sure. And -- let me just give you a little insight as we get -- how we get that information. We use a third-party credit card vendor. It's widely available in the market or any one wants to pay for it. So we can see credit card numbers that haven't been in the store in X period of time and then when they return. So that's how we're measuring it.

It's somewhat of a new muscle where we are strategically prospecting for them from a marketing standpoint and how we're spending our money. And now we have an ability to measure it based on that credit card data, albeit it might be a little rough, it's certainly directional. And the goal, of course, is to show them just a world-class merchandise assortment once they get in the store and have them have a great experience and encourage them to come back and come back more frequently, and we're seeing that aswell.

Operator

Your next question comes from Paul Lejuez with Citigroup.

Paul Lejuez

Jim, I'm curious if there's any way you can quantify for us the number of new customers that you're seeing on a year-over-year basis? How did it look in 2Q sales coming from new customers versus what you saw in 1Q. And kind of the same question on the vendor side. Any way to frame the number of vendors you're currently working with today versus, let's say, a year ago? How would you characterize the new vendors? Is there a common thread? And what is ultimately the right number of vendors to be working with?

James Conroy

Sure. On the vendor question, there are times when we're trying to invite in a stronger national brand into the store. And when they come in, there's occasion when it's a net new add, but there's also an occasion where they take the space from a vendor that perhaps is more tertiary in nature. So the vendor count wouldn't really get -- wouldn't really get you there. I think if you walk the store and look at the vendor brand plates that are in the store, you'll start to get a sense for not necessarily always higher price point vendors, but just the strength of the brands that we're carrying now, which honestly is just an extension of the brand strategy that started a few years ago.

In terms of the -- quantifying the customer capture, it would be hard to provide that much data. And I suppose it's a little proprietary also. But if you parse out some of the things we've said, a 10 comp, most of that was transactions. A small portion of it was an increase in basket. And of those transactions, it was a combination of brand-new customers, returning customers that used to shop with us and existing customers shopping more frequently.

I wouldn't say it's 1/3, 1/3, 1/3 necessarily, but I would think of it in those 3 buckets. So it's -- each of them are meaningful in their own right, meaning the new customers that are coming or just recapturing the lapse customers. We're just getting current customers to shop more frequently. And again, I think we can continue to find opportunities to do more of all of that.

Operator

Your next question comes from Michael Binetti with Evercore ISI.

Michael Binetti

Let me add my congrats on a nice quarter. I ask one, and then if it's okay, I'll ask a follow-up after. But you've talked about a lot about vendor -- better vendor acceptance, stronger merchandise availability as the sales and the store experience have improved, has that changed the quality of what each of these vendors is willing to offer you? Are you getting more access to the better and best side of the assortments? And more importantly, is buying in those higher-tier categories from these vendors more competitive with other off-pricers than what you've seen in the past?

James Conroy

I didn't quite follow the second part of the question. The first part is, are we getting more vendors and even higher end or better quality product. What was the second part of your question?

Michael Binetti

As you get access to the better and best side of the assortments, are you finding -- are the buyers finding those higher-tier categories with these vendors more competitive with other off-pricers?

James Conroy

I see. I think the answer to the first part of your question is, yes, we're getting more access to better brands, more popular brands, not necessarily always higher price point brands. And in terms of are they more competitive? I think all of the off-pricers and one of them is already reported, the opportunities from a supply side standpoint, from a closeout standpoint are -- they're outstanding.

There's plenty of product to continue to fuel the fire. And I think we're -- we've always been competing to some degree for that next buy. And we have some formidable competition out there. we're helped a little bit right now because of the outsized growth.

So I think occasionally, we're getting the ability to open up vendors because we're growing more or one of our competitors may not want more product or need more product. So I think there's a number of factors. And we still have plenty of work to be done in front of us to continue to knock on doors and just be persistent with brands that we'd like to bring into the store to the extent that I'm calling vendors from time to time, trying to open them up if I can.

Michael Binetti

And then if I could ask a follow-up. As you think beyond this year, which has been kind of remarkable, do you believe these business -- the business ultimately settles back into what we think of as a traditional off-price the 3% to 4% algorithm on same-store sales? Or do the ongoing pilot and implementation of the initiatives that you talked about in marketing and merchandising, customer acquisition. Do those support comp potential above that for another year? What would mean to continue working for the latter to be true?

Michael Hartshorn

Michael, it's Michael Hartshorn. We're clearly pleased with the current performance and trend. And as Jim said multiple times, many of the things that were testing in-store, testing and merchandising and even testing and marketing at very early stages. So we think we can certainly grow beyond where we're trending today and be able to comp on top of the very strong comps this year.

I think from a -- is it time to update the long-term algorithm, I think the right time to do that would be further along in some of the initiatives we have in place. So at this point, we wouldn't update kind of the long-term year-over-year algorithm and hope to beat that long-term algorithm in the short term.

Operator

Your next question comes from Alex Straton with Morgan Stanley.

Alexandra Straton

Perfect. Maybe, Jim, as you look forward, do those initiatives you've spoken to require a structurally higher level of investment to sustain that high comp growth? Or do you believe most of the investment is already reflected in the current cost structure? And I just have one follow-up.

Michael Hartshorn

This is Michael again. Within the cost structure, and you can see it in the results in the P&L and from the capital structure. Clearly, we've expanded our unit growth, which that takes additional investment, but that's the best investment we can making the company usually that capital pays back in a matter of 2 to 3 years. And all the initiatives, the biggest impact you can have is across 2,300 stores. And we have very good test and learn capabilities.

So the investments we're making, we're first testing in pilot stores and if it makes sense, it's going to make sense not only in the -- if it's a capital investment, it's going to make sense through the P&L. So despite the initiatives we have in place, we've been able to leverage store payroll this year, we've been able to leverage the SG&A as a whole. We'll continue to test if it works on the total P&L, we'll make the investment. And we've been very happy with how we've been able to manage putting these new initiatives in place and managing our capital and expenses.

Operator

Your next question comes from Brooke Roach with Goldman Sachs.

Brooke Roach

I had a follow-up on Alex's question, which is that you give a success of each of these growth initiatives. Are there any areas where you think you should lean in and increase the pace of these investments, whether it's marketing or otherwise? Maybe said another way, is there a change in your thinking about the typical level of flow-through that we should see per point of comp outperformance versus your guide?

James Conroy

Maybe I can start with that one, and Michael or Bill could add if necessary. We have been asked that question. Should we be doing even more, could we drive even more growth. We're pretty pleased with the underlying growth that we have right now. And so demand generation hasn't been a huge challenge for us.

With all of these things, working together and our flow through, one of the questions when we get ourselves organized to prepare for a call, sales have been really strong what's our flow-through, and we're going to meet those expectations. And the answer to that question for the last 4 or 5 quarters has been yes. For the time being, we're going to continue to work largely within the economic model that we had with the flow-through assumptions that are out there.

If -- I guess I would just signal if there was a point in time in the future where we thought we were going to overinvest or overclub something, betting on the come for future sort of longer-term value, I'd really like to bring that to the market before we just do it and then surprise you at the end of the quarter. So right now, with the acceptance of some small things here or there that have been subsumed in the growth that we're seeing, we're working within the financial construct of the business that's been in place for years now.

William Sheehan

So yes, Brooke, I mean that same 10 to 15 bps for 1% of comp model still holds.

Operator

Your next question comes from Mark Altschwager with Baird.

Mark Altschwager

Maybe first question, just following up again on the margin, maybe a little bit more near-term focus. I guess if my math is correct, I think the implied raise in the back half is a bit more than that 10 to 15 basis points as we look at just how much the earnings went up relative to the comp raise. I guess is that right?

And maybe what are the other factors affecting the flow-through assumptions in the back half aside from better leverage on higher sales, has anything changed in terms of your view on the margin what it takes for the back half?

William Sheehan

Yes. I think that back half, we're in line with the comp raise that we have there on the 6 to 7 to 4 to 5 comp raise, I think we're seeing that top line momentum, and we feel good about what's in place there. But our guidance reflects some of what we talked about there, higher merchandise margins, some lower DC costs. So it's in line.

Mark Altschwager

Okay. And then maybe a bigger picture one on the competitive backdrop. A number of the large national chains are leaning harder into price investment this year and the back half of this year, reinvesting some of the tariff refunds. Given the acceleration through the quarter that you cited and the August trend, it doesn't seem like that's having an impact. But even so, how are you thinking about protecting the value gap in this environment? And what are your assumptions for ticket growth in the back half and how that might change as you maintain your competitive pricing?

James Conroy

Sure. Starting with the overarching premise that we always want to have sort of that pricing umbrella and be underneath mainstream retail. The second piece is one of the things, if you were to retroactively go back through the last 4 quarters, we were very hesitant to pass through AUR increases. So much so that we called out some impact to our earnings when tariffs first came to bear last year. So I think a lot of other retailers took a different position and try in the past now long and maybe now sort of reversing course.

We've tried to maintain a little bit more stability. And in today's environment, today's inflationary economy, we absolutely want to have best values in our store. And if that were -- that were -- if we were to see something where we didn't have that price umbrella under mainstream retail, we would make a change. But I think we're -- we are still safe where we are now for the back half of the year, you'll likely see some very modest AUR increases sort of at the same sort of levels that we're seeing now. A low single-digit and we really want to be there for a customer that's battling higher gas prices and all the other inflation pressures that they have in their life.

So it's an important question. It's a strategic question, but I'm liking sort of the consistency of our pricing strategy right now. And I think as it stands, if we were to do some competitive price shopping, we would look very, very competitive.

Operator

Your next question comes from Ike Boruchow with Wells Fargo.

Irwin Boruchow

Let me add my congrats. I was wondering if we could dig into the back half margins. Just curious if you can maybe let us know what's going on in the gross margin within your plan for the third quarter and the fourth quarter? And then specifically, I know you called out freight as a 10 bps headwind in the second quarter. Does that worsen in the back half? Kind of what have you seen with contracts over the -- since the last time we heard from you. Just kind of curious how to think about the freight line within that.

William Sheehan

Yes. Certainly, you saw that -- you heard the specifics on Q3. We will obviously provide more specifics on Q4 margin when we report the Q3 results, but we do anticipate merchandise margin will remain a tailwind and some benefit in DC costs. I think similar to Q3, we are projecting domestic freight to deleverage due to higher fuel costs.

And as you can surmise, that raised sales guidance in Q4 would imply some EBIT margin improvement versus last year. So on fuel, we don't hedge fuel cost. The biggest component of our freight is fuel. So if things are going to change materially on the fuel side from where they are today, that would have an impact. But we do have embedded in our guidance right now, higher fuel.

Irwin Boruchow

Is that impact more detrimental in the third quarter and fourth quarter than it was in the second quarter?

William Sheehan

I think it kind of depends what happens with fuel prices. We have our best estimate from where they are now. But again, it kind of depends on where it goes from here.

Operator

Your next question comes from Jay Sole with UBS.

Jay Sole

Great. Jim, I'm curious about trying to understand the comp a little bit better because it sounds like transactions was a big driver, which presumably means traffic. But a lot of the key initiatives like getting better brands, holding more inventory in the store, those aren't really traffic drivers, whereas like marketing, which would be a traffic driver or a better in-store execution, could drive transactions, but those sorts sounds secondary.

Are we sort of missing the point that maybe the marketing is a bigger driver of traffic in some of the merchandise initiatives have yet to really show the results that you're expecting that you're starting to see? And maybe that's why you see only the beginning of the improvement at Ross being able to continue for longer term?

James Conroy

So it's a great question, Jay. Hopefully, hopefully, we're being clear. I think all three pieces work together. The part we don't have great we have a great ability to parse out is if we see an increase in transactions, there are probably times when it's a customer that maybe was going to shop anyway and wasn't always going to buy, but now the assortment is great or the store looks better and now they get converted. And we can't -- we can't connect that last piece of the arithmetic because we don't have traffic counters.

But -- if you think about what's driving the traffic, I mean, the logical place to go is great creative -- a great way of spending the media and we're continuing to tweak our media mix and capturing sort of a whole cadre of customers, new and customers that use to shop with us and perhaps encouraging existing customers to come back more. Now there is a thesis and part of this is true, I'm sure that there's an existing customer that had shopped with us with some periodic frequency. And now she comes in and she feels great about the assortment and the store looks better and she doesn't wait in the line as long. So it's actually just shopping more frequently.

I can't fully or we can't fully attribute that to marketing efforts. It might just be a better experience that she is now shopping more frequently and potentially telling others. So we try to split it into three handy buckets, meaning marketing drive sales and the store experience, and of course, the assortment converts -- sorry, marketing drives traffic and the assortment and store experience converts that traffic into buyers. But it's not quite that clearly delineated between the different pieces.

So I'm not sure I've answered your question, but we are absolutely challenging marketing to continue to fill top of final customers that's working we're challenging the merchants to bring the best assortments, continue to add new vendors. That seems to be working. And the store experience has absolutely improved not only sort of anecdotally when we shop the stores, but we have metrics and customer survey instruments that are telling us that. So all of them work together and we continue to call it sort of the flywheel or the virtuous cycle and we're going to continue to try to roll that forward.

Jay Sole

That's helpful. Jim, let me ask you one more, if that's okay. Just kind of want to help understanding how you're thinking about brand relevance because we all saw what happened at Boot Barn and how much brand relevance increased over a multiyear period. But can you just tie the importance of improving brand relevance of Ross to getting better brands in the store? How much are you making sort of that connection where it's not just about getting more consumers or a higher income consumer, but it's also about selling Ross to the vendors who are going to give you the products that you really want?

James Conroy

It's a very astute connection of two dots there, Jay. We want Ross and dd's to both resonate with consumers in their own right as brands. And the underlying proposition of both of them right now are very, very strong value orientation, and we don't want to lose that. we do think we can be more than that, and that's what we're trying to do. And you can see it in -- it's no secret, unfortunately, but you can see it in our Instagram posts, right? We will swing from product and value stories and posts, and then we'll push towards sort of more storytelling and creative stretches. And that's intentional, and it seems to be working.

Operator

Your next question comes from Dana Telsey with Telsey Advisory Group.

Dana Telsey

Congratulations and so nice to see the progress. As you think about the categories that you called out, Jim, cosmetics and home being strong drivers. Last quarter, I think it was ladies and cosmetics. So cosmetics has been consistent. Any update on apparel or on ladies and how that performed? And then the uptick in the new store openings any in the Northeast? Or where do you see them going? Where do you see them opening? And is the size at all different? And does the acceleration this year in new store openings does it suggest that we could see an accelerated pace of new store openings going forward in future years?

James Conroy

Okay. I'll start, and then Michael will do the stores piece. On the category growth, Yes, let me just start off with the ones that you called out. Cosmetics was wrong, [ Michael Kim ], [ Stephanie Levin ] and [ Stephanie Levin's ] that team has done a really nice job quarter after quarter of growing that business. The home business was very strong in this quarter and to sort of play back the tape. That was a business that while growing was growing slightly less than company average and is now -- we have kind of home business is outpacing company average.

So we've seen particular strength in both Ross and dd's and even really unique strength in sort of the more fashionable parts of home, decorative home and housewares and with that growth in mid-teens. So hats off to [ Germet ] and his team. From a ladies perspective, the ladies business continues to be very strong. We didn't call it out, so it's not one of the top 2, but you often kind of remind us of how that was part of the brand strategy, et cetera.

And in Q1, it was comp enhancing. In Q2, it's slightly below the company average, but pretty much in line. We've seen some nice growth in the younger parts of that business, particularly juniors. So that part of the strategy continues to be strong. But as I stare at a sheet of paper in front of me that admittedly, I recognize you can't all see. it's just really encouraging to look down a column of numbers and see every single major merchandise category comping positive.

Michael Hartshorn

Dana, on real estate, the team has done just an outstanding job and really growing our pipeline and the intent is to grow that so that we have year-over-year, 5% unit growth is what's in our model. This year, we had these 5 stores that we added were stores that were dearing on, could we open them this year, get through the negotiations and construction or should we open them in spring of next year and team again did a good job and they're ready to go this year. So that's really the increase.

In terms of where we're going, clearly, you see us entering the Northeast. We've been very happy with that performance. our overall new store performance this year, we had planned a year around 70% to 75%. We have half of the fleet in place this year and they're running ahead of that. So we'll see how the fall openings do. But we're very excited about growth in the Northeast. You also mentioned store size. We really haven't changed our store size, but it's on a side-by-side basis. Sometimes we'll take on more real estate and sometimes less than the average but we're really excited about our expansion opportunities.

Operator

Your next question comes from Adrienne Yih with Barclays.

Adrienne Yih-Tennant

And I'll add my congratulations. Really great quarter. I guess my first question is, are you seeing any shift in the inventory availability from closeouts at retail versus wholesale partners and vendors. And then secondarily, if you can talk about any categories, I mean, obviously, home has been great, cosmetic beauty, et cetera. Are you seeing any categories that are becoming more competitive or that -- where you think you are underpenetrated and you can be more competitive in the landscape?

James Conroy

Sure. No meaningful shifts to the first part of your question. The closeout opportunities are very strong. But we do see categories where we think we can grow or we think we are underpenetrated relative to where we should be or relative to where some of our off-price competitors are. So there are certain places where we're pressing for more growth. I'd rather not sort of divulge specifically what they are. But that is something that we look at all the time, which is sort of what's our percentage of business by category? And how do we think that compares to some of the other folks out there.

In terms of competing for goods, there's definitely a piece of that in off-price. However, the availability is from there's a lot of goods being canceled. So there is -- as you see some of the softness in mainstream retail right now, there's a lot of goods becoming available, and we expect that to continue. And so we'll get our fair share. Our competitors will get their fair share. And off price at the end of the day, will probably continue to be winning sector, and we hope to be leading in that sector.

Adrienne Yih-Tennant

Great. And then my follow-on question, a little bit of a higher-level question. As you think about how sort of AI and agentic search is going to be much more directed directing the consumer to where they need to purchase? How do you think that impacts off-price over time?

James Conroy

Look, AI is everywhere. It's in every conference room in every boardroom across the country. So it's going to be important to us. Of course, way before I got here, Michael and the IT team had already started investing in sort of the foundational data elements that you'll -- we need to rely on to integrate AI. And then as we go function by function across the business, we don't look at any new process or any sort of system application without figuring out a way to enhance it further with AI. So that could be analytics or whatever we're doing planning and allocation.

Of course, the software developers are using it every day. what it's unlikely that we'll do, and we've seen other companies do this is stand up an entire separate functional area within the organization that only does that. We'd much rather have it integrated within how we operate the business. So it will be an enhancer to how we operate. I'm sure we'll get questions on it in the future. I can tell you, I'm personally very bullish on AI, but I also see tremendous opportunity for us to just execute on sort of basic blocking and tackling and continuing to improve the customer experience, improve our assortments and continue to drive sales growth and AI could just be icing on the cake on top of that.

Operator

Our next question comes from Krisztina Katai with Deutsche Bank.

Krisztina Katai

So you described the new customer cohort as having -- I believe you said the word exceptionally strong report card. Can you talk about the metric or the various metrics that have exceeded your expectations the most?

And then secondly, Jim, when you were discussing still being in the early innings, I think you said some initiatives have been implemented chain-wide some in certain stores, some in certain categories. So when we sort of take a step back, like what percentage of stores are currently opening under this new playbook. If you could just sort of frame that up for us in terms of opportunity?

James Conroy

All right. Now I'll try to help clarify both of those because it sounds like maybe I wasn't crystal clear on either. On the first piece, I think what I said or at least what I was trying to say is the performance indicators from a customer standpoint are extremely strong. And what I mean by that is the dimensions perhaps are -- there's 4 of them.

One is, are you seeing customer capture from new customers, people that have essentially never shopped Ross before? Yes, we are. We're also seeing shoppers that have shopped with us in the past and perhaps have gone away, and we haven't heard from them in 2 or 3 years, and they've returned. So we've seen that, and we've seen an increase year-over-year versus last year in that group. Then we can measure the frequency of our existing shoppers, and we're seeing them shop more frequently, and then we can see our basket go up, so they're all spending more money.

So that's the sort of report card. Rounding out that part of your question, the new customers look and feel very similar to our current customers. It's a diversity of age groups of income levels, of ethnicities. It's kind of a mirror image of the customers that are in the store already. In terms of the initiatives, I suppose that was more of a conceptual response. But if you think of -- we've got a list, and we can break it into 3 buckets, merchandising stores and marketing, but there are others, too, right? HR, supply chain, there's a million things going on. And some things we've tried and they've worked. Michael, a few minutes ago, mentioned the test and learn capability that the company has. So there'll be something that we'll say -- occasionally, we'll say this is a great idea.

Let's just roll it out. Oftentimes, we'll say, this is an idea that might work. Let's put it in 200 stores. And that team within this test and learn is essentially a department here will -- of extremely talented smart people will come back 4 weeks, 6 weeks, 8 weeks later and say this is what we're seeing. And if we feel good about the return, we'll expand it. If it's a no-brainer, we'll put it in all stores. If we want to learn a little bit more, we'll expand it to half the chains. So you -- it would be hard for us to say, go to store 12, 29, you'll see everything because every store is a little different. There are different sizes. They're in different types of shopping centers, et cetera.

So all the initiatives that we're rolling out kind of behave a little bit differently depending on the store, the store location, the merchandise category that we might be talking about if we're doing something from a merchandising standpoint. So it's not -- it's not easy to say, here's the new store prototype that has every bell and whistle and you'll see all the new marketing and all the new brands, it's not like that. It's a series of things that are all ramping up over time.

Operator

Your next question comes from Aneesha Sherman with Bernstein.

Aneesha Sherman

So I want to ask about your strategy of increasing in-store inventories. We're seeing some signs of a weaker U.S. consumer across the board. How do you think about the risk to a higher inventory strategy if we do see some softening in the consumer trend and perhaps if you start to see a slowdown in turns.

And then a quick follow-up, Jim, on your comment just now around new customers being very similar demographically as your current ones. When you look at customer surveys or our performance by store, do you believe some share shifts going on within off price? Or do you believe these new customers are entering the off-price space from mainstream retail?

Michael Hartshorn

Aneesh, on inventory, you are right. I mean we did carry store level inventory, higher store level inventory during the quarter, partly to support the stronger consumer demand. Despite that higher level of inventory, our in-store turns remained very strong. And at the same time, we delivered higher merchandise margins. With the inventory levels, we -- our clearance levels have historically been low. They remain low for us. I mean the key for us is to maintain flexibility in the open to buy, and we'll always be positioned to take advantage of closeouts in the marketplace or if there's a pullback, we'll have some flexibility to adjust the inventory levels.

James Conroy

Yes. I agree with Michael, on that point. And we've seen merchandise margin increase in each of the last few quarters. So I don't really described any real risk to our inventory position right now. From a share shift within off-price, I suppose there's two ways to respond.

The first way trying to not be immodest at all, just mathematically, over the last 4 quarters, we've grown stronger than each of the other 2 players. So mathematically, we've captured more ships. So of the off-price retail market were a bigger piece than we were a year ago because we've outgrown them. In terms of -- is our business uniquely impacting one or both of the other off-pricers, I don't think we can comment on that.

They're both very formidable companies. They're both extremely well run. We're all competing against each other, but we're also capturing share from a whole bunch of other places in the retail industry. So to some degree, we want off-price to win, and we just want to be a slightly bigger winner. So I couldn't comment on whether we're specifically impacting either other 2 players and one of which is much bigger than us and does a truly world-class job. So I'm not terribly worried about that.

Operator

Your next question comes from Marni Shapiro with Retail Tracker.

Marni Shapiro

So I had a couple of quick ones. Just I've been very impressed with your Instagram by the way. And I think it's a lot of fun, and it's young. Do you have any data showing that it is driving in the younger consumer? I think we could assume it, but I'm curious if you have had any data? And are you going to increase your spend in marketing in the back half and into '27?

James Conroy

So on the data front, as you can imagine, we are constantly pouring through data. We have pretty strong indication that our marketing efforts, both the creative and how we mix the media are driving traffic, including younger customers. It sometimes pause because I think I think people often draw to direct of a line between you run a poster -- poster [ Ariel ] and the next day sales goes up. And I think we're trying to build a big different kind.

In terms of marketing spend, yes, as our business continues to grow, we plan our marketing as a rate of sales. Yes. So we'll get some increased spend in the back half because we had planned the business to be bigger than it was last year in the back half. In terms of rate of sales, we might see some slight escalation there, but we'll see how it goes.

Marni Shapiro

Great. And then just one follow-up. You mentioned FIFA. We're now back to school. I'm curious if the team is leaning a little bit more or plans to lean a little bit more into these holidays and events. It seems that that's when the shopper is coming out across all income levels, but definitely more so in the last couple of years. And I'm curious, it's not just back-to-school, but Halloween and Valentine's Day, Graduation, Mothers Day, all the events during the year. Is there a change in thinking there?

James Conroy

I guess I agree. The concept of event-driven in-store selling I think, has existed now for a couple of years. I think we have done a pretty good job. I know each of the chief merchants are trying to further hone that ability. I wouldn't call it a sharp change in our strategy or direction, maybe just doubling down a little bit on each of the events.

But we've had the good fortune. I was just looking in preparation for this call at weekly comps, and they're pretty consistent. It's not like we're comping massively around an event. and then falling off and then catching it all back up at the next event. It will be interesting with the later -- potentially a later back-to-school season, if people will call that out given that Labor Day has shifted if back-to-school extends longer or comes later. But I think we've somewhat strongly hinted that our business right now is pretty strong also.

Marni Shapiro

So you're not seeing kind of the ups and downs between the holidays that some other retailers might see?

James Conroy

Correct.

Marni Shapiro

Or not to the extent that you need to call it out, I guess.

James Conroy

I'll tell you this. I looked at the last 4 weeks in July, and they were almost exactly the same number in terms of comp for 4 weeks in a row. So there's not a lot of massive events in July, maybe at the end of the started getting the back-to-school.

But we are not seeing comps build massively around Mother's Day, Father's Day, Father's Day shifted, but -- and then fall back to low single digits and then come back up to mid-teens. It's just not operating like that. It's been on a year-over-year -- while the volume might change during an event week, the year-over-year comp that we're seeing has been pretty darn consistent each week.

Operator

And our final question for the day comes from Bob Drbul with BTIG.

Robert Drbul

I guess two questions, if I could. I guess the first one is, when you think about the new vendor adds and what's happening in the business, is your mix of good, better, best shifting dramatically over historical years of the company.

I guess the second question, I'd just love to hear your take on the dd's business, where you feel that is and the opportunity that you're seeing, especially as it relates to the performance at the Ross division.

James Conroy

The quick answer on the price point, good, better, best is we're not seeing a massive shift there. In fact, we're sort of planfully trying to maintain that good price point because that's kind of our bread and butter. We recognize that the environment that we're in right now, a lot of retailers are under pressure, a lot of discount retailers are under pressure, and it would sort of be a full hearty strategy to take this moment in time to elevate the assortment and bring our price points up in a meaningful way. dd's is in a great spot.

I mean we talk about good, better, best within Ross. dd's sort of tucks in beneath those price points. And they -- we don't split them out specifically, but they had a very strong quarter as well. On a 1-year basis, not quite as strong as Ross, but on a 2-year basis, almost exactly in line with Ross.

So Karen and [ Ken Margolis ] and those folks are doing a really good job running that business. So we absolutely want new and better brands, national brands at all price points. Sometimes they shade higher, but not all the time. And we're very, very cognizant to make sure that we're not overshooting our customer, particularly in the current environment.

Operator

Thank you. I'll now hand it over to Jim Conroy for closing remarks.

James Conroy

Very good. Well, thank you, everyone, for joining us today, and we look forward to speaking with you on our next earnings call. Take care.

Operator

Thank you. And this concludes today's conference. All parties may disconnect. Have a good day.