(Reuters) - Ross Stores (NASDAQ:ROST) raised annual sales and profit forecasts after beating quarterly estimates, as inflation-hit customers shopped for its discounted clothing and shoes, sending the company's shares up about 6% in extended trading on Thursday.
Demand for discounted and off-price items gathered steam as consumers looked for cheaper deals on both essentials and non-essentials at a time when higher interest rates and rental costs have tightened household spending.
According to analysts, strong product assortments and the ability to provide in-trend items, especially in the back-to-school category, have also driven demand from Ross' core customers.
"Despite the recent moderation in inflation, our low-to-moderate income customer continues to face persistently higher costs on necessities. As such, it is prudent to continue to plan the business cautiously," CEO Barbara Rentler said.
Ross Stores expects 2023 same-store sales to rise 2% to 3%, compared with its prior expectations of sales being relatively flat.
The off-price retailer sees annual profit per share of $5.15 to $5.26, compared with $4.77 to $4.99 projected earlier.
According to data firm Placer.ai, Ross' foot traffic, which was in negative in April, gained momentum and was positive through May to July.
Another off-price retailer, TJ Maxx parent TJX (NYSE:TJX) Cos raised its annual forecast on Wednesday, buoyed by steady sales of its discount apparel and accessories and an uptick in demand for home decor goods.
Ross Stores posted second-quarter profit per share of $1.32, topping analysts' average estimate of $1.16 per share, according to Refinitiv data.
The company's net sales rose 7.7% to $4.93 billion in the quarter ended July 29, also beating expectations of $4.75 billion.