Ross Stores, Inc.

Good afternoon and welcome to the Raw Stores first quarter 2025 earnings release conference call. The call will be given with prepared comments by management followed by a question and answer session. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Before we get started, on behalf of Raw 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 2024 Form 10K and fiscal 2025 Form 8K is on file with the SEC. And now I'd like to turn the call over to Jim Conroy, Chief Executive Officer.

Good afternoon. Joining me on our call today are Michael Hartzhorn, Group President and Chief Operating Officer, Adam Orvos, Executive Vice President and Chief Financial Officer, and Connie Cao, Group Vice President Investor Relations. I would like to start the call by thanking all of our associates throughout the entire organization who have worked tirelessly over the last few months to help us navigate through a volatile and uncertain external environment. I sincerely appreciate the team's continued dedication and hard work. Now let's turn to our first quarter results. As noted in today's press release, total sales grew 3% to $5 billion with comparable store sales flat versus last year. Earnings per share were $1.47 compared to $1.46 last year, while net income for the same period in 2024. Despite the slower start to the spring selling season in February, our monthly sales performance improved sharply month after month for the balance of the quarter. For the period, sales and earnings performed at the high end of our expectations while operating margin of .2% was flat year over year. Cosmetics was the strongest merchandise area during the quarter, while geographic trends were broad based with the southeast performing the best. Our DVDs discount brand continued its strong momentum from 2024 with another quarter of solid sales and operating profits as the chain's value and fashion offerings again resonated with shoppers. At quarter end, total consolidated inventories were up 8% versus last year mainly due to opportunistic buys during the period. Average store inventories were up 4% in line with our plan and pack away merchandise represented 41% of total inventory similar to last year. We believe our inventory is well positioned as we enter the second quarter. Turning to store growth, we opened 16 new Ross and 3 DVDs discount locations in the first quarter. We continue to plan for approximately 90 new stores this year comprised of about 80 Ross and 10 DVDs. As usual, these numbers do not reflect our plans to close or relocate about 10 to 15 older stores. Before I turn the call over to Adam to provide further details on our financial performance and guidance, I wanted to briefly discuss tariffs and the potential impact they will have on our business. While we directly import only a small portion of our merchandise, more than half of the total merchandise that we sell originates in China. At tariffs for me at elevated levels, we will be working to find the right combination of pricing versus merchandise margin compression. We believe we have a number of levers available to minimize the overall impact, but it is possible that we will see short-term pressure on our profitability. That said, our focus has been and will continue to be to provide our customers high quality branded merchandise at a great value. From a pricing standpoint, we expect modest but broad-based inflationary pressure across the retail industry and we will remain focused on maintaining a substantial pricing umbrella below traditional retailers in order to deliver the bargains our customers have come to expect from us. Overall, trade policy remains unpredictable and we will continue to make the necessary adjustments to best position the company to navigate through this uncertain environment. We are pleased with the momentum of the business given the sequential improvement in comp sales in the quarter. In addition, we believe our inventory is well positioned to maximize the availability of closeouts and we have multiple strategies in place to gain market share while minimizing the margin impact from the tariffs. With that said, in our view, there are simply too many unknown variables that are limiting our visibility into the second half of the fiscal year and we believe it is prudent to withdraw our previously provided annual guidance at this time. Raw stores and the off-price sector in general have historically benefited from significant disruptions to the supply chain with more opportunistic buys available to us and we believe there will be no different this time. I will now turn the call over to Adam to provide further details on our first quarter results and additional color on our second quarter outlook.

Thank you, Jim. As previously mentioned, our comparable store sales were flat for the quarter. First quarter operating margin of .2% was similar to last year. Cost of goods sold was relatively unchanged from a year ago. Merchandise margin declined 45 basis points mainly due to higher ocean freight costs and the initial impact of tariffs. A portion of this tariff impact was caused by purchase orders for goods that were on the water when tariffs were increased. Occupancy and distribution costs rose by 20 basis points and five basis points respectively. Buying costs declined by 50 basis points from lower incentives and domestic freight leveraged by 20 basis points. SG&A for the period was flat year over year as the benefit from lower incentive compensation was offset by sales deleverage. During the first quarter, we repurchased 2 million shares of common stock for an aggregate cost of $263 million under the company's two-year $2.1 billion authorization approved by our quarter directors in March of 2024. We remain on track to buy back a total of $1.05 billion in stock during 2025 and complete the program as planned. Now let's discuss our outlook. For the 13 weeks ending August 2nd, 2025, comparable store sales are projected to be flat to up 3%. Earnings per share for the second quarter are now projected to be in the range of $1.40 to $1.55 and includes a cost impact of $0.11 to $0.16 from the announced tariffs. Our guidance assumptions for the second quarter of 2025 include the following. Total sales are forecast to increase 2 to 6% versus the prior year. If same store sales perform in line with our forecast, operating margin for the second quarter is projected to be in the 10.7 to .4% range, which includes a 90 to 120 basis point negative impact from announced tariffs, mostly in merchandise margin. This estimate is based on the current level of tariffs, but we recognize there could be wide range of outcomes given the uncertainty with varying trade policy announcements. Excluding the tariff impact, we would expect merchandise margin to be similar to the prior year. We are also forecasting higher distribution costs as we opened our eighth distribution center earlier this month. Partially offsetting these higher costs are lower incentives. We expect to open 31 stores in the second quarter, including 28 Ross and 3 Deedee's locations. We expect net interest income to be approximately $29 million. The tax rate is projected to be 24 to 25%. And diluted shares outstanding are expected to be approximately $325 million. Now I will turn the call back to Jim for closing comments.

Thank you, Adam. To sum up, after a slow start in February, we saw broad-based improvement throughout the quarter and were able to meet the high end of our guidance in both sales and earnings. As mentioned earlier, despite the underlying health of the business, we have limited visibility on how customer demands may evolve over the balance of the year, given prolonged inflation, deteriorating consumer sentiment, and still elevated and potentially fluctuating tariff levels. That said, we have a seasoned executive team, a flexible off-price business model, and a strong financial foundation that should enable us to navigate through these uncertain times. I do want to specifically commend the entire buying and planning organization for managing through the tumultuous external environment, driving top-line sales growth, and working tirelessly to minimize the impact of tariffs on the performance of the business. At this point, we would like to open up the call and respond to any questions you may have. John?

Thank you. We will now be conducting the question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate that your line is in the queue. You may press star 2 to remove yourself from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. In the interest of time, we ask that you please limit yourself to one question. Thank you. One moment please while we poll for questions.

And the first question comes

from the line of Matthew Boss with JPMorgan. Please proceed with your question.

Great, thanks. And thanks for all the color. So, maybe Jim, could you elaborate on the cadence of comps or drivers of the sharp improvement that you cited as the first quarter progressed, maybe what you've seen in May relative to the flat to 3% comp outlook. And for Michael, I guess, is there a way to walk us through strategies that you have in place to mitigate tariffs in the back half of the year or just maybe any range of scenarios to consider if tariffs were to remain at today's level for the remainder of the year?

Here, I'll take the first part, Matt. The sequential improvement was really broad based across the merchant-owned hierarchy. And as we look at the April business, most departments were performing pretty nicely. As you know, we don't give current quarter performance trends, but we did guide to a flat to a plus three. So, that should give you some sense of how we feel about the health of the business. Michael, do you want to take the tariffs question?

Sure. Matt, it's Michael Hartzhorn. There's three very obvious ways to mitigate the cost. The first of which is to work with our vendors and get better costing, which we've done at this point even in the second quarter. There is you can pass along the price, but we want to be very careful with price increases. We don't want to be the first one to raise prices. We want to make sure that we keep our value or pricing umbrella versus mainstream retail. That's a substantial value gap to make sure we're delivering the values that customers come to expect. We also have the same toolkits other off-pricers have, and that includes taking advantage of closeouts already in the country. We did that in the second quarter. We also have our pack away. Again, much of that arrived prior to the tariffs. So, those are unburdened by tariffs, and we'll use those as well. And in some cases, we'll be able to shift country of origin.

Great. Best of luck. Thanks, Matt.

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

Thank you. Good afternoon. The 2Q gross margin hit from tariffs at 90 to 120. It seems that that would include tariffs at peak rates. Should we expect the impact to come down as we move through the year to current rates? Is that solely related to direct imports, or were you already seeing brands pass through costs for the second quarter product?

The second quarter impact really includes two primarily costs. One, the first of which is it did include costs or orders that were already in place when the tariffs were announced. So, that includes both the original 30% and also the 145%. The other thing we've done in our supply chain is we paused ticketing until we understood what the tariff impact was. So, that also includes additional ticketing efforts in the DC until we understand what the ongoing tariff will be across the board. In terms of the back half, as Jim described in the commentary, there are too many variables to reliably predict the back half, and that includes both the consumer behavior on the revenue side and also retail sourcing market dynamics. I mentioned in Q2 that we did take the hit for goods already in transit. We used closeouts to take advantage of, and we also used our own pack away. Those goods, again, were unburdened by tariffs. So, that's a long-winded way of saying we'll have to wait and see how the macro economy and retail environment involves and what the outlook

looks for inflation. Thank you. And the next question comes from the line of Mark Altschlager

with Baird. Please proceed with your question.

Good afternoon. Thank you for the question. First, a quick follow-up on the comment you just made there. I think you said one of the factors impacting the visibility in the back half relates to maybe less certainty on the product flows. Do I have that right? Maybe unpack how you're thinking about inventory availability, anything you're seeing right now that is leading to maybe some concern about what the back half might look like. And then separately, Jim, when you joined, you spoke to some opportunities with marketing, with store environment enhancements. I know those are longer-term initiatives as it is, but just curious how this disruption here with macro trade policy has affected your near-term playbook there. Thank you.

Sure. On the first part, we certainly think there's availability of closeouts out there. If you think about what happened when the 145 passed, a lot of goods were sort of frozen in time in China. And when that 145 then came back down to 30, about a month later, all those goods were relieved. So that does provide an influx of closeouts. Not all of them are going to be seasonally appropriate, but there's a bit of a sort of big in the python there where that product will be coming through. That said, the other thing that happened when the tariffs were passed at 145 is a lot of production in China came to a halt. So there's a bit potentially of a gap right behind that. We believe we're extremely well positioned to manage through that. As we look at our receipt plans and our receipt flows for the next few months, we think we can get through that with no problem. So overall, in the short term, I think there will be availability of closeout. If there is a little bit of receipt risk, we think we've managed through that. And then once we get beyond this near term, given just this disruption in the economy and in mainstream retail, we believe that raw stores and the whole off-price sector will be benefactors to it. In terms of some of the things we had laid out in the last call and any change in direction based on current environment, in the last call we sort of laid out an early vision for some of the things that we think can improve the overall brand experience of Ross and the store experience to complement the great merchandise that the merchants bring and deliver to the stores. I also explained at that point that this is part of a transformational and evolutionary change and not sort of a revolutionary or significant step function change. So based on that, I see very little reason to drastically change our focus on that longer term vision of trying to bring merchandising, marketing in stores and concert to really contemporize the brand and drive more store traffic. We'll be doing that in an expense neutral way. We don't plan to overly invest, certainly this year, given the macro environment, but nor do we want to put all those plans on pause.

Thank you. Of course. And the next question comes from the line of Paul Ledgeway

with Citigroup. Please proceed with your question.

Thanks. It's Tracy Cogan filling in for Paul. I just had one quick follow-up and then another question. So we should think about the 11 to 16 cents in 2Q as including some mitigation because I think you said that you were able to negotiate some costs with vendors, so I just wanted to check on that. And then secondly, I wondered if you think you're seeing a trade-down customer and if that may be contributed to the improvement in the quarter. Thanks.

In the second quarter, it does include some mitigation, but it also includes product that was on order in transit when the tariffs arrived, so there was no chance for mitigation. On the comp, if we look at comp by income band across the company, we saw the comps are fairly broad-based, so that's our only indication. And it doesn't suggest a change across income band.

Great. Thank you. And the next question comes from

the line of Michael Benetti with Evercore ISI. Please proceed with your question.

Hey guys, thanks for taking our questions here. So I guess I just want to ask maybe a jump ball, but maybe the different scenarios that you're looking at for two-Q, that would land us between a zero and a three comps, since it certainly sounds like the exit rate was good from one-Q, or maybe even just the difference between the wider spread, 2% to 6% on total revenues. What are you leaving room for to decelerate if we entered the quarter at a better pace? And then I guess just backing up, looking at the inventory, I think we get a little lost in the narrative around off-price and the difference between direct sourcing being very small in China and your helpful comments today that it's up to half of the total goods sold. How much of that is the indirect portion that's coming from China is semi-permanent and recurring goods that are made up for you versus the ability to quickly move some of that exposure that's been recurring in China for a long time to other geographies? Is that muscle that the sourcing team in Asia has today or is it a muscle that you have to build? Maybe you could give us just a few thoughts on that.

Michael, I'll start with the guidance range. It was really just out of abundance of caution given the macroeconomic and geopolitical environment. We're cognizant that inflation has been going on a long time and it's impacting our core customer. The impact of tariffs, we expect to start hitting the customer in the late June, July timeframe. We want to see how we exit the quarter. Those are really the two reasons that we're more

cautious with the guidance than we have a bigger range. In terms of the sourcing,

as we said in the commentary about a small portion are directly sourced. What that means for us, that's the piece that we're responsible for the tariff. There's some portion of our goods, remember we're in the close out business, so we're agnostic to where it's sourced. We're looking for branded value to the customer. When you look at, even though we take possession where it's already in the country, it was originally sourced from China. The piece that we have the direct control over, country of origin, is the small portion that we directly import. Mainly we can home and choose.

On that other portion, the market available piece, all the off-price players essentially shop from the same market. We don't think we're going to be uniquely less competitive, at least in any significant way. The market is still pretty heavily reliant on China imports.

Thanks for all the clarifying comments. Appreciate it guys. No problem. The next question comes from the line of Alex Straten

with Morgan Stanley. Please proceed with your question.

Perfect. Thanks so much. I wanted to touch on the branded strategy that you started enacting last year, just where that stands now, if the mix is where you want it to be, and if it does still remain a margin drag and how you think about that for the rest of the year. Related to that, I just wanted to dig into women's apparel. I know that's been a focus for you all. Just curious how that particular category is doing for you, if the branded product is helping out there. Thanks so much.

Sure. We feel very good about the team's execution of the branded strategy. I think at this point we can say we're sort of hitting the guidelines or targets that we had hoped to. Those are a little bit fluid. They're not hard and fast rules. But we've gotten the entire assortment repositioned in a way where we are bringing true branded values to the consumer. So we feel great about that. There was a slight tail of an impact in margin in the beginning of this quarter, but now we've totally anniversaryed it. So we don't expect margin headwinds going forward any longer from the brand strategy. And as you pointed out in your question, it was very astute. The branded strategy was really for the entire business. It tended to then take on a more heavy focus on the ladies' business. We generally keep our cards close to our vest in terms of how the business performs by category. That said, in this particular quarter, we were very encouraged that the ladies' business was in line, in fact slightly better than the chain average. So I think we can, you know, it's early days and we perhaps have some business owed to us in the ladies' category over the last few years, but it's now at least trending in line with the rest of the company.

Thanks so much. Good luck. Thank you. And the next question comes from the line of Chuck Grom

with Gordon Haskett. Please proceed with your question.

Hi, thanks. Good afternoon. Just on the tariff topic, can you talk about your expectations for elasticity if you have to raise prices as we progress throughout the year? You know, maybe what you've learned in the past, what categories your confidence is the most high? Thank you.

I don't have a great sort

of knowledge base for past years here. I think the elasticity is going to depend on the category of business and whether it's discretionary or functional in nature. So when we're looking at pricing, we're being very strategic in terms of sort of what's happening across the end use of that item and how much leeway do we have to change prices. And we're also very cognizant of what's happening across mainstream retail, both their full price goods and what they're clearing as well as the other players within our sector. So there's a lot of factors that go into it. And the elasticity, I think, will depend not only across categories, but even within categories down to the specific item. I would circle back to a comment I made earlier. I think we're all in the same boat here as it relates to elasticity, right? So all retailers that are selling footwear and apparel and home goods are going to face the same set of questions. And it will be interesting to see how it all plays out. But we do expect broad-based inflationary pressure across all retailers. And that will create some disruptions. And we tend to come out on top and be curious being an off

-pricer when that happens. And the next question comes from the line of Brooke Roach with

Goldman Sachs. Please proceed with your question.

Good afternoon, and thank you for taking our question. I was hoping you could talk about your category plans for mitigating tariffs. Are there any opportunities for you to shift assortment either within categories or within subcategories to try and minimize the sourcing impact from China towards other countries? Over time, how much can that be shifted both for your direct sourcing and also for some of your vendor partners? Thank you.

Sure. So there's a

tremendous amount of flexibility. It does, again, kind of depend on the item specifically and the timing. So as we roll into back to school, if you need to have certain signature items like backpacks, you need to find a way to get backpacks into the assortment one way or another. As you get further into the fall, you might have the ability to amplify one part of the assortment and downplay another to mix out the margin or to mitigate the tariff a bit. There are certain signature items and signature categories that we want to have in the assortment regardless of the impact to markup. So we're sort of thinking about it very strategically. All of the vendors, the entire marketplace is trying to resource goods, right? So for third-party product, all of our vendor partners are moving quite quickly to resource product, but still a several-month process. And then similarly for the product that we direct import, on occasion you can find another country that manufactures a very similar item and hopefully at the same quality level. Otherwise, we would sort of void it out. But that also, as we switch to new countries or try to resource goods, there's a timeline associated with that at all. So that's a 2026

sort

of adjustment,

not a 2025 adjustment. And the next question comes from the line of Ike Borachow with Wells

Fargo. Please proceed with your question.

Hi, this is Juliana Duket on for Ike. Thank you for taking my question. I just wanted to ask when we're thinking about the impact that we're seeing by consumer and by income level, what you're seeing there, and if there's anything that you could parse out between the traffic and spend trends there as well. Thank you.

Sure. As I said earlier on the call, for us, we look at stores on the population around a store in the income level to try to band performance by income level, and for us it was fairly broad-based across income levels. As far as comp components for the quarter, comps were flat, as we said, slightly higher baskets was offset by a slight decline in traffic, particularly earlier in the quarter. The higher average basket was driven primarily by number of units sold as average

unit retail and the higher average basket was flat. The next question comes from the line of Simeon Siegel

with BMO Capital Markets. Please proceed with your question.

Thanks. Hey, guys. Good afternoon. Understanding that there are moving pieces like incentive comp you mentioned, what's the best way for us to think about what comp you need to leverage overall SG&A at this point? Just reflecting on the flat SG&A on a flat comp this quarter. And then just general thoughts on various category opportunities and challenges going forward. I was specifically wondering about children's. I think this is the first quarter in over a year that you haven't even called that out as the area of strength, so anything there would be helpful. Thank

you. Excluding on the first question, obviously excluding the impact of tariffs, obviously this can vary from quarter to quarter. In the first quarter, we were able to hold either margins at the flat comp, but generally over an annual period or over a longer term, it's three to four percent to be able to leverage.

And in terms of the category detail, I wouldn't read anything into it. We tend to try to provide a small amount of color on the categories that are overperforming. Occasionally we call out those that are massively underperforming. There's nothing really notable about the kid's business

to call out. And the next question comes from the line of

Dana Telsey with the Telsey Advisory Group. Please proceed with your question.

Hi. Good afternoon, everyone. As you think about the performance this quarter, was there a difference between the stores along the border versus the base and also any color on how DDs has done? And then lastly, as you're thinking about the merchandise margin go forward, how do you think about that margin puts and takes and how you're planning inventory? And I just have a quick follow-up. Thank you.

Dana. Hi. Okay, let me get through all of those. First, let me talk through the geographies and border store locations. We mentioned in the release that Southeast was the strongest region for us. Our largest markets, California, Florida, and Texas, were relatively in line with the chain. Texas specifically, the border stores were well below the chain average and had a slightly negative impact to the overall chain, even with the low number of stores. What we attribute the quarterly performance to was the long delays for cross-border traffic to get in and out of the country. We also saw a negative impact in our northern border stores, but we have very few stores there, so not a large impact to the chain.

I'm going to take DDs. Both brands, both Ross and DDs saw nice sequential improvement throughout the quarter from month to month. The acceleration, if I compare the February to April, was actually much stronger in Ross, but admittedly it started at a lower point. So the DDs business continues to perform well. It was comp enhancing for us for the quarter, and I think it's a testament to some of the strategies around cold weather stores, the young customer, et cetera, that have proven out to be the right strategies, and the team is executing very well against them.

Dana, your question on the merchant margin going forward and puts and takes. Outside of the tariff impact, we'd expect merchant margin to be neutral versus last year in the second quarter, and Jim mentioned earlier our brand strategy that's put pressure on merchandise margin over the last, call it, year. We're past

that point of pressure. And the next question comes from the line of Anisha

Sherman with Bernstein. Please proceed with your question.

Thank you so much. I'm curious to hear some context around how you're thinking about pricing. Over the last few years, you've chosen at a couple of times not to pass on cost inflation as price, but rather to fit, and you did this in 2023 with freight costs. You did it again over the last year with the branded strategy and chose to absorb that. Why is your approach different now? I heard what you said around competitors raising prices, but that was also the case in recent years. What's driving a different approach, and do you still think that Ross can maintain the perception of value with your lower income consumer whilst raising prices? Thank you.

Anisha, on the pricing, I would disaggregate the brand strategy from choosing not to raise prices. We were indeed shifting brands, but we were also maintaining our value proposition versus not only our direct competitors and off-price, but also traditional retailers, whether it's department and specialty stores. In this case, we expect to see broad-based inflation, not category-specific with the tariffs. We would expect to be able to maintain that value proposition against

the whole retail set. The next question comes from the line

of Marni Shapiro with Retail Tracker. Please proceed with your question.

Hey, guys. One clarification. How many DD stores did you say opened in the quarter? You said it kind of quickly, and I missed that. If you could talk a little bit about your use of packaways, and specifically you've been very effective using them for times when you really needed the goods on time, so polos for Father's Day, dresses for Mother's Day or Easter. Were you able to pack away as much as possible, as for -to-school, -your-backpack analogy or comment, or Christmas decorations and tchotchkes, because all of that stuff is from China. What does that look like? What does the collection of your packaway look like?

Sure. On the first part of your question, apologies if that wasn't clear, three DDs were opened in the quarter. In terms of packaway, I don't think the complexion of packaway is all that different in past years, but we are really focused on places where if we thought there was any receipt risk, we could fill it in with products from the hotel. I think we're extremely well positioned to maximize our business and continue to flow goods to the store, and while at the same time, work through this entire situation and minimize the impact as much as we can. Perhaps the last piece I would add to that, circling back to the prior question, we fully intend to continue to be quality product branded values in the store. So the pricing piece, I don't think we will lose our reputation at all for being extremely well branded at

great values. And the next question comes from the line of Laura

Champagne with Loop Capital Markets. Please proceed with your question.

Hi. Thanks for taking my question. I know that we talked about tariffs sort of ad nauseam, but I'm still not clear on what the strategy is. So if you're at more than 50% of goods from China today, assuming tariffs don't change from here, where would you expect to be at the end of the year?

There's multiple things we can do to try to source product from other countries, but at the end of the day, there's a lot of product, particularly over the next six months that is going to be imported from China for us and for every other retailer and every other off-price company. So the amount of flexibility that you have as you sit in the middle of the year for the next three to six months is somewhat limited. So I'm not prepared to give you an exact number for what our sourcing by country will look like six months from now. I would tell you that what the merchants are looking at is how do I deliver product to the store that is part of a compelling assortment at a great value? And in this environment, we expect a lot of that will come from the closeout part of our business, and some of it might come from resourcing merchandise overseas. But they don't start with a country of origin in mind, right? In most cases, we're not the company importing the product.

I hope that helps. And the next question comes from the line of Corey

Tarlo with Jeffreys. Please proceed with your question.

Great, thanks. Jim, I was wondering if you could just provide a little bit of color on traffic trends that you saw in the quarter. I think you implied that Think got better, but it was down. So did you end up – and then just on AUR, what have been the key drivers there beyond – is it just bringing in good, better – more of the better and best type products? Sure. So

the quarter started off slow. It seems like a lot of retailers started off slow in February. And then the business got better between February and March, and then got better again between March and April, significantly slower at Ross. A portion of that – not all of it – a portion of that was the shift in Easter. In terms of traffic or transactions, if we look at just the April business, yeah, we had a pretty solid comp there, and it was largely transaction-based, a little bit of help from AUR, but a very small increase in AUR. And then we had a bigger basket driven by more units per transaction. So if I were to look at the April business in a vacuum, I would be pretty pleased. We had growth across all three elements, transactions, AUR, and UPT, sort of a very healthy way to drive a comp. And our exit

performance coming out of the quarter was pretty strong. Okay, great. And the next question comes from

the line of Christina Katai with Deutsche Bank. Please proceed with your question.

Hi, this is Jessica Taylor on for Christina. Thanks for taking our questions. I just wanted to follow up a little bit on the performance by income and the health of the customer. And just to follow up on Juliana's question a little, ask differently, have you seen any changes in terms of the customer behavior in their spend, how they're approaching their buying from last quarter or the last six months?

I would say not really. Michael commented a little bit about the income bands, and there's some very slight movement there. But anticipating this question, we were looking to try to find out and support or validate the logical hypothesis, but it just wasn't obvious within the data. In terms of customer behavior, perhaps you could say there's a little bit of a shift towards more functional item versus discretionary items. But I wouldn't say there's

anything that's glaringly different. And our final question comes from the

line of Adrian Yee with Barclays. Please proceed with your question.

Hi, this is Angus Kelleher on for Adrian. You noted that Cosmetics was the strongest merchandise area in Q1. Can you elaborate on what's driving that strength? Was it brand Nix pricing or something else? And do you expect this momentum to continue? Then also, given the flat comp performance and cautious consumer backdrop, are you seeing any shifts in consumer behavior around basket size or frequency specifically? Thank you.

So on the Cosmetics piece, I would give kudos to the team for some really strong execution and for putting together a great assortment there. Cosmetics is a pretty broad category, but part of what's driving it is some of the better brands there and a little bit of a trend in that space for a particular type of Cosmetics. So we feel good about that. In terms of frequency and basket size, et cetera, there's

very

small changes. Nothing to call out just yet in terms of consumer behavior in the quarter, certainly in the second half of the quarter, versus if you go back to our fourth quarter, where we had a nicely positive comp, they feel relatively

similar to us. And there are no further questions at this time. I would like to turn the floor back

over to Jim Conroy for any closing remarks.

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

Ladies and gentlemen, that does conclude today's teleconference. We thank you for your participation. You may disconnect your lines at this time.