Ross Stores (ROST) Posts $2.66 EPS in Q2, Raises Full-Year Outlook to $8.61-$8.77

Q2 2026 Results

Ross Stores (NASDAQ: ROST) reported diluted EPS of $2.66 for its fiscal second quarter ended August 1, 2026, against a consensus estimate of $1.85, a beat of 43.8%. Revenue rose 13.3% year over year to $6.3 billion from $5.5 billion, powered by a 10% comparable store sales increase that the company said was primarily driven by customer traffic. Shares gained 4.39% on Friday, August 21, 2026, while the S&P 500 advanced 0.41%.

Key metrics for the quarter ended August 1, 2026:

• Revenue: $6.3 billion, up 13.3% year over year from $5.5 billion
• Diluted EPS: $2.66, up 70.5% from $1.56 in Q2 2025, including an approximately $0.60 per share benefit from IEEPA tariff refunds
• Operating income: $1.1 billion, up 72.9% year over year, including approximately $253 million in IEEPA tariff refunds
• Operating margin: 17.6%, a 610-basis-point improvement versus 11.5% in the prior-year period; excluding the tariff refund benefit, operating margin expanded 205 basis points, above the company's plan of 130 to 150 basis points
• Net income: $851.3 million, up 67.6% from $508.0 million in Q2 2025
• New stores opened: 47 during the quarter, comprising 35 Ross Dress for Less and 12 dd's DISCOUNTS locations

What Drove the Results

The EPS of $2.66 beat the $1.85 consensus by $0.81, or 43.8%. The largest single driver was the approximately $253 million in IEEPA tariff refunds recognized during the quarter, which contributed roughly $0.60 of the $2.66 diluted EPS and added 405 basis points to the reported operating margin improvement of 610 basis points. Stripping out the tariff benefit, the underlying operating margin expansion of 205 basis points still exceeded management's original plan by 55 to 75 basis points, reflecting stronger-than-expected merchandise margins and operating leverage on the 10% comparable-store sales gain.

For the first six months of fiscal 2026, revenue reached $12.3 billion, up 17% from $10.5 billion, with comparable store sales up 13%. Six-month diluted EPS of $4.69 compared to $3.03 in the prior-year period. The company generated $1.7 billion in operating cash flow in the first half, with capital expenditures of $460.2 million, up 12.5% from $409.1 million, yielding free cash flow of $1.3 billion for the period.

Why It Matters

Ross raised its full-year fiscal 2026 diluted EPS guidance to a range of $8.61 to $8.77, which includes the approximately $0.60 per share tariff refund benefit already recognized. For Q3 2026, the company projected diluted EPS of $1.75 to $1.83 with comparable store sales growth of 6% to 7%; Q4 2026 EPS guidance stands at $2.17 to $2.26 with comparable store sales growth of 4% to 5%. The company also expanded its 2026 new store opening plan to 115 locations, consisting of approximately 90 Ross Dress for Less and 25 dd's DISCOUNTS stores, up from prior plans. Share repurchases remain on track for $1.275 billion in fiscal 2026, supported by the company's existing two-year $2.55 billion authorization approved in March 2026.

Wall Street View

Two analyst firms updated their views on ROST following the results. Citigroup analyst Paul Lejuez maintained a Buy rating and raised his price target to $290 from $270. Jefferies analyst Corey Tarlowe also maintained a Buy rating, lifting his target to $285 from $265. Both revisions reflect the stronger-than-expected second-quarter performance and the raised full-year guidance.

Investor Takeaway

The Q2 beat is substantial in absolute terms, but investors will note that roughly $0.60 of the $2.66 diluted EPS is non-recurring, tied to a one-time IEEPA tariff refund. The more durable signal is the 205-basis-point underlying operating margin expansion that exceeded management's own plan, alongside a 10% comparable-store sales gain driven by traffic growth from both new and returning customers. With the full-year EPS range now set at $8.61 to $8.77 and 115 new store openings planned, the back half of fiscal 2026 faces tougher year-over-year comparisons, and whether the company can sustain the traffic momentum without the tariff tailwind will be the key variable for the remainder of the year.