By Senad Karaahmetovic

Ross Stores’ shares fell 27% to NASDAQ (NASDAQ:), after Ross Stores’ full-year guidance was revised.

ROST Q1 EPS at 97c was lower than $1.34 and missed the consensus estimates for $1.00 per share. Revenues were $4.33Billion. This is 4.1% less YoY than analyst expectations of $4.54B.

The company reported a total location count of 1,951, up 1.5% quarter-over-quarter, and in line with the estimated 1,953 locations. Analysts expected Ross Stores to report $2.67 Billion in merchandise inventories.

Lower margins are “reflecting the deleveraging effect from the same store sales decline combined with ongoing headwinds from higher freight and wage costs that began rising in the second half of 2021,” the company said.

“Given our first quarter results and today’s increasingly uncertain macro-economic and geopolitical environment, we believe it is prudent to adopt a more conservative outlook for the balance of the year.”

ROST anticipates that EPS will range from $4.34 to 4.58 for the entire fiscal 2023. This is lower than the $4.71- $5.12 forecast and less than the consensus projection at $5.04.

“We now expect same store sales to drop 4%-6% for the 13 Weeks ending July 30, 2022. This is on top a strong 15% gain from the preceding year. The earnings per share are projected to range between $0.99 and $1.07 as compared with $1.39 in the second quarter of last year.”

ROST also predicts comparable store sales falling 2%-4%, compared to an 13% increase in fiscal 2021.

Analyst Dana Telsey of Telsey has downgraded Ross Stores stocks from Outperform (from 145.00) to Market Perform, with an $80.00 price target

“While FY21 marked a strong recovery year for ROST, FY22 is off to a more challenging start with both sales and earnings coming in below expectations in the first quarter as execution missteps were exacerbated by ongoing macro and geopolitical headwinds. With challenging visibility to a timeline of improved performance, we are downgrading our rating,” Telsey said.

Morgan Stanley analyst Kimberly Greenberger remains Overweight-rated on ROST shares and said she expects shares to trade in a penalty box after an “unexpected miss.”

“The 1Q miss & FY guidance cut caught investors offsides, sending the stock down 20%+ AMC. While an extreme move, the stock may struggle to rally from here until there are signs of performance acceleration, which may take a few quarters,” the analyst wrote to clients.