(Reuters) -Ross Stores on Thursday topped quarterly profit estimates and reinstated its annual earnings forecast, betting on demand for discounted apparel and accessories as tariffs raise retail prices during the holiday season.

The company's shares were up about 2% in extended trading after it also forecast strong holiday quarter profit.

Discount stores are expected to attract budget-conscious customers as President Donald Trump's tariffs force companies to raise prices on products sourced from countries hit with steep duties.

Ross Stores' comparable sales rose 2% in the second quarter, with improvement through the period, and strong demand in July, as shoppers looked for discounted back-to-school apparel and accessories.

Excluding items, the company reported a profit of $1.56 per share for the three months ended August 2, topping estimates by 2 cents, according to data compiled by LSEG.

It reinstated its outlook and expects annual earnings per share of $6.08 to $6.21, compared to estimates of $6.10. This includes a per-share tariff impact of 22 cents to 25 cents.

Ross Stores withdrew its annual forecasts in May amid tariff uncertainty, and added that more than half of its goods it sells originate from China.

The company said it was adjusting prices strategically, and diversifying sourcing to cushion the tariff impact.

Ross Stores expects third-quarter profit of $1.31 to $1.37 per share, below estimates of $1.47, but it targets a profit of $1.74 to $1.81 per share for the key holiday quarter, which was above estimates of $1.69.

"We are looking at the back half of the year with cautious optimism ... there's a lot going on in the macro environment," Conroy said.

Rival and TJ Maxx parent TJX raised its annual profit target earlier this week, helped by strong demand for discounted apparel and home furnishings.

Ross Stores targets comparable store sales growth of 2% to 3% for the third and fourth quarters. Analysts had expected growth of 2.59% and 2.14%, respectively.

Second-quarter sales of $5.53 billion fell short of estimates of $5.57 billion.