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Ross Stores Reports Second Quarter Earnings
For the six months ended August 4, 2001, net earnings totaled $70.0 million, compared to $76.8 million for the same period in 2000. Earnings per share for the first six months declined 3% to $.87 from $.90 in the prior year. Sales for the first six months grew 7% to $1.399 billion, with same store sales down 1% for the period.
Michael Balmuth, Vice Chairman and Chief Executive Officer, said, "We are pleased that our sales trends improved each month during the second quarter despite the continued difficult economic and competitive environment. Comparable store sales were down 1%, flat and then up 5% in May, June and July, respectively, compared to the prior year. Over the past several months, we have strengthened our merchandise offerings with increased levels of nationally-recognized name brand product, a more balanced mix of ladies career vs. casual apparel, and more diversity in our home assortments. We believe that our customers are responding favorably to these changes, especially in light of the solid sales of early fall season merchandise in July."
Mr. Balmuth continued, "Gross margin declined about 40 basis points during the second quarter. As a percent of sales, slightly higher freight costs, a lower markup and some loss of leverage on occupancy expense were partially offset by lower markdowns, which benefited from tight inventory controls. General, selling and administrative expenses rose about 50 basis points, primarily due to higher store payroll, benefit and distribution costs combined with loss of leverage from the below plan same store sales. As a result, operating margin for the second quarter fell to 8.2%, compared to 9.1% for the same period in 2000."
Mr. Balmuth noted, "During the first six months of the year, we continued to invest free cash flows in our stock repurchase program. As of August 4, 2001, we had repurchased a total of 12.3 million shares for an aggregate purchase price of $216 million under our two-year, $300 million buyback program authorized in February of 2000. We ended the quarter with 79.8 million shares of common stock outstanding."
"Our expansion program remains on schedule. We are pleased with the performance of the 23 new stores we opened to date in 2001, including five locations in our new southeast markets of Georgia, North and South Carolina. We expect to add another 22 new stores in the third quarter, our largest group of store openings this year. After closing four older locations, we plan to end fiscal 2001 with about 450 stores in 22 states," said Mr. Balmuth.
The company will provide additional details concerning its second quarter results and business outlook on a conference call to be held on Wednesday, August 22, 2001 at 11:00 a.m. EDT. A listen-only live recording of the conference call can be accessed by dialing 973-321-1030 or going to the company's website at www.rossstores.com. A playback of the call will also be available at the web site address through the end of September or by calling 402-220-5900, PIN #2342 until August 29, 2001.
Forward-Looking Statements: This press release contains certain forward-looking statements which are subject to risks and uncertainties that could cause the company's actual results to differ materially from management's current expectations. The words "expect," "anticipate," "estimate," "believe," "forecast," "projected" and similar expressions identify forward-looking statements. Risk factors include obtaining acceptable new store locations, competitive pressures in the apparel industry, changes in economic conditions, changes in the level of consumer spending on or preferences in apparel or home-related merchandise, the availability of dependable energy resources at reasonable costs, unseasonable weather trends, and greater than planned operating costs. Other risk factors are detailed in the company's Form 10-K for fiscal 2000. The factors underlying our forecasts are dynamic and subject to change. As a result, our forecasts speak only as of the date they are given and do not necessarily reflect the company's outlook at any other point in time. The company does not undertake to update or revise these forward-looking statements.
Ross Stores, Inc. operates a chain of off-price retail stores offering first quality, in-season, branded apparel and apparel-related merchandise for the entire family at prices that average 20% to 60% less than department and specialty stores, as well as merchandise for the home at similar savings. The company had 431 stores in operation August 4, 2001, compared to 392 stores at the end of the same period last year.
ROSS STORES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
Three Months Ended Six Months Ended
August 4, July 29, August 4, July 29,
2001 2000 2001 2000
($000, except per share
data, unaudited)
Sales $724,591 $657,035 $1,398,950 $1,290,463
Costs and Expenses
Cost of goods sold and
occupancy 505,393 455,797 969,921 890,222
General, selling and
administrative 147,989 130,646 287,226 252,092
Depreciation and
amortization 12,077 10,772 24,077 21,250
Interest expense (income) 1,050 835 2,705 840
666,509 598,050 1,283,929 1,164,404
Earnings before income
taxes 58,082 58,985 115,021 126,059
Provision for taxes on
earnings 22,710 23,063 44,973 49,289
Net earnings $35,372 $35,922 $70,048 $76,770
Earnings per share
Basic $0.44 $0.43 $0.87 $0.91
Diluted $0.44 $0.43 $0.87 $0.90
Weighted average shares
outstanding
Basic 79,967 82,753 80,122 84,020
Diluted 80,989 83,530 80,967 84,853
Stores open end of period 431 392 431 392
ROSS STORES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
August 4, July 29,
($000, unaudited) 2001 2000
ASSETS
Current Assets
Cash and cash equivalents $38,956 $41,948
Accounts receivable 20,364 16,217
Merchandise inventory 612,415 577,569
Other current assets 22,485 19,061
Total Current Assets $694,220 $654,795
Property and equipment, net 312,528 283,492
Lease rights, deferred income taxes
and other assets 40,273 62,338
$1,047,021 $1,000,625
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable, accrued expenses
and other $408,210 $419,403
Income taxes payable 42,217 20,071
Total Current Liabilities $450,427 $439,474
Long-term debt 50,000 80,000
Other liabilities 43,979 53,704
Stockholders' Equity 502,615 427,447
$1,047,021 $1,000,625
SOURCE Ross Store, Inc.
CONTACT: John G. Call, Senior Vice President, Chief Financial Officer, +1-510-505-4315, or Katie Loughnot, Director, Investor Relations, +1-510-505-4509, or katie.loughnot@ros.com, both of Ross Stores, Inc.