Ross Stores Reports First Quarter 2007 Results, Provides Second Quarter 2007 Guidance, and Reiterates Fiscal 2007 EPS Targets
PLEASANTON, Calif., May 23 /PRNewswire-FirstCall/ -- Ross Stores, Inc. (Nasdaq: ROST) today reported earnings per share for the 13 weeks ended May 5, 2007 of $.48, compared to $.41 for the 13 weeks ended April 29, 2006. Net earnings for the first quarter of 2007 were $67.0 million, compared to $59.2 million in the first quarter of 2006. Sales for the 13 weeks ended May 5, 2007 were $1.4 billion, up 9% versus the first quarter in fiscal 2006. Comparable store sales for the 13 weeks ended May 5, 2007 were flat compared to the 13 weeks ended May 6, 2006. For the 13 weeks ended April 29, 2006, comparable store sales rose 6%.
Michael Balmuth, Vice Chairman, President and Chief Executive Officer, commented, "First quarter earnings were driven by a combination of top line growth and expansion in operating margin. Same store sales for the quarter were slightly below our projection of a 1% to 2% increase, due to our sales shortfall in April. We believe April was affected by a larger-than-expected impact from the Easter calendar shift and unseasonable weather during the first two weeks. Geographic and merchandise trends during the quarter were relatively broadbased. The best performing markets were on the west coast, while Home and Dresses were the strongest merchandise departments."
Mr. Balmuth continued, "Operating margin for the period grew about 30 basis points to 7.7%, benefiting from a 60 basis point gain in gross margin that was partially offset by a 30 basis point increase in selling, general and administrative costs as a percent of sales. These results were mainly due to higher merchandise gross margin and reductions as a percent of sales in distribution and buying costs. These improvements were partially offset by higher freight and the deleveraging effect of flat comparable store sales on store and occupancy expenses."
Mr. Balmuth also noted, "Our balance sheet and cash flows remain strong. We continued to return capital to stockholders during the quarter through our stock repurchase and dividend programs. During the first three months of fiscal 2007, we repurchased 1.5 million shares of common stock for an aggregate of $51 million. We are on track to repurchase the remaining $149 million of our two-year $400 million program authorized by our Board of Directors in the fourth quarter of 2005."
Looking ahead, Mr. Balmuth said, "For the second quarter ending August 4, 2007, we are forecasting same store sales gains of 1% to 2% and earnings per share in the range of $.35 to $.37. For the second half of 2007, same store sales are forecasted to grow 3% to 4%, based on merchandising opportunities we have identified for the fall season as well as easier prior year sales comparisons. We also continue to project earnings per share for fiscal 2007 that are within the range of our original guidance of $1.85 to $1.95 for the 52 weeks ending February 2, 2008."
The Company will provide additional details concerning its first quarter results and management's outlook for the balance of 2007 on a conference call to be held on Wednesday, May 23, 2007 at 11:00 a.m. Eastern time. Participants may listen to a real time audio webcast of the conference call by visiting the Company's website located at http://www.rossstores.com. A recorded version of the call will also be available until the end of July at the website address and via a telephone recording through Thursday, June 7, 2007 at 402-220-5900, PIN #2342.
Forward-Looking Statements: This press release and the recorded comments and transcript on our website contain forward-looking statements regarding expected sales and earnings levels that are subject to risks and uncertainties which could cause our actual results to differ materially from management's current expectations. The words "plan," "expect," "anticipate," "estimate," "believe," "forecast," "projected," "guidance," "looking ahead" and similar expressions identify forward-looking statements. Risk factors for Ross Dress for Less(R) ("Ross") and dd's DISCOUNTS(R) include, without limitation, our ability to convert certain Albertsons LLC real estate sites to the Ross and dd's DISCOUNTS formats in a timely and cost effective manner and on acceptable terms, and the ability to achieve targeted levels of sales, profits and cash flows from these acquired store locations; our ability to effectively operate our various supply chain, core merchandising and other information systems; our ability to improve our merchandising capabilities through the implementation of new processes and systems enhancements; achieving and maintaining targeted levels of productivity and efficiency in our distribution centers; potential pressure on freight costs from higher-than-expected fuel surcharges; obtaining acceptable new store locations; competitive pressures in the apparel industry; changes in the level of consumer spending on or preferences for apparel or home-related merchandise, including the potential impact from higher gas prices on consumer spending; changes in geopolitical and general economic conditions; unseasonable weather trends; disruptions in supply chain; lower than planned gross margin, including higher than planned markdowns and higher than expected inventory shortage; greater than planned operating costs; our ability to continue to purchase attractive brand-name merchandise at desirable discounts; our ability to identify and successfully enter new geographic markets; and our ability to attract and retain personnel with the retail talent necessary to execute our strategies. Other risk factors are detailed in our SEC filings including, without limitation, the Form 10-K for fiscal 2006 and Form 8-K's for fiscal 2007. 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 our outlook at any other point in time. We do not undertake to update or revise these forward-looking statements.
Ross Stores, Inc., a Fortune 500 and Nasdaq 100 (ROST) company headquartered in Pleasanton, California, is the nation's second largest off-price company with fiscal 2006 revenues of $5.6 billion. As of May 5, 2007, the Company operated 796 Ross Dress for Less(R) ("Ross") stores and 34 dd's DISCOUNTS(R) locations, compared to 726 Ross and 20 dd's DISCOUNTS locations at the end of the first quarter of 2006. Ross offers first-quality, in-season, name brand and designer apparel, accessories, footwear and home fashions for the entire family at everyday savings of 20 to 60 percent off department and specialty store regular prices. dd's DISCOUNTS features a more moderately-priced assortment of first-quality, in-season, name brand apparel, accessories, footwear and home fashions for the entire family at everyday savings of 20 to 70 percent off moderate department and discount store regular prices. Additional information is available on the Company's website at http://www.rossstores.com.
Ross Stores, Inc. Condensed Consolidated Statements of Earnings Three Months Ended ($000, except stores and per share May 5, April 29, data, unaudited) 2007 2006 Sales $1,410,541 $1,291,676 Costs and expenses Cost of goods sold 1,071,278 988,836 Selling, general and administrative 230,203 207,167 Interest income, net (1,391) (1,884) Total costs and expenses 1,300,090 1,194,119 Earnings before taxes 110,451 97,557 Provision for taxes on earnings 43,407 38,340 Net earnings $67,044 $59,217 Earnings per share Basic $0.49 $0.42 Diluted $0.48 $0.41 Weighted average shares outstanding (000) Basic 137,087 141,710 Diluted 139,576 144,193 Dividends per share Cash dividends declared per share 0.00 0.00 Stores open at end of period 830 746 Ross Stores, Inc. Condensed Consolidated Balance Sheets May 5, April 29, ($000, unaudited) 2007 2006 Assets Current Assets Cash and cash equivalents $199,123 $145,230 Short-term investments 6,821 43,072 Accounts receivable 36,940 36,035 Merchandise inventory 1,101,525 979,995 Prepaid expenses and other 51,029 43,064 Deferred income taxes 29,516 20,014 Total current assets 1,424,954 1,267,410 Property and equipment, net 762,345 633,225 Other long-term assets 69,299 58,902 Long-term investments 33,548 14,100 Total assets $2,290,146 $1,973,637 Liabilities and Stockholders' Equity Current Liabilities Accounts payable, accrued expenses and other $919,410 $852,264 Income taxes payable 33,575 38,223 Total current liabilities 952,985 890,487 Long-term debt 150,000 -- Other long-term liabilities 166,165 123,600 Deferred income taxes 84,987 98,828 Commitments and contingencies Stockholders' Equity 936,009 860,722 Total liabilities and stockholders' equity $2,290,146 $1,973,637 Ross Stores, Inc. Condensed Consolidated Statements of Cash Flows Three Months Ended May 5, April 29, ($000, unaudited) 2007 2006 Cash Flows From Operating Activities Net earnings $67,044 $59,217 Adjustments to reconcile net earnings to net cash from operating activities: Depreciation and amortization 28,522 24,261 Stock-based compensation 6,370 6,905 Deferred income taxes (14,489) (1,270) Tax benefit from equity issuance 4,565 5,088 Excess tax benefits from stock-based compensation (3,826) (2,547) Change in assets and liabilities: Merchandise inventory (49,796) (41,904) Other current assets, net (13,619) (12,887) Accounts payable (78,829) 80,355 Other current liabilities (36,889) (12,754) Other long-term, net 24,902 1,001 Net cash (used in) provided by operating activities (66,045) 105,465 Cash Flows Used in Investing Activities Additions to property and equipment (47,381) (18,024) Purchases of investments (9,016) (46,550) Proceeds from investments 5,257 13,142 Net cash used in investing activities (51,140) (51,432) Cash Flows Used in Financing Activities Payment of term debt -- (50,000) Issuance of common stock related to stock plans 8,863 6,577 Excess tax benefits from stock-based compensation 3,826 2,547 Treasury stock purchased (2,592) (2,190) Repurchase of common stock (50,868) (48,882) Dividends paid (10,309) (8,622) Net cash used in financing activities (51,080) (100,570) Net decrease in cash and cash equivalents (168,265) (46,537) Cash and cash equivalents: Beginning of period 367,388 191,767 End of period $199,123 $145,230 Non-Cash Investing Activities Change in fair value of investment securities $227 $(201)
SOURCE Ross Stores, Inc.
John G. Call, Senior Vice President, Chief Financial Officer, +1-925-965-4315,
Katie Loughnot, Vice President, Investor Relations, +1-925-965-4509, firstname.lastname@example.org, both of Ross Stores, Inc.