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Ross Stores Reports First Quarter Results and Forecasted EPS Ranges for Fiscal 2006Fiscal 2005 and 2004 Quarterly Income Statement

PLEASANTON, Calif., May 17 /PRNewswire-FirstCall/ -- Ross Stores, Inc. (Nasdaq: ROST) today reported earnings per share for the 13 weeks ended April 29, 2006 of $.41 and net earnings of $59.2 million. These results are after $3.5 million, or an equivalent of about $.015 per share, in stock option related expenses in connection with the adoption of FAS No. 123(R), "Share-Based Payment." For the 13 weeks ended April 30, 2005, net earnings totaled $50.1 million, and earnings per share were $.34. Sales for the first quarter ended April 29, 2006 increased 15% to $1.292 billion, with comparable store sales for the period up 6% over the prior year.

Michael Balmuth, Vice Chairman, President and Chief Executive Officer, commented, "Strength across many geographic markets and merchandise categories drove our solid sales gains during the first quarter. The strongest regions during the period were the Southwest and Texas, while the best performing merchandise categories were Shoes, Juniors and Home. Before any stock option related expenses in connection with the adoption of FAS No. 123(R), first quarter 2006 operating margin expanded by about 40 basis points to 7.7%. Our improved profitability was driven mainly by a decline in distribution costs as a percent of sales and leverage on other expenses from our solid sales performance, partially offset by higher shrinkage accruals, freight and incentive compensation costs as a percent of revenue."

Mr. Balmuth continued, "Our balance sheet and cash flows remain strong and healthy. We continue to return capital to stockholders through our stock repurchase and dividend programs. During the first three months of 2006, we repurchased 1.7 million shares of common stock for an aggregate of $48.9 million under the two-year $400 million program authorized by our Board of Directors in the fourth quarter of 2005."

As noted above, the Company has adopted FAS No. 123(R), "Share-Based Payment," with its first quarter 2006 results. The portion of these new non-cash compensation charges that relates to our associates in the merchandising and distribution organizations is included in "Cost of Goods Sold." The balance of these non-cash charges is included in "Selling, General and Administrative" expenses. The Company's operating results for the first quarter of fiscal 2006 also reflect comparable classification of the Company's cash bonus payments and restricted stock compensation costs. In prior periods, all of these expenses were included in "Selling, General and Administrative" expenses. For consistent presentation with the first quarter of 2006, the Company is reclassifying a portion of the bonus and restricted stock expenses for prior periods, including the first quarter of 2005. The reclassification for prior periods has no impact on previously reported total costs and expenses, net earnings or earnings per share. The Company is making corresponding adjustments to reflect these line item classifications to our previously reported quarterly operating statements for 2004 and 2005, and they are now available on the press release page of the Company's website located at

Looking ahead, Mr. Balmuth continued, "Based on our first quarter results, we now forecast earnings per share for the 53 weeks ending February 3, 2007 to increase 16% to 22%, compared to fiscal 2005, to a range of $1.58 to $1.66, after projected non-cash charges equivalent to about $.06 per share related to adoption of FAS No. 123(R). This annual projection assumes quarterly earnings per share to be $.30 to $.32 for the second quarter of 2006, $.27 to $.29 for the third quarter and $.60 to $.64 for the fourth quarter." Each of these quarterly projections takes into account projected stock option related expenses equivalent to about $.01 to $.02 per share, per quarter, in connection with the adoption of FAS No. 123(R). Reported earnings per share for fiscal 2005 were $1.36. For the second, third and fourth quarters of 2005, reported earnings per share were $.29, $.25 and $.49, respectively.

The Company will provide additional details concerning its first quarter results and management's outlook for the balance of 2006 on a conference call to be held on Wednesday, May 17, 2006 at 11:00 a.m. Eastern Daylight Time. Participants may listen to a real time audio webcast of the conference call by visiting the Company's website located at 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 1, 2006 at 402-220-5900, PIN #2342.

Forward-Looking Statements: This press release and the recorded comments and transcript on the Company's website contain forward-looking statements regarding expected sales and earnings levels, growth plans and productivity initiatives that are subject to risks and uncertainties which could cause the Company's 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 Stores and dd's DISCOUNTS(R) include, without limitation, the Company's ability to effectively operate its various supply chain, core merchandising and other information systems, including generation of all necessary data and reports in a timely and cost effective manner; its ability to improve its micro-merchandising capabilities through the implementation of new processes and systems enhancements; achieving and maintaining targeted levels of productivity and efficiency in its 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; 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; the Company's ability to continue to purchase attractive brand-name merchandise at desirable discounts; the Company's ability to identify and successfully enter new geographic markets; and the Company's ability to attract and retain personnel with the retail talent necessary to execute its strategies. Other risk factors are detailed in the Company's SEC filings including, without limitation, the Form 10-K for fiscal 2005 and the Form 8-K's for fiscal 2006. 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., a Fortune 500 and Nasdaq 100 (ROST) company headquartered in Pleasanton, California, is the nation's second largest off-price company with fiscal 2005 revenues of $4.9 billion. As of April 29, 2006, the Company operated 726 Ross stores and 20 dd's DISCOUNTS locations, compared to 663 Ross stores and 10 dd's DISCOUNTS locations at the end of the same period last year. Ross Stores 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

                                Ross Stores, Inc.
                  Condensed Consolidated Statements of Earnings

                                                      Three Months Ended
    ($000, except stores and per share            April 29,         April 30,
      data, unaudited)                              2006              2005

    Sales                                       $1,291,676        $1,123,937

    Costs and expenses
           Cost of goods sold                      988,836           864,999
           Selling, general and
            administrative                         207,167           177,053
           Interest (income) expense, net           (1,884)             (298)
              Total costs and expenses           1,194,119         1,041,754

    Earnings before taxes                           97,557            82,183

    Provision for taxes on earnings                 38,340            32,133
    Net earnings                                   $59,217           $50,050

    Earnings per share
           Basic                                     $0.42             $0.34
           Diluted                                   $0.41             $0.34

    Weighted average shares outstanding (000)
           Basic                                   141,710           146,007
           Diluted                                 144,193           148,464

    Dividends per share
           Cash dividends declared per share           $--               $--

    Stores open at end of period                       746               673

                                Ross Stores, Inc.
                      Condensed Consolidated Balance Sheets

                                                  April 29,         April 30,
    ($000, unaudited)                               2006              2005


    Current assets
           Cash and cash equivalents              $145,230          $144,381
           Short-term investments                   43,072            84,350
           Accounts receivable                      36,035            35,277
           Merchandise inventory                   979,995           964,694
           Prepaid expenses and other               43,064            38,098
           Deferred income taxes                    20,014             8,968
                Total current assets             1,267,410         1,275,768

    Property and equipment, net                    633,225           550,581
    Other long-term assets                          58,902            54,080
    Long-term investments                           14,100                --
    Total assets                                $1,973,637        $1,880,429

    Liabilities and stockholders' equity

    Current liabilities
           Accounts payable, accrued
            expenses and other                    $852,264          $809,363
           Income taxes payable                     38,223             4,773
                Total current liabilities          890,487           814,136

    Long-term debt                                      --            50,000
    Other long-term liabilities                    123,600           114,381
    Deferred income taxes                           98,828            94,510

    Commitments and contingencies

    Stockholders' equity                           860,722           807,402
            Total liabilities and
             stockholders' equity               $1,973,637        $1,880,429

                                Ross Stores, Inc.
                 Condensed Consolidated Statements of Cash Flows

                                                     Three Months Ended
                                                  April 29,         April 30,
     ($000, unaudited)                              2006              2005

     Cash Flows from Operating Activities
     Net earnings                                  $59,217           $50,050
     Adjustments to reconcile net earnings
      to net cash provided by operating
          Depreciation and amortization             24,261            22,092
          Deferred income taxes                     (1,270)            2,309
          Stock-based compensation                   6,905             3,961
          Tax benefit from equity
           issuance                                  5,088            13,708
          Excess tax benefits from
           stock-based compensation                 (2,547)               --
     Change in assets and liabilities:
          Merchandise inventory                    (41,904)         (111,582)
          Other current assets, net                (12,887)            4,535
          Accounts payable                          80,355           110,408
          Other current liabilities                (12,754)             (498)
          Other long-term, net                       1,001               263
          Net cash provided by operating
           activities                              105,465            95,246

     Cash Flows Used in Investing Activities
     Additions to property and equipment           (18,024)          (16,025)
     Purchases of investments, net                 (33,408)          (16,950)
          Net cash used in investing
           activities                              (51,432)          (32,975)

     Cash Flows Used in Financing Activities
     Repayment of long-term debt                   (50,000)               --
     Issuance of common stock related to
      stock plans                                    6,577            22,630
     Excess tax benefits from stock-based
      compensation                                   2,547                --
     Treasury stock purchased                       (2,190)           (5,833)
     Repurchase of common stock                    (48,882)          (42,637)
     Dividends paid                                 (8,622)           (7,381)
          Net cash used in financing
           activities                             (100,570)          (33,221)
     Net (decrease) increase in cash and
      cash equivalents                             (46,537)           29,050
     Cash and cash equivalents:
          Beginning of period                      191,767           115,331
          End of period                           $145,230          $144,381

     Non-Cash Investing Activities
     Straight-line rent capitalized in
      build-out period                                 $--              $611
     Change in fair value of investment
      securities                                     $(201)              $--

SOURCE Ross Stores, Inc.

CONTACT: John G. Call, Senior Vice President, Chief Financial Officer,
+1-925-965-4315, or Katie Loughnot, Vice President, Investor Relations,
+1-925-965-4509, or, both of Ross Stores, Inc./
/Web site: