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Ross Stores Reports Fourth Quarter and Fiscal 2004 Results

PLEASANTON, Calif., March 16, 2005 /PRNewswire-FirstCall via COMTEX/ -- Ross Stores, Inc. (Nasdaq: ROST) today reported net earnings for the 13 weeks ended January 29, 2005 of $49.4 million and earnings per share of $.33. These fourth quarter results are inclusive of a non-cash lease accounting charge of $2.3 million to net earnings, or approximately $.02 per share. For the 13 weeks ended January 31, 2004, the Company generated $71.3 million in net earnings and $.46 in earnings per share, which reflects the expected restatement of last year's results to reduce net earnings by about $2.4 million, or $.02 per share, from applying the corrective adjustment in lease accounting.

For the fiscal year ended January 29, 2005, net earnings totaled $168.5 million, and earnings per share were $1.12, which also includes the above-referenced non-cash corrective accounting adjustment of $.02 per share. In addition, fiscal 2004 results include a non-cash charge of approximately $.06 per share to write-down the value of the Company's former headquarters and distribution center in Newark, California to its estimated fair market value. For the fiscal year ended January 31, 2004, net earnings totaled $225.7 million, and earnings per share were $1.45, again reflecting a reduction of about $.02 per share due to the adjustment in lease accounting.

As previously announced, in response to recent SEC communications, the Company has adjusted the way it accounts for its operating leases, including the accounting for "rent holidays" and tenant allowances. The Company expects to report a cumulative, non-cash charge to earnings per share through fiscal 2002 of $.05. The Company plans to restate its financial statements for its fiscal years 2003 and prior, which will be reflected in the Company's Form 10-K for its fiscal year ended January 29, 2005.

Sales for the fourth quarter ended January 29, 2005 increased 10% to $1.212 billion with comparable store sales flat to the prior year. For the fiscal 2004 year ended January 29, 2005, sales increased 8% to $4.240 billion with comparable store sales down 1% from the prior year.

Michael Balmuth, Vice Chairman, President and Chief Executive Officer, commented, "Fiscal 2004 was a challenging year. Difficulties associated with the implementation and integration of new information systems and distribution centers resulted in below plan sales and a contraction in profit margins. As previously reported, by the end of fiscal 2004 we were essentially complete with the remediation of the remaining merchant reporting issues related to our Core Merchandising System. We also have initiatives in place to roll out engineered standards throughout our distribution network by early 2006, which we believe will eventually result in a gradual improvement of distribution productivity."

Mr. Balmuth continued, "The in-store merchandise imbalances that resulted from our system problems in 2004 continued to negatively impact both sales and operating margin during the fourth quarter. Gross margin declined about 450 basis points as a percent of sales, mainly due to higher markdowns, an increase in distribution costs, and the deleveraging effect on occupancy and buying expenses from flat same store sales during the period. The lower gross margin was partially offset by a 55 basis point decline in selling, general and administrative costs as a percent of sales, mainly due to lower incentive plan costs during the period."

"Strong operating cash flows continued to provide the resources to fund capital investments in new store growth and infrastructure, as well as the Company's stock repurchase and dividend programs. During fiscal 2004, $147 million in capital expenditures supported the addition of 71 net new Ross locations and ten dd's DISCOUNTS(SM) stores, along with continued investments in infrastructure. We also repurchased 6.5 million shares of common stock for an aggregate purchase of $175 million under the two-year $350 million program authorized by our Board of Directors in early 2004," Mr. Balmuth said.

"In addition, initial customer response to dd's DISCOUNTS(SM) appears to be favorable. During the third quarter of 2004, we opened the first ten of these new concept stores, which feature competitive everyday discounts on moderate department and discount store brands. We are targeting customers with household incomes of $30,000 to $40,000, one of the fastest-growing demographics in the country. Ultimately, we believe that dd's DISCOUNTS(SM) has the potential to become a chain of at least 500 locations," noted Mr. Balmuth.

The Company will host a conference call on Wednesday, March 16, 2005 at 11:00 a.m. Eastern time to communicate additional details concerning the fourth quarter and fiscal year 2004 results and management's outlook and plans for 2005. A real time audio webcast of the conference call will be available at An audio playback will be available at 402-220-5900, PIN #2342 through March 23, 2005.

Forward-Looking Statements: This press release and the recorded comments and transcript on the Company's website contain forward-looking statements regarding planned new store growth and expected sales and earnings levels and forward-looking statements concerning the Company's distribution centers and information systems, all of 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 "plan," "expect," "anticipate," "estimate," "believe," "forecast," "project," "guidance," "looking ahead" and similar expressions identify forward-looking statements. Risk factors for Ross Stores and dd's DISCOUNTS(SM) include, without limitation, the Company's ability to effectively operate and integrate various new supply chain and core merchandising systems, including generation of all necessary information in a timely and cost effective manner; migrating the Company's data center from Newark, California to Pleasanton, California in the first half of 2005 without unexpected delays or interruption in system availability; achieving and maintaining targeted levels of productivity and efficiency in its distribution centers; 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; and greater than planned operating costs. Other risk factors are detailed in the Company's Form 10-K for fiscal 2003. 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 2004 revenues of $4.2 billion. As of January 29, 2005, the Company operated 639 Ross stores and ten dd's DISCOUNTS(SM) stores, compared to 568 Ross 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(SM) 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


                                Three Months Ended       Twelve Months Ended
                              January 29, January 31,  January 29, January 31,
                                 2005        2004        2005        2004
    ($000, except stores and
      per share data,                         As                      As
       unaudited)                          Restated                Restated

    Sales                     $1,211,754  $1,098,749  $4,239,990  $3,920,583

    Costs and Expenses
      Cost of goods sold,
       including related
       buying, distribution
       and occupancy costs       952,431     814,243   3,280,689   2,921,942
      Selling, general and
       administrative            178,035     167,425     665,635     628,359
      Impairment of
       long-lived assets              --          --      15,818          --
      Interest expense
       (income), net                  19          11         915        (262)
        Total costs and
         expenses              1,130,485     981,679   3,963,057   3,550,039

    Earnings before taxes         81,269     117,070     276,933     370,544

    Provision for taxes on
     earnings                     31,887      45,774     108,392     144,883
    Net earnings                 $49,382     $71,296    $168,541    $225,661

    Earnings per share
      Basic                        $0.34       $0.47       $1.14       $1.48
      Diluted                      $0.33       $0.46       $1.12       $1.45

    Weighted average shares
     outstanding (000)
      Basic                      145,662     150,725     147,468     152,165
      Diluted                    148,563     154,030     150,380     155,151

    Stores open end of period        649         568         649         568

    The impact of the Company's
     lease accounting adjustment

    Increase in cost of goods
     sold, including related
     buying distribution
     and occupancy costs          $2,050      $4,007      $2,050      $4,007

    Increase in selling,
     general, and
     administrative                1,467          --         1,467        --

    Reduction in earnings
     before taxes                  3,517       4,007       3,517       4,007
    Reduction in provision
     for taxes on earnings         1,264       1,566       1,264       1,566

    Reduction in net earnings     $2,253      $2,441      $2,253      $2,441

    Reduction in diluted
     earnings per share            $0.02       $0.02       $0.02       $0.02

                                ROSS STORES, INC.

                                                 January 29,       January 31,
                                                    2005              2004
    ($000, unaudited)                                             As Restated


    Current Assets
           Cash and cash equivalents              $115,331          $201,546
           Short-term investments                   67,400                --
           Accounts receivable                      31,154            25,292
           Merchandise inventory                   853,112           841,491
           Prepaid expenses and other               46,750            29,467
           Deferred income taxes                    20,115            29,794
                Total Current Assets            $1,133,862        $1,127,590

    Property and equipment, net                    542,004           504,758
    Other long-term assets                          57,100            52,473
           Total Assets                         $1,732,966        $1,684,821


    Current Liabilities
           Accounts payable, accrued
            expenses and other                    $711,561          $703,721
           Income taxes payable                         --             9,146
                Total Current Liabilities         $711,561          $712,867

    Long-term debt                                  50,000            50,000
    Other long-term liabilities                    117,872            97,809
    Deferred income taxes                           97,447            79,709

    Stockholders' Equity                           756,086           744,436
            Total Liabilities and
             Stockholders' Equity               $1,732,966        $1,684,821

                                ROSS STORES, INC.

                                                          Year Ended
                                                 January 29,       January 31,
                                                    2005              2004
     ($000, unaudited)                                             As Restated

     Net earnings                                 $168,541          $225,661
     Adjustments to reconcile net
      earnings to net cash provided
      by operating activities:
          Depreciation and amortization             89,626            76,739
          Impairment of long-lived assets           15,818                --
          Deferred income taxes                     27,417            30,380
     Change in assets and liabilities:
          Merchandise inventory                    (11,621)         (124,973)
          Other current assets, net                (23,145)              494
          Accounts payable                           2,908            48,881
          Other current liabilities                 (5,123)           35,331
          Other long-term, net                      15,927            10,402
          Net cash provided by operating
           activities                              280,348           302,915

     Additions to property and equipment          (146,537)         (149,227)
     Purchases of short-term investments           (67,400)               --
     Proceeds from sale of Newark facility          17,400                --
          Net cash used in investing
           activities                             (196,537)         (149,227)

     Proceeds from long-term debt                       --            25,000
     Issuance of common stock related to
      stock plans, net                              23,391            28,351
     Tax benefit from equity issuance               14,805            15,089
     Treasury stock related to tax withholding      (7,962)           (3,656)
     Repurchase of common stock                   (175,000)         (150,003)
     Dividends paid                                (25,260)          (17,572)
          Net cash used in financing activities   (170,026)         (102,791)
     Net increase (decrease) in cash and
      cash equivalents                             (86,215)           50,897
     Cash and cash equivalents:
          Beginning of year                        201,546           150,649
          End of year                             $115,331          $201,546

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, or, both of Ross Stores, Inc.