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Ross Stores Reports Record Fourth Quarter and Fiscal 2006 Results
PLEASANTON, Calif., March 21 /PRNewswire-FirstCall/ -- Ross Stores, Inc. (Nasdaq: ROST) today reported that earnings per share for the 14 weeks ended February 3, 2007 grew 35% to $.66, compared to earnings per share of $.49 for the 13 weeks ended January 28, 2006. Net earnings for the 14 weeks ended February 3, 2007 were $93.1 million compared to $71.0 million for the 13 weeks ended January 28, 2006. Sales for the 14 weeks ended February 3, 2007 increased 14% to $1.608 billion. Comparable store sales for the 13 weeks ended January 27, 2007 grew 1% on top of a 6% increase in the prior year.
For the 53 weeks ended February 3, 2007, earnings per share grew 25% to $1.70 from $1.36 for the 52 weeks ended January 28, 2006. Net earnings for the 53 weeks ended February 3, 2007 were a record $241.6 million compared to $199.6 million for the 52 weeks ended January 28, 2006. Sales for the 53 weeks ended February 3, 2007 increased 13% to $5.570 billion. Same store sales for the 52 weeks ended January 27, 2007 were up 4% on top of a 6% increase in the prior year.
Michael Balmuth, Vice Chairman, President and Chief Executive Officer, commented, "We are pleased with the solid earnings growth we achieved in the fourth quarter and the year. Sales during the important holiday season were in line with expectations, benefiting from strength in the Mid Atlantic and Southwest regions and healthy gains in our Home and Shoe businesses. Operating margin in the fourth quarter grew by about 115 basis points, driven by a 60 basis point improvement in gross margin and a decline of about 55 basis points in selling, general and administrative expenses."
Mr. Balmuth continued, "For the full year, earnings benefited from healthy top line growth and a 40 basis point increase in operating margin. Improved profitability was driven mainly by increased gross margin, which benefited from lower markdowns, distribution costs and shortage accrual as a percent of sales, more than offsetting higher freight costs and stock option-related expenses. Selling, general and administrative expenses as a percent of sales were flat to the prior year."
"Strong operating cash flows during 2006 continued to provide the resources to fund capital investments in new store growth and infrastructure. During fiscal 2006, $224 million in capital expenditures supported the addition of 57 net new Ross locations, 6 dd's DISCOUNTS(R) stores, the buyout of the lease for our Southeast distribution center in South Carolina, and other various information technology and infrastructure investments," said Mr. Balmuth.
"We also continued to enhance stockholder value through our share repurchase and dividend programs. During 2006, we repurchased a total of 7.1 million shares of common stock, for an aggregate purchase price of $200 million. During 2007, we expect to complete the $200 million remaining authorization on our $400 million two-year stock repurchase program approved by our Board of Directors in the fourth quarter of 2005. In addition, in January 2007, our Board approved a 25% increase in our quarterly cash dividend to $.075 per share, our thirteenth consecutive annual dividend increase," Mr. Balmuth concluded.
The Company will host a conference call on Wednesday, March 21, 2007 at 11:00 a.m. Eastern time to communicate additional details concerning the fourth quarter and fiscal year 2006 results and management's outlook and plans for 2007. A real time audio webcast of the conference call will be available at www.rossstores.com. An audio playback will be available at (402) 220-5900, PIN #2342 through March 28, 2007.
Forward-Looking Statements: This press release, the recorded comments and other material on our website contain forward-looking statements 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 and dd's DISCOUNTS 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; 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 2005 and the Form 10-Q's and 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 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 February 3, 2007, the Company operated 771 Ross Dress for Less(R) ("Ross") stores and 26 dd's DISCOUNTS locations, compared to 714 Ross and 20 dd's DISCOUNTS locations at the end of fiscal 2005. 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 www.rossstores.com.
Ross Stores, Inc.
Condensed Consolidated Statements of Earnings
Three Months Ended Twelve Months Ended
February 3, January 28, February 3, January 28,
($000, except stores and
per share data,
unaudited) 2007 2006 2007 2006
Sales $1,608,437 $1,411,488 $5,570,210 $4,944,179
Costs and expenses
Cost of goods sold 1,230,741 1,088,539 4,317,527 3,852,591
Selling, general
and administrative 227,645 207,699 863,033 766,144
Interest income,
net (3,414) (1,559) (8,627) (2,898)
Total costs and
expenses 1,454,972 1,294,679 5,171,933 4,615,837
Earnings before taxes 153,465 116,809 398,277 328,342
Provision for taxes on
earnings 60,358 45,831 156,643 128,710
Net earnings $93,107 $70,978 $241,634 $199,632
Earnings per share
Basic $0.68 $0.50 $1.73 $1.38
Diluted $0.66 $0.49 $1.70 $1.36
Weighted average shares
outstanding (000)
Basic 137,550 142,439 139,488 144,325
Diluted 140,174 144,665 141,883 146,532
Dividends per share
Cash dividends
declared per share 0.135 0.120 0.255 0.220
Stores open at end of
period 797 734 797 734
Ross Stores, Inc.
Condensed Consolidated Balance Sheets
February 3, January 28,
($000, unaudited) 2007 2006
Assets
Current assets
Cash and cash equivalents $367,388 $191,767
Short-term investments 5,247 12,763
Accounts receivable 30,105 29,122
Merchandise inventory 1,051,729 938,091
Prepaid expenses and other 44,245 37,090
Deferred income taxes 16,242 20,014
Total current assets 1,514,956 1,228,847
Property and equipment, net 748,233 639,852
Other long-term assets 64,266 58,837
Long-term investments 31,136 11,202
Total assets $2,358,591 $1,938,738
Liabilities and stockholders' equity
Current liabilities
Accounts payable, accrued
expenses and other $1,049,680 $803,397
Income taxes payable 33,577 25,586
Short-term debt - 50,000
Total current liabilities 1,083,257 878,983
Long-term debt 150,000 -
Other long-term liabilities 129,303 122,926
Deferred income taxes 86,201 100,657
Commitments and contingencies
Stockholders' equity 909,830 836,172
Total liabilities and
stockholders' equity $2,358,591 $1,938,738
Ross Stores, Inc.
Condensed Consolidated Statements of Cash Flows
Year Ended
February 3, January 28,
($000, unaudited) 2007 2006
Cash Flows from Operating Activities
Net earnings $241,634 $199,632
Adjustments to reconcile net
earnings to net cash provided
by operating activities:
Depreciation and amortization 108,135 94,180
Stock-based compensation 26,680 16,668
Deferred income taxes (10,684) (2,590)
Tax benefit from equity
issuance 12,090 21,947
Excess tax benefits from stock-
based compensation (9,599) -
Change in assets and liabilities:
Merchandise inventory (113,638) (84,979)
Other current assets, net (8,138) 11,698
Accounts payable 221,644 21,448
Other current liabilities 34,417 94,670
Other long-term, net 4,326 2,517
Net cash provided by operating
activities 506,867 375,191
Cash Flows Used in Investing
Activities
Other additions to property and
equipment (136,626) (175,851)
Purchase of assets under lease (87,329) -
Proceeds from sales of property and
equipment 615 -
Purchases of investments (71,938) (313,569)
Sales of investments 59,337 357,024
Net cash used in investing
activities (235,941) (132,396)
Cash Flows Used in Financing
Activities
Payment of term debt (50,000) -
Proceeds from issuance of long-term
debt 150,000 -
Excess tax benefits from stock-based
compensation 9,599 -
Issuance of common stock related to
stock plans 32,517 45,982
Treasury stock purchased (3,787) (6,626)
Repurchase of common stock (200,000) (175,000)
Dividends paid (33,634) (30,715)
Net cash used in financing
activities (95,305) (166,359)
Net increase in cash and cash
equivalents 175,621 76,436
Cash and cash equivalents:
Beginning of period 191,767 115,331
End of period $367,388 $191,767
Non-Cash Investing Activities
Straight-line rent capitalization in
build-out period $- $3,290
Change in fair value of investment
securities $(183) $20
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, katie.loughnot@ros.com
Both of Ross Stores, Inc.
Web site: http://www.rossstores.com