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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 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

                                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


    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
     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
     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.

John G. Call, Senior Vice President, Chief Financial Officer
Katie Loughnot, Vice President, Investor Relations
Both of Ross Stores, Inc.
Web site: