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Ross Stores Reports Record Second Quarter 2009 Results, With Earnings Per Share Up 52%, Raises Third and Fourth Quarter 2009 Sales and EPS Targets

PLEASANTON, Calif., Aug. 20 /PRNewswire-FirstCall/ -- Ross Stores, Inc. (Nasdaq: ROST) today reported that earnings per share for the 13 weeks ended August 1, 2009 rose 52% to $.82, from $.54 for the 13 weeks ended August 2, 2008. Net earnings for the second quarter of 2009 grew 45% to a record $103.4 million, from $71.3 million in the second quarter of 2008. Sales for the 13 weeks ended August 1, 2009 increased 8% to $1.769 billion, with comparable store sales up 3% on top of a strong 6% gain in the prior year.

For the six months ended August 1, 2009, earnings per share rose 37% to $1.55, from $1.13 for the six months ended August 2, 2008. Net earnings for the six months ended August 1, 2009 grew 29% to a record $194.8 million, compared to $150.8 million in the prior year period. Sales for the first six months of 2009 increased 8% to $3.460 billion, with comparable store sales up 3% on top of a 5% gain last year.

Michael Balmuth, Vice Chairman, President and Chief Executive Officer, commented, "We are extremely pleased with our healthy sales and robust earnings gains in the second quarter and first six months, both of which were well ahead of plan. This outstanding performance is even more notable considering the ongoing difficult macro economic and retail climate. Our ability to deliver compelling bargains, while operating our business on much lower inventories, remains the primary driver of our strong results. The best performing merchandise categories during the second quarter and year to date periods were Dresses and Shoes, while the strongest regions were the Mid-Atlantic and Southeast."

Mr. Balmuth continued, "Second quarter operating margin grew about 260 basis points to 9.7%, driven by a 240 basis point improvement in gross margin and a 20 basis point decrease in selling, general and administrative costs versus the prior year. The gross margin improvement was mainly due to substantial gains in merchandise margin and much lower freight costs as a percent of sales."

Mr. Balmuth also noted, "As we ended the first half of the year, our balance sheet and cash flows remained healthy. We continued to return capital to stockholders through our stock repurchase and dividend programs. During the first six months of fiscal 2009, we repurchased 4.2 million shares of common stock for an aggregate purchase price of $154 million. We are on track to complete the remaining $146 million stock repurchase authorization by the end of fiscal 2009."

Looking ahead, Mr. Balmuth said, "We are optimistic about the important back-to-school and holiday periods for a number of reasons. We delivered exceptional sales and earnings growth for the first six months on top of strong results the prior year and are up against much easier comparisons in the second half. More importantly, we are well positioned in the value retailing sector and excited about our merchandise offerings and the availability of great product as we enter the fall season. As a result, we are now forecasting same store sales gains of 5% to 6% for both the third and fourth quarters, up from our previous guidance for a 2% to 3% increase."

Based on these updated sales targets, the Company is projecting third and fourth quarter earnings per share to be in the ranges of $.57 to $.63 and $.88 to $.94, respectively. These 2009 ranges compare to earnings per share of $.44 and $.76 in the 2008 third and fourth quarters, respectively. For the fiscal year ending January 30, 2010, the Company now projects earnings per share to increase 29% to 34% to $3.00 to $3.12, up from $2.33 in fiscal 2008.

The Company will provide additional details concerning its second quarter results and management's outlook for the third and fourth quarters on a conference call to be held Thursday, August 20, 2009 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 A recorded version of the call will also be available until the end of October at the website address and via a telephone recording through 8:00 p.m. Eastern time on Thursday, August 27, 2009 at (706) 645-9291, PIN # 86370053.

Forward-Looking Statements: This press release and the recorded comments and transcript on our corporate website contain forward-looking statements regarding expected sales and earnings levels in future periods 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," "target," "anticipate," "estimate," "believe," "forecast," "projected," "guidance," "looking ahead" and similar expressions identify forward-looking statements. Risk factors for Ross Dress for Less ("Ross") and dd's DISCOUNTS include, without limitation, competitive pressures in the apparel or home-related merchandise industry; changes in the level of consumer spending on or preferences for apparel or home-related merchandise, including the potential impact from uncertainty in financial and credit markets and the severity and duration of the current recession; 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 attract and retain personnel with the retail talent necessary to execute our strategies; our ability to effectively operate our various supply chain, core merchandising and other information systems; our ability to improve our merchandising capabilities through the development and implementation of new processes and systems enhancements; achieving and maintaining targeted levels of productivity and efficiency in our distribution centers; and obtaining acceptable new store locations. Other risk factors are detailed in our SEC filings including, without limitation, the Form 10-K for fiscal 2008 and Form 10-Q and 8-K's for fiscal 2009. 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 retailer with fiscal 2008 revenues of $6.5 billion. As of August 1, 2009 the Company operated 939 Ross Dress for Less ("Ross") stores and 51 dd's DISCOUNTS locations, compared to 888 Ross and 55 dd's DISCOUNTS locations at the end of the same period last year. 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 at

                                  Ross Stores, Inc.
                    Condensed Consolidated Statements of Earnings

                                   Three Months Ended      Six Months Ended
                                  ---------------------   ------------------
    ($000, except stores and per  August 1,  August 2,   August 1,  August 2,
         share data, unaudited)      2009       2008        2009       2008
     ----------------------------    ----       ----        ----       ----

    Sales                        $1,768,636 $1,640,412  $3,460,235 $3,196,740

    Costs and expenses
      Costs of goods sold         1,311,136  1,255,222   2,579,845  2,436,779
      Selling, general and
       administrative               286,158    268,839     558,188    516,511
      Interest expense (income),
       net                            1,390     (1,052)      3,046     (2,673)
                                      -----     ------       -----     ------
        Total costs and expenses  1,598,684  1,523,009   3,141,079  2,950,617

    Earnings before taxes           169,952    117,403     319,156    246,123
    Provision for taxes on
     earnings                        66,545     46,104     124,362     95,339
                                     ------     ------     -------     ------
    Net earnings                   $103,407    $71,299    $194,794   $150,784
                                   ========    =======    ========   ========

    Earnings per share
      Basic                           $0.84      $0.55       $1.57      $1.15
      Diluted                         $0.82      $0.54       $1.55      $1.13

    Weighted average shares
     outstanding (000)
      Basic                         123,467    130,110     124,080    130,714
      Diluted                       125,658    132,433     126,063    132,914

    Dividends per share
      Cash dividends declared per
       share                          $0.11      $0.10       $0.11      $0.10

    Stores open at end of period        990        943         990        943

                             Ross Stores, Inc.
                   Condensed Consolidated Balance Sheets

                                         August 1,     August 2,
    ($000, unaudited)                       2009          2008
    -----------------                       ----          ----

    Current Assets
      Cash and cash equivalents           $520,424      $309,554
      Short-term investments                 1,135         2,821
      Accounts receivable                   49,375        49,423
      Merchandise inventory                926,244     1,018,726
      Prepaid expenses and other            63,926        63,223
      Deferred income taxes                 13,669        20,883
                                            ------        ------
        Total current assets             1,574,773     1,464,630

    Property and equipment, net            942,745       906,533
    Long-term investments                   21,752        44,176
    Other long-term assets                  61,379        63,078
                                            ------        ------
    Total assets                        $2,600,649    $2,478,417
                                        ==========    ==========

    Liabilities and Stockholders' Equity

    Current Liabilities
      Accounts payable                    $702,977      $682,565
      Accrued expenses and other           219,479       234,423
      Accrued payroll and benefits         172,913       153,077
      Income taxes payable                  11,268             -
                                            ------           ---
        Total current liabilities        1,106,637     1,070,065

    Long-term debt                         150,000       150,000
    Other long-term liabilities            168,558       168,814
    Deferred income taxes                  106,032        83,418

    Commitments and contingencies

    Stockholders' Equity                 1,069,422     1,006,120
                                         ---------     ---------
    Total liabilities and
     stockholders' equity               $2,600,649    $2,478,417
                                        ==========    ==========

                              Ross Stores, Inc.
               Condensed Consolidated Statements of Cash Flows

                                                      Six Months Ended
                                                    August 1,  August 2,
    ($000, unaudited)                                  2009       2008
    -----------------                                  ----       ----

    Cash Flows From Operating Activities
    Net earnings                                     $194,794   $150,784
    Adjustments to reconcile net earnings
     to net cash provided by operating activities:
      Depreciation and amortization                    75,502     65,866
      Stock-based compensation                         13,017     11,330
      Deferred income taxes                             9,400      3,275
      Tax benefit from equity issuance                  5,256      6,608
      Excess tax benefit from stock-based
       compensation                                    (4,008)    (4,714)
      Change in assets and liabilities:
        Merchandise inventory                         (45,186)     6,569
        Other current assets                          (16,890)   (23,257)
        Accounts payable                              180,240     58,145
        Other current liabilities                        (678)    23,200
        Other long-term, net                            2,521      8,750
                                                        -----      -----
        Net cash provided by operating activities     413,968    306,556
                                                      -------    -------

    Cash Flows From Investing Activities
      Additions to property and equipment             (80,731)  (113,472)
      Proceeds from sales of property and equipment        10        117
      Net proceeds from (purchases of) investments     16,811     (1,950)
                                                       ------     ------
        Net cash used in investing activities         (63,910)  (115,305)
                                                      -------   --------

    Cash Flows From Financing Activities
      Excess tax benefit from stock-based
       compensation                                     4,008      4,714
      Issuance of common stock related to stock
       plans                                           31,745     36,470
      Treasury stock purchased                         (4,546)    (2,907)
      Repurchase of common stock                     (154,371)  (152,631)
      Dividends paid                                  (27,825)   (24,923)
                                                      -------    -------
        Net cash used in financing activities        (150,989)  (139,277)
                                                     --------   --------

    Net increase in cash and cash equivalents         199,069     51,974

    Cash and cash equivalents:
      Beginning of period                             321,355    257,580
                                                      -------    -------
      End of period                                  $520,424   $309,554
                                                     ========   ========

    Supplemental Cash Flow Disclosures
      Interest paid                                    $4,834     $4,834
      Income taxes paid                              $105,012   $109,099

    Non-Cash Investing Activities
      Increase (decrease) in fair value of
       investment securities                             $886    $(1,817)

SOURCE Ross Stores, Inc.

John G. Call,
Senior Vice President,
Chief Financial Officer,
Bobbi Chaville,
Senior Director,
Investor Relations,
both of Ross Stores, Inc.

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