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Ross Stores Reports Record Third Quarter Earnings; Reaffirms Fourth Quarter 2009 Guidance

PLEASANTON, Calif., Nov. 19 /PRNewswire-FirstCall/ -- Ross Stores, Inc. (Nasdaq: ROST) today reported that earnings per share for the 13 weeks ended October 31, 2009 increased 91% to $.84, from $.44 for the 13 weeks ended November 1, 2008. Net earnings for the third quarter ended October 31, 2009 grew 83% to a record $105.1 million, up from $57.3 million for the third quarter ended November 1, 2008. Fiscal 2009 third quarter sales increased 12% to $1.744 billion, with comparable store sales up a strong 8% over last year.

For the nine months ended October 31, 2009, earnings per share increased 52% to $2.39, from $1.57 for the nine months ended November 1, 2008. Net earnings for the year-to-date period in 2009 grew 44% to a record $299.9 million, up from $208.1 million in the prior year period. Sales for the first nine months of 2009 increased 10% to $5.204 billion, with comparable store sales up 5% on top of a 3% gain in the prior year period.

Michael Balmuth, Vice Chairman, President and Chief Executive Officer, commented, "We are very pleased with our robust sales and earnings growth in the third quarter and first nine months, both of which were well ahead of plan. Our ability to deliver compelling bargains, while operating our business on much lower inventories, remains the primary driver of these outstanding results. In addition, shortage results from our annual physical inventory during the quarter were much better than expected, mainly due to the ongoing successful implementation of our shortage control initiatives. Shoes and Dresses continued to be the top merchandise categories while the Southeast and Mid-Atlantic remained the strongest regions."

Mr. Balmuth continued, "Third quarter operating margin grew about 385 basis points to 9.9%, due to 340 basis points of higher gross margin and a 45 basis point decline in selling, general and administrative costs. The gross margin improvement was from a combination of healthy merchandise gross margin gains, much lower than expected shortage results, a decline in freight and distribution expenses as a percent of sales, and leverage on occupancy costs."

Mr. Balmuth also noted, "As we ended the third quarter, 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 nine months of fiscal 2009, we repurchased 5.8 million shares of common stock for an aggregate purchase price of $230 million. We are on track to complete the remaining $70 million stock repurchase authorization by the end of fiscal 2009."

Looking ahead, Mr. Balmuth said, "As we enter the important holiday season, we remain well positioned as a value retailer, and our stores are stocked with fresh and exciting assortments of terrific name-brand bargains. That said, with a still uncertain economic climate, we believe it is prudent to maintain our prior forecast for both sales and earnings."

"For the 13 weeks ending January 30, 2010, we continue to forecast same store sales gains of 5% to 6% and earnings per share in the range of $.88 to $.94. For the fiscal year ending January 30, 2010, we now project earnings per share to increase 40% to 43% to $3.27 to $3.33, up from $2.33 in fiscal 2008," concluded Mr. Balmuth.

The Company will provide additional details concerning its third quarter results, fourth quarter and fiscal 2009 guidance, and business outlook on a conference call to be held on Thursday, November 19, 2009 at 11:00 a.m. Eastern time. Participants may listen to a real time audio webcast of the conference call by visiting the Investors section of the Company's website, located at A recorded version of the call will be available at the website address and via a telephone recording until 8:00 p.m. Eastern time on November 26, 2009 at (706) 645-9291, PIN # 86370218.

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-Qs and 8-Ks 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 October 31, 2009 the Company operated 955 Ross Dress for Less(®) ("Ross") stores and 53 dd's DISCOUNTS(®) locations, compared to 906 Ross and 57 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         Nine Months Ended
                               ------------------         -----------------
                          October 31,   November 1,  October 31,  November 1,
    ($000, except stores         2009          2008         2009         2008
     and per share data,         ----          ----         ----         ----

    Sales                  $1,744,139    $1,555,287   $5,204,374   $4,752,027

    Costs and expenses
      Costs of goods sold   1,284,852     1,198,451    3,864,697    3,635,230
      Selling, general and
       administrative         286,511       262,534      844,699      779,045
      Interest expense
       (income), net            1,943           (15)       4,989       (2,688)
                                -----           ---        -----       ------
        Total costs and
         expenses           1,573,306     1,460,970    4,714,385    4,411,587

    Earnings before taxes     170,833        94,317      489,989      340,440
    Provision for taxes
     on earnings               65,753        37,047      190,115      132,386
                               ------        ------      -------      -------
    Net earnings             $105,080       $57,270     $299,874     $208,054
                             ========       =======     ========     ========

    Earnings per share
      Basic                     $0.86         $0.44        $2.43        $1.60
      Diluted                   $0.84         $0.44        $2.39        $1.57

    Weighted average shares
     outstanding (000)
      Basic                   122,377       128,930      123,512      130,119
      Diluted                 124,648       131,099      125,592      132,324

    Dividends per share
      Cash dividends
       declared per
       share                   $0.110        $0.095       $0.220       $0.190

    Stores open at end of
     period                     1,008           963        1,008          963

                                Ross Stores, Inc.
                     Condensed Consolidated Balance Sheets

                                         October 31,     November 1,
    ($000, unaudited)                           2009            2008
    -----------------                           ----            ----

    Current Assets
      Cash and cash equivalents             $576,162        $231,241
      Short-term investments                     979           2,833
      Accounts receivable                     47,496          47,104
      Merchandise inventory                1,014,638       1,093,082
      Prepaid expenses and other              63,048          62,591
      Deferred income taxes                   11,737          19,805
                                              ------          ------
        Total current assets               1,714,060       1,456,656

    Property and equipment, net              945,734         931,891
    Long-term investments                     18,974          39,072
    Other long-term assets                    62,702          55,020
                                              ------          ------
    Total assets                          $2,741,470      $2,482,639
                                          ==========      ==========

    Liabilities and Stockholders' Equity

    Current Liabilities
      Accounts payable                      $767,771        $686,401
      Accrued expenses and other             235,605         243,509
      Accrued payroll and benefits           193,221         168,845
      Income taxes payable                    11,275               -
                                              ------             ---
        Total current liabilities          1,207,872       1,098,755

    Long-term debt                           150,000         150,000
    Other long-term liabilities              171,666         162,134
    Deferred income taxes                    104,739          85,860

    Commitments and contingencies

    Stockholders' Equity                   1,107,193         985,890
                                           ---------         -------
    Total liabilities and
     stockholders' equity                 $2,741,470      $2,482,639
                                          ==========      ==========

                                  Ross Stores, Inc.
                  Condensed Consolidated Statements of Cash Flows

                                                        Nine Months Ended
                                                    October 31,  November 1,
    ($000, unaudited)                                      2009         2008
    -----------------                                      ----         ----

    Cash Flows From Operating Activities
    Net earnings                                       $299,874     $208,054
    Adjustments to reconcile net earnings to net
     cash provided by operating activities:
      Depreciation and amortization                     115,188      100,919
      Stock-based compensation                           19,232       17,156
      Deferred income taxes                               9,838        6,795
      Tax benefit from equity issuance                    7,773        8,105
      Excess tax benefit from stock-based
       compensation                                      (6,184)      (5,850)
      Change in assets and liabilities:
        Merchandise inventory                          (133,580)     (67,787)
        Other current assets                            (14,133)     (19,272)
        Accounts payable                                245,034       61,982
        Other current liabilities                        36,564       48,646
        Other long-term, net                              4,276       10,085
                                                          -----       ------
        Net cash provided by operating activities       583,882      368,833
                                                        -------      -------

    Cash Flows From Investing Activities
      Additions to property and equipment              (124,175)    (175,468)
      Proceeds from sales of property and equipment          10          117
      Purchases of investments                           (2,904)     (32,942)
      Proceeds from investments                          23,223       33,833
                                                         ------       ------
        Net cash used in investing activities          (103,846)    (174,460)
                                                       --------     --------

    Cash Flows From Financing Activities
      Excess tax benefit from stock-based
       compensation                                       6,184        5,850
      Issuance of common stock related to stock
       plans                                             45,392       45,599
      Treasury stock purchased                           (5,428)      (3,560)
      Repurchase of common stock                       (229,817)    (231,404)
      Dividends paid                                    (41,560)     (37,197)
                                                        -------      -------
        Net cash used in financing activities          (225,229)    (220,712)
                                                       --------     --------

    Net increase (decrease) in cash and cash
     equivalents                                        254,807      (26,339)

    Cash and cash equivalents:
      Beginning of period                               321,355      257,580
                                                        -------      -------
      End of period                                    $576,162     $231,241
                                                       ========     ========

    Supplemental Cash Flow Disclosures
      Interest paid                                      $4,834       $4,834
      Income taxes paid                                $166,382     $139,215

    Non-Cash Investing Activities
      Increase (decrease) in fair value of
       investment securities                             $1,462      $(4,069)

SOURCE Ross Stores, Inc.

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