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Ross Stores Reports Second Quarter Earnings

NEWARK, Calif., Aug 22, 2001 /PRNewswire/ -- Ross Stores, Inc. (Nasdaq: ROST) today reported net earnings for the 13 weeks ended August 4, 2001 of $35.4 million, compared to $35.9 million for the 13 weeks ended July 29, 2000. Earnings per share for the same period grew 2% to $.44, from $.43 in the prior year. Current year second quarter sales totaled $725 million, up 10% from the $657 million in sales for the quarter ended July 29, 2000. Comparable store sales for the period increased 1% over the prior year.

For the six months ended August 4, 2001, net earnings totaled $70.0 million, compared to $76.8 million for the same period in 2000. Earnings per share for the first six months declined 3% to $.87 from $.90 in the prior year. Sales for the first six months grew 7% to $1.399 billion, with same store sales down 1% for the period.

Michael Balmuth, Vice Chairman and Chief Executive Officer, said, "We are pleased that our sales trends improved each month during the second quarter despite the continued difficult economic and competitive environment. Comparable store sales were down 1%, flat and then up 5% in May, June and July, respectively, compared to the prior year. Over the past several months, we have strengthened our merchandise offerings with increased levels of nationally-recognized name brand product, a more balanced mix of ladies career vs. casual apparel, and more diversity in our home assortments. We believe that our customers are responding favorably to these changes, especially in light of the solid sales of early fall season merchandise in July."

Mr. Balmuth continued, "Gross margin declined about 40 basis points during the second quarter. As a percent of sales, slightly higher freight costs, a lower markup and some loss of leverage on occupancy expense were partially offset by lower markdowns, which benefited from tight inventory controls. General, selling and administrative expenses rose about 50 basis points, primarily due to higher store payroll, benefit and distribution costs combined with loss of leverage from the below plan same store sales. As a result, operating margin for the second quarter fell to 8.2%, compared to 9.1% for the same period in 2000."

Mr. Balmuth noted, "During the first six months of the year, we continued to invest free cash flows in our stock repurchase program. As of August 4, 2001, we had repurchased a total of 12.3 million shares for an aggregate purchase price of $216 million under our two-year, $300 million buyback program authorized in February of 2000. We ended the quarter with 79.8 million shares of common stock outstanding."

"Our expansion program remains on schedule. We are pleased with the performance of the 23 new stores we opened to date in 2001, including five locations in our new southeast markets of Georgia, North and South Carolina. We expect to add another 22 new stores in the third quarter, our largest group of store openings this year. After closing four older locations, we plan to end fiscal 2001 with about 450 stores in 22 states," said Mr. Balmuth.

The company will provide additional details concerning its second quarter results and business outlook on a conference call to be held on Wednesday, August 22, 2001 at 11:00 a.m. EDT. A listen-only live recording of the conference call can be accessed by dialing 973-321-1030 or going to the company's website at A playback of the call will also be available at the web site address through the end of September or by calling 402-220-5900, PIN #2342 until August 29, 2001.

Forward-Looking Statements: This press release contains certain forward-looking statements 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 "expect," "anticipate," "estimate," "believe," "forecast," "projected" and similar expressions identify forward-looking statements. Risk factors include obtaining acceptable new store locations, competitive pressures in the apparel industry, changes in economic conditions, changes in the level of consumer spending on or preferences in apparel or home-related merchandise, the availability of dependable energy resources at reasonable costs, unseasonable weather trends, and greater than planned operating costs. Other risk factors are detailed in the company's Form 10-K for fiscal 2000. 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. operates a chain of off-price retail stores offering first quality, in-season, branded apparel and apparel-related merchandise for the entire family at prices that average 20% to 60% less than department and specialty stores, as well as merchandise for the home at similar savings. The company had 431 stores in operation August 4, 2001, compared to 392 stores at the end of the same period last year.

                              ROSS STORES, INC.

                                 Three Months Ended      Six Months Ended
                              August 4,     July 29,  August 4,    July 29,
                                 2001         2000       2001        2000
    ($000, except per share
     data, unaudited)

    Sales                      $724,591     $657,035  $1,398,950 $1,290,463

    Costs and Expenses
      Cost of goods sold and
       occupancy                505,393      455,797     969,921    890,222
      General, selling and
       administrative           147,989      130,646     287,226    252,092
      Depreciation and
       amortization              12,077       10,772      24,077     21,250
      Interest expense (income)   1,050          835       2,705        840
                                666,509      598,050   1,283,929  1,164,404

    Earnings before income
     taxes                       58,082       58,985     115,021    126,059

    Provision for taxes on
     earnings                    22,710       23,063      44,973     49,289
    Net earnings                $35,372      $35,922     $70,048    $76,770

    Earnings per share
      Basic                       $0.44        $0.43       $0.87      $0.91
      Diluted                     $0.44        $0.43       $0.87      $0.90

    Weighted average shares
      Basic                      79,967       82,753      80,122     84,020
      Diluted                    80,989       83,530      80,967     84,853

    Stores open end of period       431          392         431        392

                              ROSS STORES, INC.

                                                    August 4,      July 29,
    ($000, unaudited)                                 2001           2000


    Current Assets
      Cash and cash equivalents                      $38,956        $41,948
      Accounts receivable                             20,364         16,217
      Merchandise inventory                          612,415        577,569
      Other current assets                            22,485         19,061
        Total Current Assets                        $694,220       $654,795

      Property and equipment, net                    312,528        283,492
      Lease rights, deferred income taxes
       and other assets                               40,273         62,338
                                                  $1,047,021     $1,000,625


    Current Liabilities

      Accounts payable, accrued expenses
       and other                                    $408,210       $419,403
      Income taxes payable                            42,217         20,071
        Total Current Liabilities                   $450,427       $439,474

      Long-term debt                                  50,000         80,000
      Other liabilities                               43,979         53,704

    Stockholders' Equity                             502,615        427,447
                                                  $1,047,021     $1,000,625

SOURCE Ross Store, Inc.

CONTACT: John G. Call, Senior Vice President, Chief Financial Officer, +1-510-505-4315, or Katie Loughnot, Director, Investor Relations, +1-510-505-4509, or, both of Ross Stores, Inc.