Ross Stores Reports Second Quarter Earnings and Forecasted Second Half 2005 Sales and EPS Ranges
PLEASANTON, Calif., Aug. 17 /PRNewswire-FirstCall/ -- Ross Stores, Inc. (ROST) today reported earnings per share for the 13 weeks ended July 30, 2005 of $.29, compared to $.21 as restated for the 13 weeks ended July 31, 2004. Net earnings for the second quarter ended July 30, 2005 were $42.3 million, compared to $32.2 million as restated for the 13 weeks ended July 31, 2004. Earnings results for the quarter ended July 31, 2004 included a non-cash after-tax charge of $11.0 million, or $.07 per share, related to the write- down of the Company's former corporate headquarters and distribution center in Newark, California. Current year second quarter sales rose 16% to $1.172 billion, from $1.009 billion for the quarter ended July 31, 2004. Comparable store sales for the period increased 7% over the prior year.
For the six months ended July 30, 2005, earnings per share totaled $.62, compared to $.53 as restated for the six months ended July 31, 2004. Net earnings for the six months ended July 30, 2005 were $92.3 million, compared to $80.4 million as restated for the same period in the prior year. Again, results for the first six months of 2004 included the charge relating to the former headquarters and distribution center. Sales for the first six months of 2005 rose 15% to $2.296 billion, with same store sales up 5% over the prior year period.
Michael Balmuth, Vice Chairman, President and Chief Executive Officer, commented, "Sales trends improved during the quarter, led by strength in Juniors and Shoes, which we believe bodes well for our back-to-school business. At the same time, operating margin continued to be affected by higher-than-expected markdowns combined with an increase in distribution center costs as a percent of sales. While partially offset by leverage on occupancy and other expenses from the 7% gain in same store sales, these factors resulted in an approximate 120 basis point decline in operating margin for the second quarter of 2005, excluding the prior year impact of the aforementioned write-down."
"Markdowns year-to-date have consistently been higher than planned. Although residual inventory issues from 2004 and modest volatility around actual-versus-plan sales had an impact on markdown activities, we believe that the internal learning curve related to numerous new system processes, procedures and information flow also has contributed to higher markdown levels. We believe we have addressed most of these transitional issues and that their overall impact on margins should diminish going forward. Nevertheless, as previously reported, higher-than-expected clearance balances at the end of the second quarter are expected to pressure both third quarter gross margin and earnings per share," said Mr. Balmuth.
The Company now projects the following same store sales and earnings per share ranges for the balance of fiscal 2005:
-- For the third quarter ending October 29, 2005, the Company expects same store sales to increase 6% to 7% on top of the 3% decline in the prior year and forecasts earnings per share to be in the range of $.28 to $.30, compared to $.25 as restated for the third quarter ended October 30, 2004.
-- For the fourth quarter ending January 28, 2006, the Company expects same store sales to increase 2% to 3% on top of flat comparable store sales in the prior year and forecasts earnings per share to be in the range of $.45 to $.48, compared to $.35 as restated in the fourth quarter ended January 29, 2005.
Mr. Balmuth concluded, "Solid cash flows year-to-date continue to provide the resources to fund capital investments in new store growth and infrastructure, as well as the Company's stock repurchase and dividend programs. During the first six months of 2005, we repurchased 3.2 million shares of common stock for an aggregate of $89.0 million and ended the quarter with 146.2 million shares of common stock outstanding. Approximately $86 million remains available under the current stock repurchase authorization, which we expect to complete by the end of fiscal 2005."
The Company will provide additional details concerning its second quarter results, projected second half guidance and its longer-term business outlook on a conference call to be held on Wednesday, August 17, 2005 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 www.rossstores.com. A recorded version of the call will also be available until at least the end of the month at the website address and via a telephone recording through August 24, 2005 at 402-220-5900, PIN #2342.
Forward-Looking Statements: This press release and the conference call recording and transcript on the Company's website contain forward-looking statements regarding planned new store growth and expected sales and earnings levels and forward-looking statements concerning the Company's distribution centers and information systems, all of 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 "plan," "expect," "anticipate," "estimate," "believe," "forecast," "projected," "guidance," "looking ahead" and similar expressions identify forward-looking statements. Risk factors for Ross Stores and dd's DISCOUNTS(R) include, without limitation, the Company's ability to effectively operate and integrate various new supply chain and core merchandising systems, including generation of all necessary information in a timely and cost effective manner; achieving and maintaining targeted levels of productivity and efficiency in its distribution centers; 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 and greater than planned operating costs. Other risk factors are detailed in the Company's Form 10-K for fiscal 2004. 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., a Fortune 500 and Nasdaq 100 (ROST) company headquartered in Pleasanton, California, is the nation's second largest off- price company with fiscal 2004 revenues of $4.2 billion. As of July 30, 2005, the Company operated 682 Ross stores and 13 dd's DISCOUNTS(R) stores, compared to 616 Ross locations at the end of the same period last year. Ross Stores 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(R) 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 Six Months Ended July 30, July 31, July 30, July 31, ($000, except stores and per share data, unaudited) 2005 2004 2005 2004 Sales $1,171,862 $1,008,600 $2,295,799 $2,000,492 Costs and Expenses Cost of goods sold, including related buying, distribution and occupancy costs 916,214 773,716 1,775,530 1,524,882 Selling, general and administrative 186,604 163,651 369,340 325,147 Impairment of long-lived assets 0 18,000 0 18,000 Interest (income) expense, net (580) 336 (878) 506 Total costs and expenses 1,102,238 955,703 2,143,992 1,868,535 Earnings before taxes 69,624 52,897 151,807 131,957 Provision for taxes on earnings 27,345 20,683 59,478 51,596 Net earnings $42,279 $32,214 $92,329 $80,361 Earnings per share Basic $0.29 $0.22 $0.63 $0.54 Diluted $0.29 $0.21 $0.62 $0.53 Weighted average shares outstanding (000) Basic 145,102 148,106 145,555 148,998 Diluted 147,321 150,903 147,894 152,148 Stores open end of period 695 616 695 616 ROSS STORES, INC. CONDENSED CONSOLIDATED BALANCE SHEETS July 30, July 31, 2005 2004 ($000, unaudited) As Restated ASSETS Current Assets Cash and cash equivalents $119,397 $64,353 Short-term investments 25,800 44,000 Accounts receivable 35,371 27,876 Merchandise inventory 975,846 897,542 Prepaid expenses and other 51,060 53,711 Deferred income taxes 8,968 25,047 Total current assets $1,216,442 $1,112,529 Property and equipment, net 608,874 509,681 Other long-term assets 53,025 58,007 Total assets $1,878,341 $1,680,217 LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities Accounts payable, accrued expenses and other $807,235 $727,089 Income taxes payable -- (2,248) Total current liabilities $807,235 $724,841 Long-term debt 50,000 50,000 Other long-term liabilities 115,127 110,023 Deferred income taxes 96,767 75,006 Stockholders' equity 809,212 720,347 Total liabilities and stockholders' equity $1,878,341 $1,680,217 ROSS STORES, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS Six Months Ended July 30, July 31, 2005 2004 ($000, unaudited) As Restated CASH FLOWS FROM OPERATING ACTIVITIES Net earnings $92,329 $80,361 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization 52,764 45,619 Deferred income taxes 4,566 (5,173) Tax benefit from equity issuance 17,430 7,473 Impairment of long-lived assets -- 18,000 Change in assets and liabilities: Merchandise inventory (122,734) (56,051) Other current assets, net (8,521) (26,827) Accounts payable 89,727 30,033 Other current liabilities 13,283 (11,633) Other long-term, net 1,147 18,967 Net cash provided by operating activities 139,991 100,769 CASH FLOWS USED IN INVESTING ACTIVITIES Additions to property and equipment (96,200) (60,118) Sales (purchases) of short-term investments, net 41,600 (44,000) Net cash used in investing activities (54,600) (104,118) CASH FLOWS USED IN FINANCING ACTIVITIES Issuance of common stock related to stock plans 28,391 11,218 Treasury stock purchased (5,960) (8,447) Repurchase of common stock (89,009) (123,847) Dividends paid (14,747) (12,768) Net cash used in financing activities (81,325) (133,844) Net increase (decrease) in cash and cash equivalents 4,066 (137,193) Cash and cash equivalents: Beginning of period 115,331 201,546 End of period $119,397 $64,353 NON-CASH INVESTING ACTIVITIES Straight-line rent capitalization in build-out period $1,608 $3,439
SOURCE Ross Stores, Inc.
John G. Call
Senior Vice President, Chief Financial Officer
Vice President, Investor Relations
both of Ross Stores, Inc.
Web site: http://www.rossstores.com