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Ross Stores Reports Second Quarter Earnings and Provides Second Half 2007 Sales And Earnings Guidance

PLEASANTON, Calif., Aug. 22 /PRNewswire-FirstCall/ -- Ross Stores, Inc. (Nasdaq: ROST) today reported earnings per share for the 13 weeks ended August 4, 2007 of $.37 and net earnings of $50.9 million. For the 13 weeks ended July 29, 2006, earnings per share were $.32 and net earnings totaled $45.4 million. Fiscal 2007 second quarter sales increased 10% to $1.445 billion, with comparable store sales for the period up 2% on top of a 4% increase in the prior year.

For the six months ended August 4, 2007, earnings per share were $.85 and net earnings totaled $117.9 million. For the six months ended July 29, 2006, earnings per share were $.73 and net earnings totaled $104.6 million. Sales for the first six months of 2007 increased 10% to $2.855 billion, with comparable store sales up 1% on top of a 5% gain in the prior year.

Michael Balmuth, Vice Chairman, President and Chief Executive Officer, commented, "The strongest sales gains during the second quarter were in the Northwest and the Mid Atlantic, while Dresses and Home were the best-performing merchandise categories. As a percent of sales, lower general and administrative and occupancy expenses more than offset higher freight, distribution and store costs, resulting in a 20 basis point improvement in operating margin for the quarter."

Mr. Balmuth also noted, "Our balance sheet and cash flows remained healthy as we ended the first half of the year. We continued to return capital to stockholders through our stock repurchase and dividend programs. During the first six months of 2007, we repurchased 3.1 million shares of common stock for an aggregate of $101 million. We are on track to complete during 2007 the remaining $99 million of our two-year $400 million stock repurchase program authorized by our Board of Directors."

Mr. Balmuth continued, "Looking ahead, we are slightly more cautious now in our second half outlook as a result of a combination of macro economic factors, recent results and projections from other retailers, and our own sales trend that slowed versus plan beginning in mid-July. Although we hope to perform better, in light of these issues, we believe it is prudent to manage our business with somewhat more conservative sales and margin assumptions for the balance of the year."

"We are now projecting same store sales growth of 1% to 3% for the third and fourth quarters, compared to our prior forecast of up 3% to 4% for both periods. Earnings per share are projected to be in the range of $.33 to $.37 for the 13 weeks ending November 3, 2007 and $.62 to $.68 for the 13 weeks ending February 2, 2008. Based on these projections, earnings per share for the fiscal year ending February 2, 2008 are forecast to be in the range of $1.80 to $1.90. This compares to our original earnings per share guidance of $1.85 to $1.95," Mr. Balmuth concluded.

Reported earnings per share for the fiscal 2006 third quarter, fourth quarter and fiscal year were $.31, $.66 and $1.70, respectively. In addition, last year's fourth quarter and fiscal year results included income equivalent to about $.07 per share related to the 53rd week in fiscal 2006.

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 22, 2007 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 through November 2, 2007 at the website address and through August 29, 2007 via a telephone recording at 402-220-5900, PIN #2342.

Forward-Looking Statements: This press release and the recorded conference call comments on our website contain forward-looking statements regarding expected sales and earnings levels 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 Dress for Less(R) ("Ross") and dd's DISCOUNTS(R) 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, including the potential impact from higher mortgage interest rates and higher gas prices; 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 2006 and Form 10-Q's and 8-K's for fiscal 2007. 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 August 4, 2007, the Company operated 817 Ross Dress for Less(R) ("Ross") stores and 45 dd's DISCOUNTS(R) locations, compared to 744 Ross and 26 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 on the Company's website at

                                Ross Stores, Inc.
                  Condensed Consolidated Statements of Earnings

                                 Three Months Ended       Six Months Ended
                                 August 4,    July 29,   August 4,    July 29,
    ($000, except stores and       2007        2006        2007        2006
     per share data,

    Sales                      $1,444,632  $1,308,052  $2,855,173  $2,599,728

    Costs and expenses
       Cost of goods sold       1,131,286   1,024,130   2,202,564   2,012,966
       Selling, general
        and administrative        229,326     210,635     459,529     417,802
       Interest (income)
        expense, net                   65      (1,554)     (1,326)     (3,438)
          Total costs and
           expenses             1,360,677   1,233,211   2,660,767   2,427,330

    Earnings before taxes          83,955      74,841     194,406     172,398

    Provision for taxes on
     earnings                      33,092      29,464      76,499      67,804
    Net earnings                  $50,863     $45,377    $117,907    $104,594

    Earnings per share
       Basic                        $0.37       $0.32       $0.86       $0.74
       Diluted                      $0.37       $0.32       $0.85       $0.73

    Weighted average shares
     outstanding (000)
       Basic                      136,052     140,348     136,569     140,991
       Diluted                    138,280     142,698     138,992     143,454

    Dividends per share
       Cash dividends
        declared per share          $0.08       $0.06       $0.08       $0.06

    Stores open at end of period      862         770         862         770

                                Ross Stores, Inc.
                      Condensed Consolidated Balance Sheets

                                                  August 4,          July 29,
    ($000, unaudited)                                 2007              2006


    Current Assets
       Cash and cash equivalents                  $132,808           $59,351
       Short-term investments                       31,263             7,417
       Accounts receivable                          42,071            33,904
       Merchandise inventory                     1,070,376           959,792
       Prepaid expenses and other                   70,396            50,567
       Deferred income taxes                        30,942            20,014
            Total current assets                 1,377,856         1,131,045

    Property and equipment, net                    790,298           733,905
    Other long-term assets                          68,249            58,057
    Long-term investments                           32,476            13,140
    Total assets                                $2,268,879        $1,936,147

    Liabilities and stockholders' Equity

    Current Liabilities
       Accounts payable, accrued
        expenses and other                        $930,789          $860,591
            Total current liabilities              930,789           860,591

    Long-term debt                                 150,000                --
    Other long-term liabilities                    169,045           123,760
    Deferred income taxes                           81,997            94,747

    Commitments and contingencies

    Stockholders' Equity                           937,048           857,049
        Total liabilities and
         stockholders' equity                   $2,268,879        $1,936,147

                                Ross Stores, Inc.
                 Condensed Consolidated Statements of Cash Flows

                                                       Six Months Ended
                                                  August 4,          July 29,
     ($000, unaudited)                                2007              2006

     Cash Flows From Operating Activities
     Net earnings                                 $117,907          $104,594
     Adjustments to reconcile net
      earnings to net cash from
      operating activities:
          Depreciation and amortization             58,006            50,915
          Stock-based compensation                  13,049            13,621
          Deferred income taxes                    (18,905)           (3,092)
          Tax benefit from equity issuance           5,505             6,280
          Excess tax benefits from stock-based
           compensation                             (4,533)           (1,243)
     Change in assets and liabilities:
          Merchandise inventory                    (18,647)          (21,701)
          Other current assets, net                (38,117)          (18,259)
          Accounts payable                         (88,665)           71,954
          Other current liabilities                (46,917)          (36,743)
          Other, net                                28,965             2,770
          Net cash provided by operating
           activities                                7,648           169,096

     Cash Flows Used in Investing Activities
     Purchase of assets under lease                     --           (87,329)
     Additions to property and equipment          (107,285)          (58,794)
     Purchases of investments                      (46,918)          (47,550)
     Proceeds from investments                      19,618            50,765
          Net cash used in investing activities   (134,585)         (142,908)

     Cash Flows Used in Financing Activities
     Payment of term debt                               --           (50,000)
     Issuance of common stock related to
      stock plans                                   11,861             8,550
     Excess tax benefits from stock-based
      compensation                                   4,533             1,243
     Treasury stock purchased                       (2,919)           (2,352)
     Repurchase of common stock                   (100,578)          (98,867)
     Dividends paid                                (20,540)          (17,178)
          Net cash used in financing activities   (107,643)         (158,604)
     Net decrease in cash and cash equivalents    (234,580)         (132,416)
     Cash and cash equivalents:
          Beginning of period                      367,388           191,767
          End of period                           $132,808           $59,351

     Supplemental Cash Flow Disclosures
     Interest paid                                  $4,834              $759
     Income taxes paid                            $119,628          $102,642

     Non-Cash Investing Activities
     Change in fair value of investment
      securities                                       $55             $(192)

SOURCE Ross Stores, Inc.

John G. Call,
Senior Vice President,
Chief Financial Officer,
Katie Loughnot,
Vice President,
Investor Relations,
both of Ross Stores, Inc.