<<  Back

Ross Stores Reports Third Quarter Earnings

PLEASANTON, Calif., Nov. 16 /PRNewswire-FirstCall/ -- Ross Stores, Inc. (Nasdaq: ROST) today reported earnings per share for the 13 weeks ended October 30, 2004 of $.26, compared to $.33 for the 13 weeks ended November 1, 2003. Net earnings for the third quarter ended October 30, 2004 were $38.1 million, compared to $50.5 million for the 13 weeks ended November 1, 2003. Fiscal 2004 third quarter sales rose 5% to $1.028 billion, from $977 million for the quarter ended November 1, 2003. Comparable store sales for the period declined 3% from the prior year.

For the nine months ended October 30, 2004, earnings per share totaled $.79, compared to $.99 for the nine months ended November 1, 2003. Net earnings for the nine months ended October 30, 2004 were $119.2 million, compared to $154.4 million for the same period in the prior year. Sales for the first nine months rose 7% to $3.028 billion, with same store sales down 1% from the prior year period.

Earnings for the third quarter are inclusive of a $.01 per share gain on the sale of the Company's former corporate office and distribution center in Newark, California. Results for the year-to-date period ended October 30, 2004 also include a previously-announced non-cash charge in the second quarter to write-down the value of the property to its estimated fair market value. Net of the gain on the recent sale, the impairment charge reflected in today's year-to-date results is $.06 per share. The net proceeds from the sale of the Newark facility were approximately $17 million.

Michael Balmuth, Vice Chairman and Chief Executive Officer, commented, "We continued to make progress during the third quarter in remedying the merchant reporting issues related to our Core Merchandising System, and we are currently on track with our target of completing this work by the end of the fiscal year. As previously reported, our merchants have been receiving the information and trend data we consider most important to the buying process since the end of August."

Mr. Balmuth continued, "The merchandise imbalances that resulted from our system problems negatively impacted both sales and operating margin during the third quarter. Gross margin declined about 350 basis points, mainly due to an increase in distribution costs, higher markdowns, and the deleveraging effect on occupancy and buying expenses from the decline in same store sales. The lower gross margin was partially offset by an approximate 100 basis point decline in selling, general and administrative costs as a percent of sales, as lower incentive plan costs during the period more than offset the deleveraging effect on store payroll and other expenses."

"Strong cash flows 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 nine months of 2004, we repurchased 5.6 million shares of common stock for an aggregate purchase of $150 million under the two-year $350 million program authorized by our Board of Directors in early 2004. We ended the quarter with 147 million shares of common stock outstanding," Mr. Balmuth said.

"Looking ahead, our healthy financial position provides us with a solid foundation on which to grow. We expect to end fiscal 2004 with 649 stores in 26 states and Guam, or unit growth of 14%, which includes the first ten dd's DISCOUNTS(SM) stores that opened during the third quarter. This exciting new off-price concept delivers exceptional values targeting consumers with household incomes of $30,000 to $40,000, one of the fastest-growing demographics in the country. With a potential of at least 500 locations, we believe dd's DISCOUNTS(SM) has the ability to significantly enhance our growth prospects over the next five to ten years," noted Mr. Balmuth.

The Company will provide additional details concerning its third quarter results and business outlook on a conference call to be held on Tuesday, November 16, 2004 at 12:00 noon 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 the month at the website address and via a telephone recording through November 23, 2004 at 402-220-5900, PIN #2342.

Forward-Looking Statements: This press release and the recorded comments 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 regarding the time needed to remedy ongoing difficulties with new core merchandising systems and the severity, duration and financial impact of resulting in-store inventory imbalances, 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 Company is continuing to assess the new information systems, and cannot be certain that all problems have currently been discovered or that their scope is understood. The words "plan," "expect," "anticipate," "estimate," "believe," "forecast," "project," "guidance," "looking ahead" and similar expressions identify forward-looking statements. Risk factors for Ross Stores and dd's DISCOUNTS(SM) include, without limitation, the Company's ability to successfully and quickly implement, integrate and correct difficulties in 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, 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 2003. 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 2003 revenues of $3.9 billion. The Company had a total of 641 Ross stores in operation as of October 30, 2004, compared to 573 locations at the end of the same period last year. In addition, a total of ten initial dd's DISCOUNTS(SM) opened in California during the third quarter of 2004. 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(SM) features a more moderate 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


                                   Three Months Ended      Nine Months Ended
    ($000, except per share        Oct. 30,    Nov. 1,    Oct. 30,     Nov. 1,
      data, unaudited)               2004       2003        2004        2003

    Sales                         $1,027,744  $976,940  $3,028,236  $2,821,834

    Costs and Expenses
      Cost of goods sold,
       including related buying,
       distribution and occupancy
       costs                         804,521   730,245   2,328,259   2,107,699
      Selling, general and
       administrative                162,509   163,962     487,599     460,933
      Impairment/(gain on disposal)
       of long-lived assets          (2,182)         0      15,818           0
      Interest expense (income),
       net                               391     (142)         897       (273)
          Total costs and expenses   965,239   894,065   2,832,573   2,568,359

    Earnings before income taxes      62,505    82,875     195,663     253,475

    Provision for taxes on earnings   24,439    32,404      76,504      99,109
    Net earnings                     $38,066   $50,471    $119,159    $154,366

    Earnings per share
      Basic                            $0.26     $0.33       $0.80       $1.01
      Diluted                          $0.26     $0.33       $0.79       $0.99

    Weighted average shares
     outstanding (000)
      Basic                          146,199   151,290     148,071     152,646
      Diluted                        148,604   154,476     150,983     155,480

    Stores open end of period            651       573         651         573

                                ROSS STORES, INC.

                                               October 30,       November 1,
    ($000, unaudited)                             2004               2003


    Current Assets
      Cash and cash equivalents                  $57,787          $117,717
      Accounts receivable                         33,077            26,310
      Merchandise inventory                      999,603           866,864
      Prepaid expenses and other                  48,052            31,034
      Deferred income taxes                       22,742            16,645
          Total Current Assets                $1,161,261        $1,058,570

    Property and equipment, net                  501,969           466,797
    Other long-term assets                        58,005            50,850
      Total Assets                            $1,721,235        $1,576,217


    Current Liabilities
      Accounts payable, accrued expenses
       and other                                $778,186          $698,055
      Income taxes payable                             0            37,785
          Total Current Liabilities             $778,186          $735,840

    Long-term debt                                50,000            50,000
    Other long-term liabilities                   69,092            57,693
    Deferred income taxes                         87,929            41,666

    Stockholders' Equity                         736,028           691,018
        Total Liabilities and
        Stockholders' Equity                  $1,721,235        $1,576,217

                                 ROSS STORES, INC.

                                                    Nine Months Ended
                                                  October 30,    November 1,
     ($000, unaudited)                                2004          2003

     Net earnings                                  $119,159       $154,366
     Adjustments to reconcile net earnings to
      net cash provided by operating activities:
       Depreciation and amortization                 66,415         54,740
       Impairment of long-lived assets               15,818             --
     Change in assets and liabilities:
       Merchandise inventory                       (158,112)      (150,346)
       Other current assets, net                    (26,370)        (2,091)
       Accounts payable                              71,054         55,292
       Other current liabilities                      1,713         59,518
       Other long-term, net                          10,541          1,222
       Net cash provided by operating
        activities                                  100,218        172,701

     Additions to property and equipment           (105,657)      (109,261)
     Proceeds from sale of Newark Facility           17,400             --
       Net cash used in investing activities        (88,257)      (109,261)

     Issuance of common stock related to
      stock plans, net                               20,982         20,415
     Proceeds from long-term debt                        --         25,000
     Treasury stock related to tax withholding       (7,532)        (3,352)
     Repurchase of common stock                    (150,141)      (125,214)
     Dividends paid                                 (19,029)       (13,221)
       Net cash used in financing activities       (155,720)       (96,372)
     Net decrease in cash and cash equivalents     (143,759)       (32,932)
     Cash and cash equivalents:
       Beginning of period                          201,546        150,649
       End of period                                $57,787       $117,717

SOURCE  Ross Stores, Inc.
    -0-                             11/16/2004
    /CONTACT:  John G. Call, Senior Vice President, Chief Financial Officer,
+1-925-965-4315; or Katie Loughnot, Vice President, Investor Relations,
+1-925-965-4509, or, both of Ross Stores, Inc./
    /Web site: /

CO:  Ross Stores, Inc.
ST:  California

-- SFTU017 --
5381 11/16/2004 08:30 EST