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Ross Stores Reports Third Quarter Earnings

PLEASANTON, Calif., Nov. 14 /PRNewswire-FirstCall/ -- Ross Stores, Inc. (Nasdaq: ROST) today reported that earnings per share for the 13 weeks ended October 28, 2006 rose 24% to $.31, from $.25 for the 13 weeks ended October 29, 2005. Net earnings for the fiscal 2006 third quarter were $43.9 million, compared to $36.3 million for the third quarter of 2005. The current year third quarter results include pre-tax stock option related expenses of $3.2 million, or about $.01 per share, recognized pursuant to FAS No. 123(R), "Share-Based Payment." Third quarter earnings per share before these non-cash charges grew 32% over the prior year period. Fiscal 2006 third quarter sales rose 10% to $1.362 billion, from $1.237 billion for the quarter ended October 29, 2005. Same store sales for the period increased 4% on top of a strong 9% gain in the prior year comparable quarter.

For the nine months ended October 28, 2006, earnings per share grew 20% to $1.04 from $.87 for the nine months ended October 29, 2005. Net earnings for the fiscal 2006 year-to-date period were $148.5 million, compared to $128.7 million for the same period in the prior year. The fiscal 2006 year-to-date results include pre-tax stock option related expenses of $10.0 million, or about $.04 per share, recognized pursuant to FAS No. 123(R), "Share-Based Payment." Before these non-cash charges, earnings per share for the first nine months of 2006 grew 24% over the prior year. Sales for the first nine months rose 12% to $3.962 billion, with same store sales up 5% on top of a 6% increase in the prior year comparable period.

Michael Balmuth, Vice Chairman, President and Chief Executive Officer, commented, "Third quarter earnings were better than planned, benefiting from healthy sales trends and a measurable improvement in operating margin. Regionally, the strongest sales performance during the quarter was in the Southwest and Texas, while Home and Shoes remained the top-performing merchandise categories. Before approximately 25 basis points in stock option- related costs, earnings before interest and taxes increased about 65 basis points during the quarter. Improvements over the prior year period in shrink- related expenses and selling, general and administrative costs were partially offset by higher supply chain and incentive plan costs along with slight increases in markdown and occupancy expenses. Better-than-plan shrink results from our recent annual physical inventory of our merchandise contributed about $.02 to our improved earnings per share during the quarter."

"Our balance sheet and cash flows as we ended the third quarter remain solid and healthy, and we continue to return capital to stockholders through our stock repurchase and dividend programs. During the first nine months of 2006, we repurchased 5.4 million shares of common stock for an aggregate of $147.7 million as part of the two-year $400 million program authorized by our Board of Directors in the fourth quarter of 2005. We ended the third quarter with 139.9 million shares of common stock issued and outstanding. Approximately $252.3 million remains available under the current stock repurchase authorization, which we expect to complete by the end of fiscal 2007."

The Company will provide additional details concerning its third quarter results and business outlook on a conference call to be held on Tuesday, November 14, 2006 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 fourth quarter at the website address and via a telephone recording through November 21, 2006 at 402-220-5900, PIN #2342.

Forward-Looking Statements: This press release, the conference call recording and other material on the Company's website contain forward-looking statements that are subject to risks and uncertainties which 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 convert certain Albertsons 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; the Company's ability to effectively operate its various supply chain, core merchandising and other information systems; its ability to improve its micro-merchandising capabilities through the implementation of new processes and systems enhancements; achieving and maintaining targeted levels of productivity and efficiency in its 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 gas prices on consumer spending; 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; the Company's ability to continue to purchase attractive brand-name merchandise at desirable discounts; the Company's ability to identify and successfully enter new geographic markets; and the Company's ability to attract and retain personnel with the retail talent necessary to execute its strategies. Other risk factors are detailed in the Company's SEC filings including, without limitation, the Form 10-K for fiscal 2005 and the Form 10-Q's and 8-K's for fiscal 2006. 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 2005 revenues of $4.9 billion. As of October 28, 2006, the Company operated 772 Ross stores and 26 dd's DISCOUNTS locations, compared to 715 Ross stores and 20 dd's DISCOUNTS 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 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
    ($000, except stores and   October 28, October 29, October 28, October 29,
     per share data, unaudited)   2006        2005        2006        2005

    Sales                      $1,362,045  $1,236,892  $3,961,773  $3,532,691

    Costs and expenses
      Cost of goods sold        1,073,820     979,887   3,086,786   2,764,052
      Selling, general
       and administrative         217,586     197,740     635,388     558,445
      Interest income, net         (1,775)       (461)     (5,213)     (1,339)
        Total costs and
         expenses               1,289,631   1,177,166   3,716,961   3,321,158

    Earnings before taxes          72,414      59,726     244,812     211,533

    Provision for taxes on
     earnings                      28,481      23,401      96,285      82,879
    Net earnings                  $43,933     $36,325    $148,527    $128,654

    Earnings per share
      Basic                         $0.32       $0.25       $1.06       $0.89
      Diluted                       $0.31       $0.25       $1.04       $0.87

    Weighted average shares
     outstanding (000)
      Basic                       138,570     143,753     140,184     144,954
      Diluted                     140,887     145,659     142,672     147,150

    Dividends per share
      Cash dividends declared
       per share                    $0.06       $0.05       $0.12       $0.10

    Stores open at end of period      798         735         798         735

                              Ross Stores, Inc.
                    Condensed Consolidated Balance Sheets

                                                October 28,       October 29,
    ($000, unaudited)                              2006              2005


    Current assets
      Cash and cash equivalents                   $122,069          $177,753
      Short-term investments                         4,857                --
      Accounts receivable                           36,823            35,246
      Merchandise inventory                      1,065,549         1,064,972
      Prepaid expenses and other                    51,326            44,705
      Deferred income taxes                         20,014             8,968
        Total current assets                     1,300,638         1,331,644

    Property and equipment, net                    740,385           629,304
    Other long-term assets                          60,267            53,593
    Long-term investments                           30,838                 -
    Total assets                                $2,132,128        $2,014,541

    Liabilities and stockholders' equity

    Current liabilities
      Accounts payable, accrued expenses
       and other                                $1,047,526          $945,414
        Total current liabilities                1,047,526           945,414

    Long-term debt                                      --            50,000
    Other long-term liabilities                    128,503           119,955
    Deferred income taxes                           97,363            96,975

    Commitments and contingencies

    Stockholders' equity                           858,736           802,197
      Total liabilities and stockholders'
       equity                                   $2,132,128        $2,014,541

                              Ross Stores, Inc.
               Condensed Consolidated Statements of Cash Flows

                                                     Nine Months Ended
                                                October 28,       October 29,
     ($000, unaudited)                              2006              2005

    Cash Flows from Operating Activities
    Net earnings                                  $148,527          $128,654
    Adjustments to reconcile net earnings to
     net cash provided by operating activities:
      Depreciation and amortization                 78,680            69,073
      Stock-based compensation                      20,121            12,384
      Deferred income taxes                           (496)            4,774
      Tax benefit from equity issuance              11,943            18,102
      Excess tax benefits from stock-based
       compensation                                 (4,509)               --
    Change in assets and liabilities:
      Merchandise inventory                       (127,458)         (211,860)
      Other current assets, net                    (21,937)           (2,041)
      Accounts payable                             204,604           209,410
      Other current liabilities                     15,145            31,779
      Other long-term, net                           5,629             3,926
        Net cash provided by operating activities  330,249           264,201

    Cash Flows Used in Investing Activities
    Purchase of assets under lease                 (87,329)               --
    Other additions to property and equipment      (93,365)         (139,331)
    Sales (purchases) of investments, net          (11,726)           67,400
      Net cash used in investing activities       (192,420)          (71,931)

    Cash Flows Used in Financing Activities
    Repayment of term debt                         (50,000)               --
    Issuance of common stock related to stock
     plans                                          13,991            31,238
    Excess tax benefits from stock-based
     compensation                                    4,509                --
    Treasury stock purchased                        (2,935)           (6,065)
    Repurchase of common stock                    (147,726)         (132,976)
    Dividends paid                                 (25,366)          (22,045)
      Net cash used in financing activities       (207,527)         (129,848)
    Net (decrease) increase in cash and
     cash equivalents                              (69,698)           62,422
    Cash and cash equivalents:
      Beginning of period                          191,767           115,331
      End of period                               $122,069          $177,753

    Non-Cash Investing Activities
    Straight-line rent capitalization in
     build-out period                                  $--            $3,059
    Change in fair value of investment securities       $5               $--

John G. Call
Senior Vice President, Chief Financial Officer

Katie Loughnot
Vice President, Investor Relations
Both of Ross Stores, Inc.