UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of report (date of earliest event reported):
August 16, 2006
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ROSS STORES, INC. |
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(Exact name of registrant as specified in its charter) |
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Delaware |
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0-14678 |
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94-1390387 |
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(State or other jurisdiction of incorporation) |
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(Commission File No.) |
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(I.R.S. Employer Identification No.) |
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4440 Rosewood Drive, Pleasanton, California 94588-3050 |
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(Address of principal executive offices) |
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Registrant’s telephone number, including area code: |
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(925) 965-4400 |
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
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Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
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Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
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Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
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Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
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ROSS STORES, INC. |
4440 Rosewood Drive, Pleasanton, California 94588-3050 |
(925) 965-4400 |
Item 2.02 Results of Operations and Financial Condition.
On August 16, 2006, the Company issued a press release regarding the Company’s financial results for its second fiscal quarter ended July 29, 2006. The full text of the Company’s press release is attached hereto as Exhibit 99.1.
Item 9.01 Financial Statements and Exhibits.
(c) Exhibits.
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Exhibit No. |
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Description |
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99.1 |
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August 16, 2006 Press Release by Ross Stores, Inc.* |
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*Pursuant to Item 2.02 of Form 8-K, Exhibit 99.1 shall not be deemed “filed” for purposes of Section 18 of the Securities Act of 1934, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, except as shall be expressly set forth by specific reference in such filing. |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
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Date: August 16, 2006 |
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ROSS STORES, INC. |
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Registrant |
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By: |
/s/ J. Call |
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John G. Call |
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Senior Vice President, Chief Financial Officer, Principal Accounting Officer and Corporate Secretary |
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Exhibit 99.1
_______________________________________________________________
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FOR IMMEDIATE RELEASE |
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Contact: |
John G. Call |
Katie Loughnot |
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Senior Vice President |
Vice President, Investor Relations |
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Chief Financial Officer |
(925) 965-4509 |
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(925) 965-4315 |
Email: katie.loughnot@ros.com |
ROSS STORES REPORTS SECOND QUARTER EARNINGS
AND FORECASTS SECOND HALF 2006 SALES AND EPS TARGETS
Pleasanton, California, August 16, 2006 -- Ross Stores, Inc. (ROST) today reported earnings per share for the 13 weeks ended July 29, 2006 of $.32 and net earnings for the period of $45.4 million. These results are after $3.3 million, or an equivalent of about $.01 per share, in stock option related expenses recognized pursuant to FAS No. 123(R), “Share-Based Payment.” For the 13 weeks ended July 30, 2005, net earnings totaled $42.3 million, and earnings per share were $.29. Fiscal 2006 second quarter sales increased 12% to $1.308 billion, with comparable store sales for the period up 4% on top of a 7% increase in the prior year.
For the six months ended July 29, 2006, earnings per share were $.73 and net earnings totaled $104.6 million. These results are after $6.8 million, or an equivalent of about $.03 per share, in stock option related expenses recognized pursuant to FAS No. 123(R), “Share-Based Payment.” For the six months ended July 30, 2005, net earnings totaled $92.3 million, and earnings per share were $.62. Sales for the first six months of 2006 increased 13% to $2.600 billion, with comparable store sales for the period up 5% on top of a 5% gain in the prior year.
Michael Balmuth, Vice Chairman, President and Chief Executive Officer, commented, “Second quarter sales and earnings were at the high end of our initial forecast for the period, benefiting from broadbased geographic and merchandise trends. Operating margin, before the effect of stock option related expenses was relatively flat to the prior year. As a percent of sales, improvements in distribution costs and merchandise margin were offset by higher shrink accruals, freight, store and occupancy expenses.”
Mr. Balmuth continued, “Our balance sheet and cash flows as we ended the first half of the year remain strong and healthy. We continue to return capital to stockholders through our stock repurchase and dividend programs. During the first six months of 2006, we repurchased 3.6 million shares of common stock for an aggregate of $99 million as part of the two-year $400 million program authorized by our Board of Directors in the fourth quarter of 2005. Approximately $301 million remains available under the current stock repurchase authorization, which we expect to complete by the end of fiscal 2007.”
On a more current note, Mr. Balmuth said, “Same store sales for the first two weeks of August were below plan at up 2% from the prior year. In addition, we are entering the fall season with residual inventory and clearance levels that are expected to pressure gross margin during the third quarter. As a result, we are adopting a more conservative outlook for the second half of the year.”
The Company now projects the following same store sales and earnings per share ranges for the balance of fiscal 2006:
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For the third quarter ending October 28, 2006, same store sales are forecast to increase 1% to 3% on top of a 9% increase in the prior year, and earnings per share are projected to be in the range of $.24 to $.27. |
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For the fourth quarter ending February 3, 2007, same store sales are forecast to increase 1% to 3% on top of a 6% gain in the prior year, and earnings per share are projected to be in the range of $.57 to $.63. |
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As a result, for the full 53-week 2006 year, same store sales are forecast to increase 3% to 4%, and earnings per share now are projected to be in the range of $1.54 to $1.63. |
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The aforementioned forecasted earnings per share ranges are inclusive of approximately $.06 to $.07 in additional earnings per share in the fourth quarter and the fiscal year from the 53rd week. Also included in these forecasted ranges are stock option related expenses equivalent to about $.01 to $.02 per share per quarter and $.06 for the fiscal year. |
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 16, 2006 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 23, 2006 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 expected sales and earnings levels, growth plans and productivity initiatives 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
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forward-looking statements. Risk factors for Ross Stores and dd’s DISCOUNTS® include, without limitation, 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 July 29, 2006, the Company operated 744 Ross stores and 26 dd’s DISCOUNTS locations, compared to 682 Ross stores and 13 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 on the Company’s website at www.rossstores.com.
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3
Ross Stores, Inc.
Condensed Consolidated Statements of Earnings
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Three Months Ended |
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Six Months Ended |
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($000, except stores and per share data, unaudited) |
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July 29, |
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July 30, |
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July 29, |
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July 30, |
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Sales |
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$ |
1,308,052 |
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$ |
1,171,862 |
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$ |
2,599,728 |
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$ |
2,295,799 |
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Costs and expenses |
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Cost of goods sold |
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1,024,130 |
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919,166 |
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2,012,966 |
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1,784,165 |
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Selling, general and administrative |
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210,635 |
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183,652 |
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417,802 |
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360,705 |
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Interest income, net |
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(1,554 |
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(580 |
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(3,438 |
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(878 |
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Total costs and expenses |
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1,233,211 |
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1,102,238 |
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2,427,330 |
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2,143,992 |
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Earnings before taxes |
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74,841 |
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69,624 |
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172,398 |
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151,807 |
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Provision for taxes on earnings |
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29,464 |
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27,345 |
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67,804 |
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59,478 |
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Net earnings |
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$ |
45,377 |
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$ |
42,279 |
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$ |
104,594 |
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$ |
92,329 |
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Earnings per share |
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Basic |
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$ |
0.32 |
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$ |
0.29 |
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$ |
0.74 |
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$ |
0.63 |
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Diluted |
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$ |
0.32 |
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$ |
0.29 |
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$ |
0.73 |
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$ |
0.62 |
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Weighted average shares outstanding (000) |
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Basic |
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140,348 |
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145,102 |
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140,991 |
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145,555 |
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Diluted |
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142,698 |
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147,321 |
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143,454 |
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147,894 |
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Dividends per share |
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Cash dividends declared per share |
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$ |
0.06 |
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$ |
0.05 |
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$ |
0.06 |
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$ |
0.05 |
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Stores open at end of period |
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770 |
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695 |
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770 |
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695 |
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4
Ross Stores, Inc.
Condensed Consolidated Balance Sheets
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($000, unaudited) |
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July 29, |
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July 30, |
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Assets |
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Current assets |
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Cash and cash equivalents |
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$ |
59,351 |
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$ |
119,397 |
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Short-term investments |
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7,417 |
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25,800 |
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Accounts receivable |
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33,904 |
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35,371 |
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Merchandise inventory |
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959,792 |
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975,846 |
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Prepaid expenses and other |
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50,567 |
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51,060 |
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Deferred income taxes |
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20,014 |
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8,968 |
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Total current assets |
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1,131,045 |
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1,216,442 |
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Property and equipment, net |
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733,905 |
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608,874 |
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Other long-term assets |
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58,057 |
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53,025 |
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Long-term investments |
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13,140 |
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— |
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Total assets |
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$ |
1,936,147 |
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$ |
1,878,341 |
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Liabilities and stockholders’ equity |
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Current liabilities |
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Accounts payable, accrued expenses and other |
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$ |
860,591 |
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$ |
807,235 |
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Total current liabilities |
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860,591 |
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807,235 |
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Long-term debt |
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— |
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50,000 |
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Other long-term liabilities |
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123,760 |
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115,127 |
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Deferred income taxes |
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94,747 |
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96,767 |
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Commitments and contingencies |
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Stockholders’ equity |
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857,049 |
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809,212 |
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Total liabilities and stockholders’ equity |
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$ |
1,936,147 |
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$ |
1,878,341 |
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5
Ross Stores, Inc.
Condensed Consolidated Statements of Cash Flows
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Six Months Ended |
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($000, unaudited) |
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July 29, |
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July 30, |
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Cash Flows from Operating Activities |
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Net earnings |
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$ |
104,594 |
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$ |
92,329 |
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Adjustments to reconcile net earnings to net cash provided by operating activities: |
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Depreciation and amortization |
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50,915 |
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44,891 |
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Stock-based compensation |
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13,621 |
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7,873 |
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Deferred income taxes |
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(3,092 |
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4,566 |
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Tax benefit from equity issuance |
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6,280 |
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17,430 |
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Excess tax benefits from stock-based compensation |
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(1,243 |
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— |
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Change in assets and liabilities: |
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Merchandise inventory |
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(21,701 |
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(122,734 |
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Other current assets, net |
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(18,259 |
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(8,521 |
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Accounts payable |
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71,954 |
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89,727 |
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Other current liabilities |
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(36,743 |
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13,283 |
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Other long-term, net |
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2,770 |
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1,147 |
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Net cash provided by operating activities |
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169,096 |
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139,991 |
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Cash Flows Used in Investing Activities |
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Purchase of assets under lease |
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(87,329 |
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— |
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Other additions to property and equipment |
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(58,794 |
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(96,200 |
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Sales of investments, net |
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3,215 |
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41,600 |
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Net cash used in investing activities |
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(142,908 |
) |
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(54,600 |
) |
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Cash Flows Used in Financing Activities |
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Repayment of term debt |
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(50,000 |
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— |
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Issuance of common stock related to stock plans |
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8,550 |
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28,391 |
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Excess tax benefits from stock-based compensation |
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1,243 |
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— |
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Treasury stock purchased |
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(2,352 |
) |
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(5,960 |
) |
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Repurchase of common stock |
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(98,867 |
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(89,009 |
) |
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Dividends paid |
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(17,178 |
) |
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(14,747 |
) |
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Net cash used in financing activities |
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(158,604 |
) |
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(81,325 |
) |
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Net (decrease) increase in cash and cash equivalents |
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(132,416 |
) |
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4,066 |
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Cash and cash equivalents: |
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Beginning of period |
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191,767 |
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|
115,331 |
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End of period |
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$ |
59,351 |
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$ |
119,397 |
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Non-Cash Investing Activities |
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Straight-line rent capitalization in build-out period |
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$ |
— |
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$ |
1,608 |
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Change in fair value of investment securities |
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$ |
(192 |
) |
$ |
— |
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6