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Ross Stores Reports Second Quarter Earnings
PLEASANTON, Calif., Aug. 18 /PRNewswire-FirstCall/ -- Ross Stores, Inc. (Nasdaq: ROST) today reported earnings per share for the 13 weeks ended July 31, 2004 of $.22, compared to $.35 for the 13 weeks ended August 2, 2003. Net earnings for the second quarter ended July 31, 2004 were $32.6 million, compared to $54.6 million for the 13 weeks ended August 2, 2003. All earnings results reported for the quarter ended July 31, 2004 are inclusive of a previously-announced non-cash charge of $.07 per share, or $11.0 million in net income, related to the write-down of the Company's former corporate office and distribution center in Newark, California. They are also consistent with the Company's previous estimates. Current year second quarter sales rose 4% to $1.009 billion, from $966 million for the quarter ended August 2, 2003. Comparable store sales for the period declined 3% from the prior year.
For the six months ended July 31, 2004, earnings per share totaled $.53, compared to $.67 for the six months ended August 2, 2003. Net earnings for the six months ended July 31, 2004 were $81.1 million, compared to $103.9 million for the same period in the prior year. Again, results for the first six months of 2004 are inclusive of the previously referenced charge. Sales for the first six months rose 8% to $2.000 billion, with same store sales flat to the prior year period.
Michael Balmuth, Vice Chairman and Chief Executive Officer, commented, "As previously reported, we believe our business in the second quarter was affected by problems associated with our new Core Merchandising System and the resulting limitations these placed on our ability to identify and respond to changes in customer trends -- especially in what appears recently to be a more difficult retail climate. This situation resulted in below-plan sales and a decline in gross margin. Selling, general and administrative costs also deleveraged due to the decline in comparable store sales."
"We made progress during the quarter in resolving many of the problems we have experienced with this new system. As previously reported, information to support the allocation function has been back to normal since early June. We continue to make progress addressing the information requirements most important to the buying process and believe that most of these data needs will be addressed in the next few weeks, with some planned to be complete later in the third quarter. Although we expect sales to begin to gradually improve once these system issues have been remedied, we anticipate that there will be a residual impact to sales and earnings throughout the second half of 2004 as we cycle through merchandise imbalances that resulted from this situation," said Mr. Balmuth.
Mr. Balmuth continued, "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 six months of 2004, we repurchased 4.5 million shares of common stock for an aggregate of $124 million under the two-year $350 million program authorized by our Board of Directors in early 2004. We ended the quarter with 147.5 million shares of common stock outstanding."
"Looking ahead, our healthy financial position provides us with a solid foundation on which to grow. We still expect to open 80 net locations in 2004 to end the year with 648 stores in 26 states and Guam, or square footage expansion of 14%."
"Last week, the first three of ten planned initial dd's DISCOUNTS(SM) stores had their grand openings in Northern California. This exciting new off-price concept delivers exceptional values to 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 second quarter results and business outlook on a conference call to be held on Wednesday, August 18, 2004 at 11:00 a.m. Eastern Daylight time. Participants may listen to a real time audio webcast of the conference call by visiting the Company's web site located at www.rossstores.com. A recorded version of the call will also be available until the end of the month at the web site address and via a telephone recording through August 25, 2004 at 402-220-5900, PIN #2342.
Forward-Looking Statements: This press release and the conference call information and transcript on the Company's website contain forward-looking statements regarding 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 information 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" and similar expressions identify forward-looking statements. Risk factors for Ross Stores and dd's DISCOUNTS(SM) include the Company's ability to successfully implement and correct difficulties in various new supply chain and merchandising systems, including generation of all necessary information in a timely and cost effective manner, 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, and 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 616 stores in operation as of July 31, 2004, compared to 553 stores at the end of the same period last year. In addition, a new concept, dd's DISCOUNTS(SM), is being launched in the Fall of 2004 with ten planned stores in Northern California. Ross Stores offers first-quality, in-season, name brand and designer apparel, accessories and footwear 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 web site at www.rossstores.com.
ROSS STORES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
Three Months Ended Six Months Ended
($000, except per share data, July 31, August 2, July 31, August 2,
unaudited) 2004 2003 2004 2003
Sales $1,008,600 $965,610 $2,000,492 $1,844,894
Costs and Expenses
Cost of goods sold, including
related buying, distribution
and occupancy costs 772,743 724,206 1,523,365 1,377,454
Selling, general and
administrative 164,032 151,832 325,463 296,971
Impairment of long-lived
assets 18,000 0 18,000 0
Interest expense (income),
net 336 (61) 506 (131)
Total costs and expenses 955,111 875,977 1,867,334 1,674,294
Earnings before income taxes 53,489 89,633 133,158 170,600
Provision for taxes on earnings 20,914 35,047 52,065 66,705
Net earnings $32,575 $54,586 $81,093 $103,895
Earnings per share
Basic $0.22 $0.36 $0.54 $0.68
Diluted $0.22 $0.35 $0.53 $0.67
Weighted average shares
outstanding (000)
Basic 148,106 152,540 148,998 153,324
Diluted 150,903 155,384 152,148 155,924
Stores open end of period 616 553 616 553
ROSS STORES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
July 31, August 2,
($000, unaudited) 2004 2003
ASSETS
Current Assets
Cash and cash equivalents $108,353 $176,860
Accounts receivable 27,876 27,041
Merchandise inventory 897,542 815,495
Prepaid expenses and other 53,978 31,420
Deferred income taxes 22,742 16,645
Total Current Assets $1,110,491 $1,067,461
Property and equipment, net 472,513 443,084
Other long-term assets 58,007 50,327
Total Assets $1,641,011 $1,560,872
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable, accrued expenses
and other $726,066 $697,334
Income taxes payable (2,248) 40,199
Total Current Liabilities $723,818 $737,533
Long-term debt 50,000 50,000
Other liabilities 68,251 56,250
Deferred income taxes 75,006 41,666
Stockholders' Equity 723,936 675,423
Total Liabilities and Stockholders'
Equity $1,641,011 $1,560,872
ROSS STORES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months Ended
July 31, August 2,
($000, unaudited) 2004 2003
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings $81,093 $103,895
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depreciation and amortization 43,276 35,733
Impairment of long-lived assets 18,000 --
Change in assets and liabilities:
Merchandise inventory (56,051) (98,977)
Other current assets, net (27,095) (3,208)
Accounts payable 30,033 74,389
Other current liabilities (11,633) 42,560
Other long-term, net 12,021 437
Net cash provided by operating activities 89,644 154,829
CASH FLOWS USED IN INVESTING ACTIVITIES
Additions to property and equipment (56,466) (70,366)
Net cash used in investing activities (56,466) (70,366)
CASH FLOWS USED IN FINANCING ACTIVITIES
Issuance of common stock related to stock
plans, net 18,691 10,437
Proceeds from long-term debt -- 25,000
Treasury stock related to tax withholding (8,447) (1,244)
Repurchase of common stock (123,847) (83,593)
Dividends paid (12,768) (8,852)
Net cash used in financing activities (126,371) (58,252)
Net decrease in cash and cash equivalents (93,193) 26,211
Cash and cash equivalents:
Beginning of period 201,546 150,649
End of period $108,353 $176,860
SOURCE Ross Stores, Inc.
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 katie.loughnot@ros.com, both of Ross Stores, Inc.
Web site: http://www.rossstores.com
(ROST)