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Ross Stores Reports Second Quarter Earnings and Forecasted Second Half 2005 Sales and EPS Ranges

PLEASANTON, Calif., Aug. 17 /PRNewswire-FirstCall/ -- Ross Stores, Inc. (ROST) today reported earnings per share for the 13 weeks ended July 30, 2005 of $.29, compared to $.21 as restated for the 13 weeks ended July 31, 2004. Net earnings for the second quarter ended July 30, 2005 were $42.3 million, compared to $32.2 million as restated for the 13 weeks ended July 31, 2004. Earnings results for the quarter ended July 31, 2004 included a non-cash after-tax charge of $11.0 million, or $.07 per share, related to the write- down of the Company's former corporate headquarters and distribution center in Newark, California. Current year second quarter sales rose 16% to $1.172 billion, from $1.009 billion for the quarter ended July 31, 2004. Comparable store sales for the period increased 7% over the prior year.

For the six months ended July 30, 2005, earnings per share totaled $.62, compared to $.53 as restated for the six months ended July 31, 2004. Net earnings for the six months ended July 30, 2005 were $92.3 million, compared to $80.4 million as restated for the same period in the prior year. Again, results for the first six months of 2004 included the charge relating to the former headquarters and distribution center. Sales for the first six months of 2005 rose 15% to $2.296 billion, with same store sales up 5% over the prior year period.

Michael Balmuth, Vice Chairman, President and Chief Executive Officer, commented, "Sales trends improved during the quarter, led by strength in Juniors and Shoes, which we believe bodes well for our back-to-school business. At the same time, operating margin continued to be affected by higher-than-expected markdowns combined with an increase in distribution center costs as a percent of sales. While partially offset by leverage on occupancy and other expenses from the 7% gain in same store sales, these factors resulted in an approximate 120 basis point decline in operating margin for the second quarter of 2005, excluding the prior year impact of the aforementioned write-down."

"Markdowns year-to-date have consistently been higher than planned. Although residual inventory issues from 2004 and modest volatility around actual-versus-plan sales had an impact on markdown activities, we believe that the internal learning curve related to numerous new system processes, procedures and information flow also has contributed to higher markdown levels. We believe we have addressed most of these transitional issues and that their overall impact on margins should diminish going forward. Nevertheless, as previously reported, higher-than-expected clearance balances at the end of the second quarter are expected to pressure both third quarter gross margin and earnings per share," said Mr. Balmuth.

The Company now projects the following same store sales and earnings per share ranges for the balance of fiscal 2005:

-- For the third quarter ending October 29, 2005, the Company expects same store sales to increase 6% to 7% on top of the 3% decline in the prior year and forecasts earnings per share to be in the range of $.28 to $.30, compared to $.25 as restated for the third quarter ended October 30, 2004.

-- For the fourth quarter ending January 28, 2006, the Company expects same store sales to increase 2% to 3% on top of flat comparable store sales in the prior year and forecasts earnings per share to be in the range of $.45 to $.48, compared to $.35 as restated in the fourth quarter ended January 29, 2005.

Mr. Balmuth concluded, "Solid cash flows year-to-date 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 2005, we repurchased 3.2 million shares of common stock for an aggregate of $89.0 million and ended the quarter with 146.2 million shares of common stock outstanding. Approximately $86 million remains available under the current stock repurchase authorization, which we expect to complete by the end of fiscal 2005."

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 17, 2005 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 24, 2005 at 402-220-5900, PIN #2342.

Forward-Looking Statements: This press release and the conference call recording 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 concerning the Company's distribution centers and information systems, 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 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 effectively operate and integrate 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; disruptions in supply chain; 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 2004. 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 2004 revenues of $4.2 billion. As of July 30, 2005, the Company operated 682 Ross stores and 13 dd's DISCOUNTS(R) stores, compared to 616 Ross 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(R) 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.

     ROSS STORES, INC.
     CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS


                                  Three Months Ended     Six Months Ended
                                 July 30,    July 31,   July 30,    July 31,
    ($000, except stores and
      per share data,
      unaudited)                   2005       2004        2005        2004

    Sales                      $1,171,862  $1,008,600  $2,295,799  $2,000,492

    Costs and Expenses
       Cost of goods
        sold, including
        related buying,
        distribution
        and occupancy
        costs                     916,214     773,716   1,775,530   1,524,882
       Selling, general
         and
         administrative           186,604     163,651     369,340     325,147
       Impairment of
        long-lived assets               0      18,000           0      18,000
       Interest (income)
        expense, net                 (580)        336        (878)        506
        Total costs and
         expenses               1,102,238     955,703   2,143,992   1,868,535

    Earnings before taxes          69,624      52,897     151,807     131,957

    Provision for taxes on
     earnings                      27,345      20,683      59,478      51,596
    Net earnings                  $42,279     $32,214     $92,329     $80,361


    Earnings per share
     Basic                          $0.29       $0.22       $0.63       $0.54
     Diluted                        $0.29       $0.21       $0.62       $0.53


    Weighted average shares
     outstanding (000)
     Basic                        145,102     148,106     145,555     148,998
     Diluted                      147,321     150,903     147,894     152,148

    Stores open end of period         695         616         695         616



                              ROSS STORES, INC.
                    CONDENSED CONSOLIDATED BALANCE SHEETS


                                                   July 30,          July 31,
                                                      2005             2004
    ($000, unaudited)                                             As Restated

    ASSETS

    Current Assets
           Cash and cash equivalents              $119,397           $64,353
           Short-term investments                   25,800            44,000
           Accounts receivable                      35,371            27,876
           Merchandise inventory                   975,846           897,542
           Prepaid expenses and other               51,060            53,711
           Deferred income taxes                     8,968            25,047
                Total current assets            $1,216,442        $1,112,529

    Property and equipment, net                    608,874           509,681
    Other long-term assets                          53,025            58,007
           Total assets                         $1,878,341        $1,680,217



    LIABILITIES AND STOCKHOLDERS' EQUITY

    Current Liabilities
           Accounts payable, accrued
            expenses and other                    $807,235          $727,089
           Income taxes payable                         --            (2,248)
                Total current liabilities         $807,235          $724,841

    Long-term debt                                  50,000            50,000
    Other long-term liabilities                    115,127           110,023
    Deferred income taxes                           96,767            75,006

    Stockholders' equity                           809,212           720,347
            Total liabilities and
             stockholders' equity               $1,878,341        $1,680,217



                              ROSS STORES, INC.
               CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

                                                        Six Months Ended
                                                   July 30,          July 31,
                                                      2005             2004
     ($000, unaudited)                                            As Restated

     CASH FLOWS FROM OPERATING ACTIVITIES
     Net earnings                                  $92,329           $80,361
     Adjustments to reconcile net
      earnings to net
       cash provided by operating
        activities:
          Depreciation and amortization             52,764            45,619
          Deferred income taxes                      4,566            (5,173)
          Tax benefit from equity
           issuance                                 17,430             7,473
          Impairment of long-lived assets               --            18,000
     Change in assets and liabilities:
          Merchandise inventory                   (122,734)          (56,051)
          Other current assets, net                 (8,521)          (26,827)
          Accounts payable                          89,727            30,033
          Other current liabilities                 13,283           (11,633)
          Other long-term, net                       1,147            18,967
          Net cash provided by operating
           activities                              139,991           100,769


     CASH FLOWS USED IN INVESTING
      ACTIVITIES
     Additions to property and equipment           (96,200)          (60,118)
     Sales (purchases) of short-term
      investments, net                              41,600           (44,000)
          Net cash used in investing
           activities                              (54,600)         (104,118)



     CASH FLOWS USED IN FINANCING
      ACTIVITIES
     Issuance of common stock related to
      stock plans                                   28,391            11,218
     Treasury stock purchased                       (5,960)           (8,447)
     Repurchase of common stock                    (89,009)         (123,847)
     Dividends paid                                (14,747)          (12,768)
          Net cash used in financing
           activities                              (81,325)         (133,844)
     Net increase (decrease) in cash and
      cash equivalents                               4,066          (137,193)
     Cash and cash equivalents:
          Beginning of period                      115,331           201,546
          End of period                           $119,397           $64,353

     NON-CASH INVESTING ACTIVITIES
     Straight-line rent capitalization in
      build-out period                              $1,608            $3,439

SOURCE Ross Stores, Inc.

CONTACT:
John G. Call
Senior Vice President, Chief Financial Officer
+1-925-965-4315
Katie Loughnot
Vice President, Investor Relations
+1-925-965-4509
katie.loughnot@ros.com
both of Ross Stores, Inc.
Web site: http://www.rossstores.com
(ROST)