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Press release from PR Newswire

Ross Stores Reports Record First Quarter Earnings and 61% Increase in EPS

Thursday, May 20, 2010

Ross Stores Reports Record First Quarter Earnings and 61% Increase in EPS08:30 EDT Thursday, May 20, 2010PLEASANTON, Calif., May 20 /PRNewswire-FirstCall/ -- Ross Stores, Inc. (Nasdaq: ROST) today reported earnings per share for the 13 weeks ended May 1, 2010 of $1.16, up from $.72 for the quarter ended May 2, 2009. These results represent a 61% increase on top of 20% growth in the prior year. Net earnings for the first quarter of 2010 rose 56% to a record $142.3 million, up from $91.4 million in the first quarter of 2009. �Sales for the 13 weeks ended May 1, 2010 grew 14% to $1.935 billion, with comparable store sales up 10% on top of a 3% gain in the prior year. Michael Balmuth, Vice Chairman and Chief Executive Officer, commented, "We are very pleased with our exceptional first quarter performance, which was driven by robust sales gains and record levels of profitability that were well ahead of plan. �We believe our results continue to benefit from the superior execution of our off-price strategies combined with our favorable position as a value retailer in the current economic and retail environment." �Mr. Balmuth continued, "Operating margin for the quarter grew about 320 basis points to a record 12.1%. �The largest driver of this increase was a 230 basis point improvement in gross margin, which benefited mainly from higher merchandise gross margin and leverage on occupancy and distribution expenses as a percent of sales. �Selling, general and administrative costs as a percent of sales declined by about 90 basis points, primarily due to leverage from the strong gains in same store sales." Discussing the Company's financial condition, Mr. Balmuth noted, "Our balance sheet and cash flows remain healthy, and we continue to enhance stockholder returns through our stock repurchase and dividend programs. �During the first three months of fiscal 2010, we repurchased 1.8 million shares of common stock for an aggregate purchase price of $94 million. �We remain on track to complete by the end of fiscal 2010 approximately $375 million of our current two-year $750 million stock repurchase authorization." � Looking ahead, Mr. Balmuth said, "For the second quarter ending July 31, 2010, we continue to forecast a same store sales gain of 3% to 4% and earnings per share growth of 16% to 21% to $.95 to $.99, up from $.82 in the same period last year. For the 2010 fiscal year ending January 29, 2011, EPS is projected to grow 16% to 20% to $4.11 to $4.24, up from $3.54 in fiscal 2009. �These forecasted increases are especially noteworthy considering they are on top of robust 52% gains in earnings per share for both the second quarter and full year in 2009."The Company will provide additional details concerning its first quarter results and management's outlook for the second quarter and the full year on a conference call to be held on Thursday, May 20, 2010 at 11:00 a.m. Eastern time. �Participants may listen to a real time audio webcast of the conference call by visiting the Investors section of the Company's website located at www.rossstores.com. �A recorded version of the call will also be available at the website address, and via a telephone recording through 8:00 p.m. Eastern time on Thursday, May 27, 2010 at 706-645-9291, ID # 55962228. Forward-Looking Statements: �This press release and the recorded comments and transcript on our corporate website contain forward-looking statements regarding expected sales and earnings levels in future periods that are subject to risks and uncertainties which could cause our actual results to differ materially from management's current expectations. The words "plan," "expect," "target," "anticipate," "estimate," "believe," "forecast," "projected," "guidance," "looking ahead" and similar expressions identify forward-looking statements. Risk factors for Ross Dress for Less� ("Ross") and dd's DISCOUNTS� include without limitation, competitive pressures in the apparel or home-related merchandise industry; changes in the level of consumer spending on or preferences for apparel or home-related merchandise, including the potential impact from the macro-economic environment, uncertainty in financial and credit markets, and changes in geopolitical 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; our ability to continue to purchase attractive brand-name merchandise at desirable discounts; our ability to attract and retain personnel with the retail talent necessary to execute our strategies; our ability to effectively operate our various supply chain, core merchandising and other information systems; our ability to improve our merchandising capabilities through the recent implementation of new processes and systems enhancements; achieving and maintaining targeted levels of productivity and efficiency in our distribution centers; and obtaining acceptable new store locations. Other risk factors are detailed in our SEC filings including, without limitation, the Form 10-K for fiscal 2009 and Form 8-Ks for fiscal 2010. �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 our outlook at any other point in time. �We do not undertake to update or revise these forward-looking statements.Ross Stores, Inc., an S&P 500, Fortune 500 and Nasdaq 100 (ROST) company headquartered in Pleasanton, California, is the nation's second largest off-price retailer with fiscal 2009 revenues of $7.2 billion. �As of May 1, 2010 the Company operated 967 Ross Dress for Less� ("Ross") stores and 54 dd's DISCOUNTS� locations, compared to 922 Ross and 52 dd's DISCOUNTS locations at the end of the same period last year. �Ross 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 www.rossstores.com. Ross Stores, Inc.Condensed Consolidated Statements of EarningsThree Months EndedMay 1,May 2,($000, except stores and per share data, unaudited)20102009Sales$1,934,778$1,691,599Costs and ExpensesCosts of goods sold1,406,0821,268,709Selling, general and administrative294,472272,030Interest expense, net2,3881,656Total costs and expenses1,702,9421,542,395Earnings before taxes231,836149,204Provision for taxes on earnings89,48957,817Net earnings$ � 142,347$ � � 91,387Earnings per shareBasic$ � � � � 1.19$ � � � � 0.73Diluted$ � � � � 1.16$ � � � � 0.72Weighted average shares outstanding (000)Basic119,829124,692Diluted122,332126,564Dividends Cash dividends declared per share$ � � � � � � -$ � � � � � � -Stores open at end of period1,021974Ross Stores, Inc.Condensed Consolidated Balance SheetsMay 1,May 2,($000, unaudited)20102009AssetsCurrent AssetsCash and cash equivalents$ � 823,652$ � 459,302Short-term investments1,9411,033Accounts receivable54,26850,098Merchandise inventory908,065917,661Prepaid expenses and other67,89565,557Deferred income taxes3,92313,487Total current assets1,859,7441,507,138Property and equipment, net933,654942,432Long-term investments15,85733,411Other long-term assets73,35259,139Total assets$2,882,607$2,542,120Liabilities and Stockholders? EquityCurrent LiabilitiesAccounts payable � �$ � 748,779$ � 682,251Accrued expenses and other231,927225,564Accrued payroll and benefits148,913134,571Income taxes payable99,93246,333Total current liabilities1,229,5511,088,719Long-term debt150,000150,000Other long-term liabilities185,375163,687Deferred income taxes 88,328103,956Commitments and contingenciesStockholders? Equity1,229,3531,035,758Total liabilities and stockholders? equity$2,882,607$2,542,120Ross Stores, Inc.Condensed Consolidated Statements of Cash FlowsThree Months EndedMay 1,May 2,($000, unaudited)20102009Cash Flows From Operating ActivitiesNet earnings$ 142,347$ �91,387Adjustments to reconcile net earnings to net cashprovided by operating activities:Depreciation and amortization39,84437,556Stock-based compensation8,9106,497Deferred income taxes(14,772)7,405Tax benefit from equity issuance6,8102,821Excess tax benefit from stock-based compensation(6,482)(2,064)Change in assets and liabilities:Merchandise inventory(35,567)(36,603)Other current assets(19,311)(19,244)Accounts payable110,149159,514Other current liabilities (43,557)(6,455)Other long-term, net810(82)Net cash provided by operating activities189,181240,732Cash Flows From Investing ActivitiesAdditions to property and equipment(35,519)(33,914)Proceeds from sales of property and equipment-10Purchases of investments-(1,481)Proceeds from investments8486,058Net cash used in investing activities(34,671)(29,327)Cash Flows From Financing ActivitiesExcess tax benefit from stock-based compensation6,4822,064Issuance of common stock related to stock plans15,00419,689Treasury stock purchased(6,776)(4,073)Repurchase of common stock(94,298)(77,171)Dividends paid(19,613)(13,967)Net cash used in financing activities(99,201)(73,458)Net increase in cash and cash equivalents55,309137,947Cash and cash equivalents:Beginning of period768,343321,355End of period$ 823,652$459,302Supplemental Cash Flow DisclosuresInterest paid$ � � � � � � -$ � � � � � �-Income taxes paid$ � 47,250$ � �9,866Non-Cash Investing ActivitiesIncrease in fair value of investment securities$ � � � � �44$ � � � 209SOURCE Ross Stores, Inc.For further information: John G. Call, Senior Vice President, Chief Financial Officer, +1-925-965-4315, or Bobbi Chaville, Senior Director, Investor Relations, +1-925-965-4289, bobbi.chaville@ros.com, both of Ross Stores, Inc.