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Press release from PR Newswire

Ross Stores Reports Third Quarter EPS Increase Of 14%, Reaffirms Fourth Quarter Guidance

Thursday, November 15, 2012

Ross Stores Reports Third Quarter EPS Increase Of 14%, Reaffirms Fourth Quarter Guidance08:30 EST Thursday, November 15, 2012PLEASANTON, Calif., Nov. 15, 2012 /PRNewswire/ -- Ross Stores, Inc. (Nasdaq:  ROST) today reported earnings per share for the 13 weeks ended October 27, 2012 of $.72, up from $.63 for the 13 weeks ended October 29, 2011.  These results reflect a 14% increase on top of a 24% gain in the third quarter of 2011.  Net earnings for the third quarter ended October 27, 2012 grew 11% to $159.5 million, up from $144.0 million for the third quarter ended October 29, 2011.  Fiscal 2012 third quarter sales increased 11% to $2.263 billion, with comparable store sales up 6%, versus a 5% gain in the prior year.   For the nine months ended October 27, 2012, earnings per share were $2.46, up from $2.01 for the nine months ended October 29, 2011.  These results represent 22% growth following a 24% increase for the first nine months of 2011.  Net earnings for the year-to-date period in 2012 grew 18% to $550.2 million, up from $465.2 million in the prior year period.  Sales for the first nine months of 2012 increased 12% to $6.960 billion, with comparable store sales up 7% on top of a 5% gain last year.   Michael Balmuth, Vice Chairman and Chief Executive Officer, commented, "We are pleased with the strong sales and earnings increases we generated in the third quarter and first nine months of 2012.  Our better-than-expected results year-to-date were driven by our ongoing ability to offer shoppers a fresh and exciting array of compelling name brand bargains for the family and the home. In addition, operating our stores on lower inventories while strictly controlling expenses continues to enhance profit margins."Mr. Balmuth continued, "Operating margin in the third quarter grew about 35 basis points to 11.3%. As a percent of sales, higher merchandise margin, lower distribution costs and leverage on occupancy and general, selling and administrative expenses were partially offset by a lower shortage benefit than the prior year and increases in freight and buying costs.  While shortage results from this year's physical inventory were better than expected, the favorable variance versus our reserve was larger in the third quarter of 2011." Mr. Balmuth also noted, "We continued to enhance stockholder returns through our stock repurchase and dividend programs in the third quarter.  During the first nine months of fiscal 2012, we repurchased 5.4 million shares of common stock for an aggregate price of $334 million.  We expect to buy $116 million in common stock during the fourth quarter, which will complete the two-year $900 million program announced in early 2011."   Fourth Quarter 2012 GuidanceLooking ahead, Mr. Balmuth said, "Our focus on bargains continues to make our stores attractive destinations for value-conscious customers.  During the holiday season, however, it is always difficult to predict how promotional other retailers may become or how current macro-economic and political uncertainties may impact consumer spending. We are also anniversarying the robust 7% increase in same store sales from last year's fourth quarter.  So, while we hope to do better, we believe it is prudent to maintain our prior fourth quarter guidance."For the 13 weeks ending January 26, 2013, the Company continues to forecast same store sales to be up 1% to 2% on top of a 7% gain for the 13 weeks ended January 28, 2012.  For the 14 weeks ending February 2, 2013, earnings per share are projected to be in the range of $.99 to $1.04, compared to $.85 for the 13 weeks ended January 28, 2012.  The fourth quarter guidance range includes the projected $.08 to $.09 benefit to earnings per share from the 53rd week in fiscal 2012.The Company will provide additional details concerning its third quarter results, fourth quarter and fiscal 2012 guidance, and business outlook on a conference call to be held on Thursday, November 15, 2012 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 be available at the website address and via a telephone recording until 8:00 p.m. Eastern time on November 23, 2012 at 404-537-3406, PIN #68796482. Forward-Looking Statements:  This press release and the recorded comments on our corporate website contain forward-looking statements regarding expected sales, earnings levels and other financial results 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; the impact from the macro-economic environment and financial and credit markets including but not limited to interest rates, recession, inflation, deflation, energy costs, tax rates and policy, unemployment trends, and fluctuating commodity costs; changes in geopolitical and geoeconomic 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 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 set forth in our SEC filings including without limitation, the Form 10-K for fiscal 2011 and Form 10-Qs and 8-Ks for fiscal 2012.  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. is an S&P 500, Fortune 500 and Nasdaq 100 (ROST) company headquartered in Pleasanton, California, with fiscal 2011 revenues of $8.6 billion.  The Company operates Ross Dress for Less® ("Ross"), the largest off-price apparel and home fashion chain in the United States with 1,097 locations in 33 states, the District of Columbia and Guam. 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% off department and specialty store regular prices. The Company also operates 108 dd's DISCOUNTS® in eight states that feature 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% off moderate department and discount store regular prices. Additional information is available at www.rossstores.com.Contact:  Michael Hartshorn Connie WongSenior Vice President,                 Senior Manager, Investor RelationsDeputy Chief Financial Officer       (925) 965-4668(925) 965-4503                              connie.wong@ros.com Ross Stores, Inc.Condensed Consolidated Statements of EarningsThree Months Ended Nine Months Ended October 27,October 29,October 27,October 29,($000, except stores and per share data, unaudited)2012201120122011Sales$ 2,262,723$ 2,046,427$ 6,960,419$ 6,210,413Costs and ExpensesCosts of goods sold1,648,9971,490,2135,017,7674,495,726Selling, general and administrative357,983332,2261,047,883962,271Interest expense, net1,6432,5655,9617,629Total costs and expenses2,008,6231,825,0046,071,6115,465,626Earnings before taxes254,100221,423888,808744,787Provision for taxes on earnings94,57677,454338,647279,569Net earnings$    159,524$    143,969$    550,161$    465,218Earnings per share 1Basic$         0.73$         0.64$         2.50$         2.05Diluted$         0.72$         0.63$         2.46$         2.01Weighted average shares outstanding (000)1Basic218,583224,540219,917227,125Diluted222,185228,460223,596231,105Dividends 1Cash dividends declared per share$         0.14$         0.11$         0.28$         0.22Stores open at end of period1,2051,1261,2051,126 1All share and per share amounts have been adjusted for the two-for-one stock split effective December 15, 2011.Ross Stores, Inc.Condensed Consolidated Balance SheetsOctober 27,October 29,($000, unaudited)20122011AssetsCurrent AssetsCash and cash equivalents$      623,822$      552,924Short-term investments1,533298Accounts receivable68,49362,384Merchandise inventory1,342,9041,233,616Prepaid expenses and other102,60988,964Deferred income taxes11,50919,914Total current assets2,150,8701,958,100Property and equipment, net1,352,1661,088,244Long-term investments4,3975,984Other long-term assets140,504129,616Total assets$    3,647,937$    3,181,944Liabilities and Stockholders' EquityCurrent LiabilitiesAccounts payable    $      886,629$      759,708Accrued expenses and other352,484290,498Accrued payroll and benefits227,475217,238Income taxes payable-1,628Total current liabilities1,466,5881,269,072Long-term debt150,000150,000Other long-term liabilities223,477204,105Deferred income taxes110,137111,516Commitments and contingenciesStockholders' Equity1,697,7351,447,251Total liabilities and stockholders' equity$    3,647,937$    3,181,944Ross Stores, Inc.Condensed Consolidated Statements of Cash FlowsNine  Months EndedOctober 27,October 29, ($000, unaudited)20122011Cash Flows From Operating ActivitiesNet earnings$      550,161$      465,218Adjustments to reconcile net earnings to net cashprovided by operating activities:Depreciation and amortization133,824117,337Stock-based compensation37,38030,411Deferred income taxes(4,294)10,402Tax benefit from equity issuance27,71414,073Excess tax benefit from stock-based compensation(26,997)(13,362)Change in assets and liabilities:Merchandise inventory(212,834)(146,699)Other current assets(32,340)(24,145)Accounts payable156,76318,227Other current liabilities 6,628(65,961)Other long-term, net10,2658,190Net cash provided by operating activities646,270413,691Cash Flows From Investing ActivitiesAdditions to property and equipment(255,332)(231,349)Increase in restricted cash and investments(2,012)(66,505)Purchases of investments(424)-Proceeds from investments80910,965Net cash used in investing activities(256,959)(286,889)Cash Flows From Financing ActivitiesExcess tax benefit from stock-based compensation26,99713,362Issuance of common stock related to stock plans15,31714,060Treasury stock purchased(28,727)(15,502)Repurchase of common stock(334,357)(342,733)Dividends paid(94,554)(76,989)Net cash used in financing activities(415,324)(407,802)Net decrease in cash and cash equivalents(26,013)(281,000)Cash and cash equivalents:Beginning of period649,835833,924End of period$      623,822$      552,924Supplemental Cash Flow DisclosuresInterest paid$          4,834$          4,834Income taxes paid$      344,686$      300,824Non-Cash Investing ActivitiesIncrease in fair value of investment securities$              14$              72 SOURCE Ross Stores, Inc.