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Ross Stores Reports Second Quarter Earnings, Provides Third Quarter Guidance

Ross Stores Reports Second Quarter Earnings, Provides Third Quarter Guidance

Ross Stores, Inc. (NASDAQ: ROST) today reported earnings per share for the 13 weeks ended July 31, 2021 grew 22% to $1.39 on net income of $494 million. This compares to $1.14 per share on net earnings of $413 million for the 13 weeks ended August 3, 2019. Sales rose 21% to $4.8 billion, with comparable store sales up a robust 15%.

For the six months ended July 31, 2021, earnings per share were $2.73 on net earnings of $971 million, up from $2.29 per share on net income of $834 million for the same period in 2019. Sales for the first half of 2021 rose 20% to $9.3 billion, with comparable store sales up 14%.

Barbara Rentler, Chief Executive Officer, commented, “We are pleased that both second quarter sales and earnings substantially exceeded our expectations. Sales benefited from customers’ positive response to our broad assortment of great bargains. In addition, our results were bolstered by a number of external factors, including ongoing government stimulus, increasing vaccination rates, and diminishing COVID restrictions. Operating margin versus 2019 improved to 14.1% as leverage from the robust sales gains was partially offset by the anticipated expense pressures from higher freight, wage, and COVID-related costs.”

Ms. Rentler continued, “During the second quarter, we repurchased 1.4 million shares of common stock for an aggregate price of $176 million. As previously announced, we expect to buy back a total of $650 million in common stock during fiscal 2021.”

Ms. Rentler further noted, “Looking ahead, there remains much uncertainty regarding the sustainability of the positive external factors that benefited our first half results as well as the potential risks we may face from the spread of COVID variants and worsening industry-wide supply chain congestion. As a result, we are forecasting third quarter same store sales to be up 5% to 7% with earnings per share in the range of $0.61 to $0.69. This guidance reflects our expectation for escalating freight and supply chain costs, and ongoing COVID-related operating expenses.”

Ms. Rentler added, “Based on first half results and our third quarter outlook, we are updating our fiscal year 2021 earnings per share forecast to be in the range of $4.20 to $4.38 on a comparable store sales gain of 10% to 11%.”

Ms. Rentler concluded, “Moving forward, we remain optimistic about our prospects for continued growth in both sales and profitability over the longer term, especially given consumers’ increasing focus on value and convenience. Moreover, the significant number of retail closures and bankruptcies in recent years further enhances our ability to gain additional market share in the future.”

The Company will host a conference call on Thursday, August 19, 2021 at 4:15 p.m. Eastern time to provide additional details concerning its second quarter results and management’s outlook for the remainder of the year. A real-time audio webcast of the conference call will be available in the Investors section of the Company’s website, located at www.rossstores.com. An audio playback will be available at 404-537-3406, PIN #6377123 until 8:00 p.m. Eastern time on August 26, 2021, as well as on the Company’s website.

Forward-Looking Statements: This press release contains forward-looking statements regarding projected sales and earnings, planned new store growth, and other financial results and market conditions 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,” “outlook,” “looking ahead,” and similar expressions identify forward-looking statements. Risk factors for Ross Dress for Less® (“Ross”) and dd’s DISCOUNTS® include without limitation, the uncertainties and potential for the recurrence of significant business disruptions arising from the COVID-19 pandemic; changes in the level of consumer spending on or preferences for apparel and home-related merchandise; impacts from the macro-economic environment, financial and credit markets, geopolitical conditions, unemployment levels or public health issues (such as pandemics) that affect consumer confidence and consumer disposable income; our need to effectively manage our inventories, markdowns, and inventory shortage to achieve planned gross margins; competitive pressures in the apparel or home-related merchandise retailing industry; issues associated with importing and selling merchandise produced in other countries, including risks from supply chain disruptions due to port of exit/entry congestion, shipping delays and ocean freight cost increases, and risks from other supply chain related disruptions in other countries, including those due to COVID-19 closures; unseasonable weather that may affect shopping patterns and consumer demand for seasonal apparel and other merchandise, and that may result in temporary store closures and disruptions in deliveries of merchandise to our stores; market availability, quantity, and quality of attractive brand name merchandise at desirable discounts and our buyers’ ability to purchase merchandise that enables us to offer customers a wide assortment of merchandise at competitive prices; potential data security breaches, including cyber-attacks on our transaction processing and computer information systems, which could result in theft or unauthorized disclosure of customer, credit card, employee, or other private and valuable information that we handle in the ordinary course of our business; potential disruptions in our supply chain or information systems; issues involving the quality, safety, or authenticity of products we sell, which could harm our reputation, result in lost sales, and/or increase our costs; an adverse outcome in various legal, regulatory, or tax matters; damage to our corporate reputation or brands; our need to continually attract, train, and retain associates to execute our off-price strategies; our need to effectively advertise and market our business; changes in U.S. tax, tariff, or trade policy regarding apparel and home-related merchandise produced in other countries that could adversely affect our business; volatility in revenues and earnings; an additional pandemic, natural or man-made disaster in California or in another region where we have a concentration of stores, offices, or a distribution center; unexpected issues or costs from expanding in existing markets and entering new geographic markets; obtaining acceptable new store sites with favorable consumer demographics; and maintaining sufficient liquidity to support our continuing operations, new store openings and reopenings, and ongoing capital expenditure plans. Other risk factors are set forth in our SEC filings including without limitation, the Form 10-K for fiscal 2020, and fiscal 2021 Form 10-Q and Form 8-Ks on file with the SEC. 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 Dublin, California, with fiscal 2020 revenues of $12.5 billion. Currently, the Company operates Ross Dress for Less® (“Ross”), the largest off-price apparel and home fashion chain in the United States with 1,611 locations in 40 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 savings of 20% to 60% off department and specialty store regular prices every day. The Company also operates 285 dd’s DISCOUNTS® stores in 21 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 savings of 20% to 70% off moderate department and discount store regular prices every day. Additional information is available at www.rossstores.com.

Ross Stores, Inc.
Condensed Consolidated Statements of Operations
 
 
Three Months Ended Six Months Ended
($000, except stores and per share data, unaudited) July 31, 2021 August 1, 2020 August 3, 2019 July 31, 2021 August 1, 2020 August 3, 2019
 
Sales

$

4,804,974

$

2,684,712

$

3,979,869

 

$

9,321,054

$

4,527,385

 

$

7,776,511

 

 
Costs and Expenses
Cost of goods sold

 

3,410,871

 

2,080,120

 

2,843,850

 

 

6,609,267

 

3,970,111

 

 

5,545,518

 

Selling, general and administrative

 

717,788

 

519,495

 

591,970

 

 

1,392,841

 

934,800

 

 

1,150,220

 

Interest expense (income), net

 

18,707

 

28,855

 

(4,782

)

 

37,756

 

35,521

 

 

(10,417

)

Total costs and expenses

 

4,147,366

 

2,628,470

 

3,431,038

 

 

8,039,864

 

4,940,432

 

 

6,685,321

 

 
Earnings (loss) before taxes

 

657,608

 

56,242

 

548,831

 

 

1,281,190

 

(413,047

)

 

1,091,190

 

Provision (benefit) for taxes on earnings (loss)

 

163,350

 

34,195

 

136,110

 

 

310,453

 

(129,252

)

 

257,327

 

Net earnings (loss)

$

494,258

$

22,047

$

412,721

 

$

970,737

$

(283,795

)

$

833,863

 

 
Earnings (loss) per share
Basic

$

1.40

$

0.06

$

1.15

 

$

2.75

$

(0.81

)

$

2.31

 

Diluted

$

1.39

$

0.06

$

1.14

 

$

2.73

$

(0.81

)

$

2.29

 

 
 
Weighted-average shares outstanding (000)
Basic

 

352,865

 

352,276

 

359,794

 

 

352,927

 

352,239

 

 

361,439

 

Diluted

 

354,935

 

354,232

 

362,074

 

 

355,161

 

352,239

 

 

364,007

 

 
 
Store count at end of period

 

1,896

 

1,832

 

1,772

 

 

1,896

 

1,832

 

 

1,772

 

 
Ross Stores, Inc.
Condensed Consolidated Balance Sheets
 
 
($000, unaudited) July 31, 2021 August 1, 2020 August 3, 2019
Assets
 
Current Assets
Cash and cash equivalents

$

5,569,071

$

3,793,043

$

1,382,025

Accounts receivable

 

159,163

 

162,723

 

130,439

Merchandise inventory

 

1,751,027

 

1,117,983

 

1,835,869

Prepaid expenses and other

 

193,588

 

273,612

 

167,585

Total current assets

 

7,672,849

 

5,347,361

 

3,515,918

 
Property and equipment, net

 

2,746,208

 

2,706,105

 

2,505,040

Operating lease assets

 

2,973,907

 

3,053,735

 

2,932,199

Other long-term assets

 

248,436

 

215,044

 

198,790

Total assets

$

13,641,400

$

11,322,245

$

9,151,947

 
Liabilities and Stockholders’ Equity
 
Current Liabilities
Accounts payable

$

2,588,551

$

1,009,704

$

1,359,829

Accrued expenses and other

 

609,719

 

557,475

 

474,273

Current operating lease liabilities

 

608,123

 

579,277

 

549,841

Accrued payroll and benefits

 

445,307

 

204,109

 

295,465

Income taxes payable

 

19,526

 

-

 

-

Short-term debt

 

-

 

802,507

 

-

Current portion of long-term debt

 

64,964

 

-

 

-

Total current liabilities

 

4,336,190

 

3,153,072

 

2,679,408

 
 
Long-term debt

 

2,450,245

 

2,286,295

 

312,665

Non-current operating lease liabilities

 

2,503,332

 

2,601,254

 

2,496,230

Other long-term liabilities

 

292,715

 

258,869

 

227,842

Deferred income taxes

 

154,932

 

155,556

 

139,538

 
Commitments and contingencies
 
Stockholders’ Equity

 

3,903,986

 

2,867,199

 

3,296,264

Total liabilities and stockholders’ equity

$

13,641,400

$

11,322,245

$

9,151,947

 
Ross Stores, Inc.
Condensed Consolidated Statements of Cash Flows
 
 
Six Months Ended
($000, unaudited) July 31, 2021 August 1, 2020 August 3, 2019
 
Cash Flows From Operating Activities
Net earnings (loss)

$

970,737

 

$

(283,795

)

$

833,863

 

Adjustments to reconcile net earnings (loss) to net cash
provided by operating activities:
Depreciation and amortization

 

174,094

 

 

179,626

 

 

166,898

 

Stock-based compensation

 

58,258

 

 

46,897

 

 

44,613

 

Deferred income taxes

 

33,065

 

 

5,877

 

 

21,868

 

Change in assets and liabilities:
Merchandise inventory

 

(242,045

)

 

714,356

 

 

(85,427

)

Other current assets

 

(63,420

)

 

(51,924

)

 

(55,309

)

Accounts payable

 

360,891

 

 

(289,710

)

 

187,050

 

Other current liabilities

 

77,963

 

 

(44,671

)

 

(8,529

)

Income taxes

 

(27,596

)

 

(145,001

)

 

(31,193

)

Operating lease assets and liabilities, net

 

2,654

 

 

5,569

 

 

8,276

 

Other long-term, net

 

794

 

 

35,197

 

 

1,353

 

Net cash provided by operating activities

 

1,345,395

 

 

172,421

 

 

1,083,463

 

 
Cash Flows From Investing Activities
Additions to property and equipment

 

(254,437

)

 

(250,047

)

 

(250,314

)

Proceeds from investments

 

-

 

 

-

 

 

517

 

Net cash used in investing activities

 

(254,437

)

 

(250,047

)

 

(249,797

)

 
Cash Flows From Financing Activities
Issuance of common stock related to stock plans

 

12,534

 

 

11,075

 

 

10,906

 

Treasury stock purchased

 

(49,015

)

 

(32,346

)

 

(52,349

)

Repurchase of common stock

 

(175,784

)

 

(132,467

)

 

(640,259

)

Dividends paid

 

(203,384

)

 

(101,414

)

 

(186,642

)

Net proceeds from issuance of short-term debt

 

-

 

 

805,601

 

 

-

 

Payments of short-term debt

 

-

 

 

(3,094

)

 

-

 

Net proceeds from issuance of long-term debt

 

-

 

 

1,976,030

 

 

-

 

Payments of debt issuance costs

 

-

 

 

(3,254

)

 

-

 

Net cash (used in) provided by financing activities

 

(415,649

)

 

2,520,131

 

 

(868,344

)

 
Net increase (decrease) in cash, cash equivalents, and restricted
cash and cash equivalents

 

675,309

 

 

2,442,505

 

 

(34,678

)

 
Cash, cash equivalents, and restricted cash and cash equivalents:
Beginning of period

 

4,953,769

 

 

1,411,410

 

 

1,478,079

 

End of period

$

5,629,078

 

$

3,853,915

 

$

1,443,401

 

 
Reconciliations:
Cash and cash equivalents

$

5,569,071

 

$

3,793,043

 

$

1,382,025

 

Restricted cash and cash equivalents included in prepaid expenses and other

 

10,801

 

 

10,348

 

 

11,048

 

Restricted cash and cash equivalents included in other long-term assets

 

49,206

 

 

50,524

 

 

50,328

 

Total cash, cash equivalents, and restricted cash and cash equivalents:

$

5,629,078

 

$

3,853,915

 

$

1,443,401

 

 
Supplemental Cash Flow Disclosures
Interest paid

$

42,051

 

$

10,069

 

$

6,341

 

Income taxes paid

$

304,984

 

$

9,872

 

$

266,653

 

 

 

Connie Kao
Group Vice President, Investor & Media Relations
(925) 965-4668
connie.kao@ros.com

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