10-KPeriod: FY2010

ROSS STORES, INC. Annual Report, Year Ended Jan 30, 2010

Filed March 30, 2010For Securities:ROST

Summary

Ross Stores, Inc. (ROST) reported strong performance in its 2010 10-K filing, demonstrating robust sales growth and profitability, even amidst a challenging macroeconomic environment. The company successfully navigated the economic pressures by adhering to its core off-price retail strategy, focusing on value-conscious consumers seeking name-brand apparel and home accessories at significant discounts. Its diversified store base, comprising both the larger Ross Dress for Less format and the smaller dd's DISCOUNTS, contributed to this success by catering to different income demographics. Key to its operational efficiency is a well-honed merchandising and purchasing strategy. Ross leverages opportunistic buying, such as close-outs and packaway inventory, to secure desirable merchandise at lower costs, which it then passes on to customers. Investments in information systems to enhance localized merchandising and a continued focus on operational efficiency, including cost management, further bolster its competitive advantage and financial health. The company's consistent store growth and solid financial position, supported by strong operating cash flows and ongoing share repurchase programs, position it favorably for continued success.

Financial Highlights

25 data points
Beta

Revenue

$7.18B

25.8% Gross Margin

Net Income

$442.76M

6.2% Net Margin

EPS (Diluted)

$0.89

Free Cash Flow

$729.90M

Financial Statements
Beta
Revenue$7.18B
Cost of Revenue$5.33B
Gross Profit$1.86B
SG&A Expenses$1.13B
Operating Expenses$6.47B
Net Income$442.76M
EPS (Basic)$0.90
EPS (Diluted)$0.89
Shares Outstanding (Basic)491.55M
Shares Outstanding (Diluted)500.06M

Key Highlights

  • 1Ross Stores operated 1,005 stores (953 Ross Dress for Less and 52 dd's DISCOUNTS) as of January 30, 2010, indicating significant scale and market penetration.
  • 2The company reported a 10.8% increase in sales for fiscal 2009, reaching $7.18 billion, driven by both new store openings and a 6% comparable store sales increase.
  • 3Net earnings increased substantially by 45% in fiscal 2009 to $442.7 million, with diluted EPS rising to $3.54 from $2.33 in the prior year.
  • 4Gross margins improved due to lower cost of goods sold as a percentage of sales (74.2% in 2009 vs. 76.4% in 2008), reflecting strong merchandising and buying strategies.
  • 5Ross Stores continued to return capital to shareholders, declaring dividends and repurchasing approximately $300 million in stock in fiscal 2009 under a new $750 million repurchase program for fiscal years 2010-2011.
  • 6Investments in information systems and supply chain enhancements were made to improve merchandising capabilities and operational efficiency.
  • 7Packaway inventory represented a significant portion (38%) of total inventories, highlighting a key strategy for securing branded merchandise at discounts.

Frequently Asked Questions

Ross Stores' primary strategy is to operate as an off-price retailer. They achieve this by purchasing branded and designer merchandise at discounts, often through opportunistic buying methods like close-outs and packaway inventory, and then selling these items at 20% to 60% off department and specialty store prices. This focus on value is central to their merchandising, purchasing, and pricing decisions.

As of January 30, 2010, Ross Stores operated 1,005 stores. The company's two main formats are Ross Dress for Less®, which accounted for the majority of stores (953) and targets middle-income households, and dd's DISCOUNTS®, which has 52 stores and targets more moderate-income households. The company has been steadily expanding its store count, opening 56 new Ross stores and closing 7 in fiscal 2009, while opening 4 dd's DISCOUNTS stores and closing 4.

In fiscal year 2009, Ross Stores reported a 10.8% increase in sales to $7.18 billion. Net earnings grew significantly by 45% to $442.7 million, resulting in diluted earnings per share of $3.54, up from $2.33 in the previous year. This strong performance was supported by an improvement in the cost of goods sold as a percentage of sales and effective expense management.

Ross Stores employs a dynamic inventory management strategy, receiving new merchandise frequently (three to six times per week) to maintain a 'treasure hunt' appeal. A key component is 'packaway' inventory, which accounted for 38% of total inventories, allowing them to secure seasonal items for future sale at lower costs. They also utilize four highly automated distribution centers to efficiently manage their supply chain and support store growth.