10-KPeriod: FY2014

ROSS STORES, INC. Annual Report, Year Ended Feb 1, 2014

Filed April 1, 2014For Securities:ROST

Summary

Ross Stores, Inc. (ROST) presents its 2014 10-K filing, detailing a strong performance driven by its off-price retail model. The company operates two distinct brands, Ross Dress for Less and dd's DISCOUNTS, catering to value-conscious consumers across various income levels. The filing highlights robust sales growth, an expanding store footprint, and effective inventory management, particularly through opportunistic 'packaway' purchases. Financially, Ross Stores demonstrates consistent revenue increases and healthy profitability, with a focus on maintaining operating costs while investing in infrastructure such as distribution centers and information systems. The company also emphasizes its commitment to shareholder returns through stock repurchases and increasing dividends. Key risks identified include competitive pressures, changes in consumer spending, and macroeconomic factors, but the company appears well-positioned to navigate these challenges through its established off-price strategy and operational efficiency.

Financial Highlights

51 data points
Beta

Revenue

$10.23B

28.0% Gross Margin

Net Income

$837.30M

8.2% Net Margin

EPS (Diluted)

$1.94

Total Assets

$3.90B

Cash & Equivalents

$423.17M

Free Cash Flow

$471.49M

Financial Statements
Beta
Revenue$10.23B
Cost of Revenue$7.36B
Gross Profit$2.87B
SG&A Expenses$1.53B
Operating Expenses$8.89B
Interest Expense$9.72M
Net Income$837.30M
EPS (Basic)$1.97
EPS (Diluted)$1.94
Shares Outstanding (Basic)425.76M
Shares Outstanding (Diluted)431.61M

Key Highlights

  • 1Continued store expansion with 88 new Ross stores and 23 new dd's DISCOUNTS stores opened in fiscal 2013, leading to a total of 1,276 stores.
  • 2Sales increased by 5.2% to $10.2 billion, driven by both new store openings and a 3% increase in comparable store sales.
  • 3Net earnings grew to $837.3 million, or $3.88 per diluted share, reflecting improved profitability and effective cost management.
  • 4Gross margin improved due to merchandise strategy, leading to a decrease in cost of goods sold as a percentage of sales.
  • 5The company continues to invest in infrastructure, with significant capital expenditures on distribution centers and information systems.
  • 6Strong cash flow generation enabled substantial stock repurchases ($550 million) and dividend payments ($147.9 million) in fiscal 2013.
  • 7Strategic 'packaway' inventory purchases accounted for approximately 49% of total inventories, contributing to strong discounts offered to customers.

Frequently Asked Questions

Ross Stores operates as an off-price retailer, offering first-quality, in-season, name-brand and designer apparel, accessories, footwear, and home fashions at everyday savings of 20% to 60% below department and specialty store prices. Its competitive advantage lies in its ability to source merchandise opportunistically through 'packaway' purchases and close-outs, its efficient supply chain, and its focus on providing a 'treasure hunt' shopping experience in well-organized stores. The company operates two brands: Ross Dress for Less, targeting middle-income households, and dd's DISCOUNTS, focusing on more moderately priced goods for moderate-income households.

Ross Stores is pursuing a growth strategy focused on expanding its store footprint, opening 88 new Ross stores and 23 dd's DISCOUNTS stores in fiscal 2013. The company is also making significant capital investments in its infrastructure, including expanding and improving distribution centers, enhancing information systems, and upgrading its buying and corporate offices. Future capital expenditures are projected to be around $800 million for fiscal year 2014, driven by new store openings and facility improvements.

The company's merchandising strategy heavily relies on opportunistic buying, with 'packaway' inventory (purchased for future sale) constituting about 49% of total inventories at the end of fiscal 2013. This allows them to secure merchandise at lower costs. Ross also focuses on maintaining low operating costs through a self-service retail format, efficient logistics, and centralized decision-making. The cost of goods sold as a percentage of sales decreased in fiscal 2013 due to improved merchandise gross margin.

Ross Stores actively returns value to shareholders through stock repurchase programs and dividend payments. In fiscal 2013, the company repurchased approximately $550 million worth of its common stock under a $1.1 billion, two-year program. Additionally, it declared quarterly cash dividends, totaling $0.70 per share in fiscal 2013, reflecting a consistent increase in dividend payouts over recent years.