01—Abstract
Summary
Summary of the 10-K filed April 1, 2014. Cited figures are marked; the original filing is the authoritative source.
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.
02—Key points
Key Highlights
- Continued 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.
- Sales increased by 5.2% to $10.2 billion, driven by both new store openings and a 3% increase in comparable store sales.
- Net earnings grew to $837.3 million, or $3.88 per diluted share, reflecting improved profitability and effective cost management.
- Gross margin improved due to merchandise strategy, leading to a decrease in cost of goods sold as a percentage of sales.
- The company continues to invest in infrastructure, with significant capital expenditures on distribution centers and information systems.
- Strong cash flow generation enabled substantial stock repurchases ($550 million) and dividend payments ($147.9 million) in fiscal 2013.
- Strategic 'packaway' inventory purchases accounted for approximately 49% of total inventories, contributing to strong discounts offered to customers.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2014filed April 1, 2014Financial Statements
FY2014 against FY2013
| Line item | FY2014FY2013 | Change |
|---|---|---|
| Revenue | $10.23B$9.72B | +5.2% |
| Cost of Revenue | $7.36B$7.01B | +5.0% |
| Gross Profit | $2.87B$2.71B | +5.9% |
| SG&A Expenses | $1.53B$1.44B | +6.2% |
| Operating Expenses | $8.89B$8.46B | +5.1% |
| Interest Expense | $9.72M$9.72M | 0.0% |
| Net Income | $837.30M$786.76M | +6.4% |
| EPS (Basic) | $1.97$1.79 | +9.7% |
| EPS (Diluted) | $1.94$1.76 | +9.9% |
| Shares Outstanding (Basic) | 425.76M438.26M | −2.9% |
| Shares Outstanding (Diluted) | 431.61M445.57M | −3.1% |
05—Questions
Frequently Asked Questions
What is Ross Stores' core business strategy and competitive advantage?
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.
How is Ross Stores managing its growth and investments?
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.
What is the company's approach to managing inventory and costs?
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.
How does Ross Stores return value to its shareholders?
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.
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