10-KPeriod: FY2016

ROSS STORES, INC. Annual Report, Year Ended Jan 30, 2016

Filed March 29, 2016For Securities:ROST

Summary

Ross Stores, Inc. (ROST) reported strong performance for the fiscal year ending January 30, 2016, demonstrating continued growth in sales and net earnings. The company operates two off-price retail chains, Ross Dress for Less and dd's DISCOUNTS, focusing on offering branded apparel and home fashions at significant discounts. This business model resonated well with value-conscious consumers, driving an 8.1% increase in sales to $11.94 billion and a 10.4% increase in net earnings to $1.02 billion. Key to the company's success is its effective off-price buying strategy, which allows it to procure merchandise opportunistically and pass savings onto customers. The company expanded its store base by opening 84 net new stores, contributing to sales growth alongside a healthy 4% increase in comparable store sales. Financially, ROST maintained a strong balance sheet with robust operating cash flow and returned capital to shareholders through dividends and significant stock repurchases. Management expressed confidence in its strategy and outlook, anticipating continued growth and profitability.

Financial Highlights

28 data points
Beta

Revenue

$11.94B

28.2% Gross Margin

Net Income

$1.02B

8.5% Net Margin

EPS (Diluted)

$2.51

Free Cash Flow

$959.29M

Financial Statements
Beta
Revenue$11.94B
Cost of Revenue$8.58B
Gross Profit$3.36B
SG&A Expenses$1.74B
Operating Expenses$10.33B
Interest Expense$18.57M
Net Income$1.02B
EPS (Basic)$2.53
EPS (Diluted)$2.51
Shares Outstanding (Basic)403.03M
Shares Outstanding (Diluted)406.40M

Key Highlights

  • 1Sales increased by 8.1% to $11.94 billion in fiscal year 2015.
  • 2Net earnings grew by 10.4% to $1.02 billion, with diluted EPS reaching $2.51.
  • 3Opened 84 net new stores, expanding the total store count to 1,446 (1,274 Ross, 172 dd's DISCOUNTS).
  • 4Achieved a 4% increase in comparable store sales, indicating strong performance in existing locations.
  • 5Maintained a strong merchandise gross margin and managed operating expenses effectively.
  • 6Returned significant capital to shareholders through $700 million in stock repurchases and $192.3 million in dividends.
  • 7Packaway inventory represented 47% of total inventories, a strategic approach to secure discounted merchandise for future sale.

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 20% to 60% off department and specialty store regular prices. Its strategy relies on opportunistic purchasing and efficient operations to deliver value to its target customers.

In fiscal year 2015, Ross Stores expanded its retail footprint by opening 84 net new stores, increasing its total store count to 1,446. This expansion included 70 new Ross Dress for Less stores and 20 new dd's DISCOUNTS stores, while six Ross stores were closed.

Ross Stores utilizes an 'opportunistic buying' strategy, which includes purchasing 'packaway' merchandise. This refers to inventory bought with the intent to store it in warehouses for later release to stores, often up to six months later. Packaway merchandise accounted for approximately 47% of total inventories as of January 30, 2016, allowing the company to secure compelling discounts and maximize brand availability.

The company generated strong cash flows from operations, which funded its capital expenditures for store expansion and improvements, as well as its regular quarterly cash dividends. Additionally, Ross Stores actively repurchased its common stock, demonstrating a commitment to returning capital to shareholders. In fiscal year 2015, approximately $700 million was spent on stock repurchases.