01—Abstract
Summary
Summary of the 10-K filed March 28, 2017. Cited figures are marked; the original filing is the authoritative source.
Ross Stores, Inc. (ROST) reported strong performance in its fiscal year 2016, demonstrating consistent growth in sales and net earnings.
The company's off-price retail model, operating under the Ross Dress for Less® and dd's DISCOUNTS® brands, continues to resonate with value-conscious consumers. This fiscal year saw a notable increase in sales, driven by both new store openings and a healthy comparable store sales increase, indicating effective operational execution and strong customer demand for branded merchandise at significant discounts. Financially, the company maintained robust profitability, with net earnings as a percentage of sales showing improvement.
The company also demonstrated a strong commitment to returning value to shareholders through substantial stock repurchases and consistent dividend payments, supported by healthy cash flows from operations. The strategic expansion of its store base and focus on optimizing merchandising and operational efficiencies position Ross Stores for continued success in the competitive retail landscape.
02—Key points
Key Highlights
- Achieved significant sales growth of 7.8% to $12.87 billion in fiscal year 2016, up from $11.94 billion in fiscal year 2015.
- Reported a 4% increase in comparable store sales, indicating sustained customer traffic and demand for its off-price offerings.
- Net earnings grew by approximately 9.5% to $1.12 billion, with diluted earnings per share increasing by 13% to $2.83.
- Continued aggressive share repurchase program, buying back approximately 11.6 million shares for $700 million in fiscal year 2016, and approved a new $1.75 billion repurchase program.
- Expanded its store footprint, opening 93 net new stores, bringing the total store count to 1,533 by the end of fiscal year 2016.
- Maintained a strong gross margin and controlled operating expenses, leading to improved net earnings margin.
- Generated robust cash flow from operations ($1.56 billion), supporting capital expenditures, dividends, and share repurchases.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2017filed March 28, 2017Financial Statements
FY2017 against FY2016
| Line item | FY2017FY2016 | Change |
|---|---|---|
| Revenue | $12.87B$11.94B | +7.8% |
| Cost of Revenue | $9.17B$8.58B | +7.0% |
| Gross Profit | $3.69B$3.36B | +9.8% |
| SG&A Expenses | $1.89B$1.74B | +8.7% |
| Operating Expenses | $11.08B$10.33B | +7.3% |
| Interest Expense | $18.57M$18.57M | 0.0% |
| Net Income | $1.12B$1.02B | +9.5% |
| EPS (Basic) | $2.85$2.53 | +12.6% |
| EPS (Diluted) | $2.83$2.51 | +12.7% |
| Shares Outstanding (Basic) | 392.12M403.03M | −2.7% |
| Shares Outstanding (Diluted) | 394.96M406.40M | −2.8% |
05—Questions
Frequently Asked Questions
What is Ross Stores' primary business strategy?
Ross Stores operates as an off-price retailer, focusing on selling first-quality, in-season, name-brand and designer apparel, accessories, footwear, and home fashions at discounts of 20% to 60% below department and specialty store regular prices. The company operates two brands: Ross Dress for Less® and dd's DISCOUNTS®.
How did Ross Stores perform financially in fiscal year 2016?
In fiscal year 2016, Ross Stores reported a 7.8% increase in sales to $12.87 billion and a 13% increase in diluted earnings per share to $2.83. Comparable store sales grew by 4%, and net earnings rose to $1.12 billion. The company also maintained a healthy profit margin and generated strong operating cash flow.
What is the company's approach to store expansion and real estate?
Ross Stores' real estate strategy involves opening new stores, primarily in states where they already operate to increase market penetration and leverage overhead. They also continue to expand in newer markets. Key considerations for new locations include site availability and quality, demographics, competition, and population density. During fiscal 2016, they opened 93 net new stores.
How does Ross Stores manage its inventory and sourcing?
The company employs opportunistic buying strategies, purchasing merchandise from over 8,000 vendors. This includes leveraging manufacturer overruns, canceled orders, and packaway merchandise (purchased in advance for later sale). Packaway inventory represented approximately 49% of total inventories at the end of fiscal 2016. New merchandise is received frequently, allowing for rapid response to selling trends.
06—Continue