01—Abstract
Summary
Summary of the 10-K filed April 3, 2018. Cited figures are marked; the original filing is the authoritative source.
Ross Stores, Inc. (ROST) reported its fiscal year 2017 results in this 10-K filing, highlighting continued growth and operational efficiency.
The company operates two distinct off-price retail brands: Ross Dress for Less, targeting middle-income households, and dd's DISCOUNTS, catering to more moderate-income consumers. The off-price model, which emphasizes offering first-quality, in-season, brand-name merchandise at discounts of 20-60%a off department store prices, continues to resonate with value-conscious shoppers. Financially, the company demonstrated strong sales growth and maintained healthy margins.
Key to its strategy is opportunistic purchasing and efficient inventory management, including significant use of packaway inventory. Ross Stores also actively returns capital to shareholders through share repurchases and dividends, indicating confidence in its financial position and future prospects. The company's risk factors primarily revolve around intense competition, changing consumer preferences, and macroeconomic conditions, but its established off-price model and strategic store growth appear to position it favorably within the retail landscape.
02—Key points
Key Highlights
- Operates two successful off-price retail chains: Ross Dress for Less and dd's DISCOUNTS, with a combined total of 1,622 stores as of February 3, 2018.
- Demonstrated consistent sales growth, with a 9.9% increase in fiscal year 2017, driven by comparable store sales increases and new store openings.
- Employs an effective off-price merchandising strategy, leveraging opportunistic purchasing and packaway inventory (49% of total inventories) to offer significant value to customers.
- Maintained healthy profit margins, with Cost of Goods Sold as a percentage of sales decreasing and Selling, General & Administrative expenses also showing leverage.
- Actively returned capital to shareholders through share repurchases totaling approximately $875 million in fiscal year 2017 and consistent quarterly dividend payments.
- Invested in growth and efficiency through capital expenditures, including new store openings and information systems enhancements.
- Successfully navigated the impact of the Tax Cuts and Jobs Act, recognizing a tax benefit in fiscal year 2017.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2018filed April 3, 2018Financial Statements
FY2018 against FY2017
| Line item | FY2018FY2017 | Change |
|---|---|---|
| Revenue | $14.13B$12.87B | +9.9% |
| Cost of Revenue | $10.04B$9.17B | +9.5% |
| Gross Profit | $4.09B$3.69B | +10.8% |
| SG&A Expenses | $2.04B$1.89B | +8.1% |
| Operating Expenses | $12.09B$11.08B | +9.1% |
| Interest Expense | $18.58M$18.57M | 0.0% |
| Net Income | $1.36B$1.12B | +21.9% |
| EPS (Basic) | $3.58$2.85 | +25.6% |
| EPS (Diluted) | $3.55$2.83 | +25.4% |
| Shares Outstanding (Basic) | 381.17M392.12M | −2.8% |
| Shares Outstanding (Diluted) | 384.33M394.96M | −2.7% |
05—Questions
Frequently Asked Questions
What is Ross Stores' core business strategy?
Ross Stores' core strategy revolves around operating off-price retail stores under two brands: Ross Dress for Less and dd's DISCOUNTS. The company focuses on offering first-quality, in-season, name-brand and designer apparel, accessories, footwear, and home fashions at discounts of 20-60% off department and specialty store regular prices. This is achieved through opportunistic buying, efficient inventory management, and maintaining low operating costs.
How does Ross Stores manage its inventory and purchasing?
Ross Stores utilizes opportunistic purchasing methods to acquire merchandise at favorable prices. This includes buying later in the merchandise cycle, taking advantage of manufacturer overruns and canceled orders ('close-outs'), and utilizing 'packaway' merchandise which is stored and released later. They maintain relationships with a large network of vendors and aim for frequent inventory turns.
What are the main risks facing Ross Stores?
Key risks identified include intense competition in the fragmented retail apparel market, potential changes in consumer spending and preferences, adverse weather conditions impacting shopping patterns, macroeconomic factors affecting consumer confidence, effective inventory management to avoid markdowns or lost sales, reliance on the availability of quality brand-name merchandise at discounts, cybersecurity threats, supply chain disruptions, and the need to secure suitable new store locations for growth.
How does Ross Stores return value to shareholders?
Ross Stores returns value to shareholders primarily through a consistent program of share repurchases and the payment of regular quarterly cash dividends. In fiscal year 2017, the company repurchased approximately $875 million worth of its common stock and continued its history of paying and increasing dividends.
06—Continue