01—Abstract
Summary
Summary of the 10-K filed April 2, 2019. Cited figures are marked; the original filing is the authoritative source.
Ross Stores, Inc. (ROST) reported its fiscal year 2018 results, ending February 2, 2019.
The company operates two off-price retail chains, Ross Dress for Less and dd's DISCOUNTS, and continues to demonstrate strong performance driven by its value-oriented business model. The off-price sector benefits from consistent consumer demand for brand-name merchandise at discounted prices, a trend that remains robust. Key financial highlights include continued sales growth and healthy earnings.
The company's strategic focus on opportunistic purchasing, efficient inventory management, and maintaining low operating costs has enabled it to navigate a competitive retail landscape. Ross Stores' expansion strategy, focusing on opening new locations in existing and new markets, along with prudent capital allocation, including stock repurchases and dividends, signals confidence in its future prospects. Investors can note the company's commitment to returning value to shareholders while investing in growth and operational improvements.
02—Key points
Key Highlights
- Operates 1,717 stores across two brands: Ross Dress for Less (1,480 stores) and dd's DISCOUNTS (237 stores).
- Maintains a strong off-price model, offering brand-name and designer apparel and home fashions at 20-60% off department store prices.
- Achieved sales growth in fiscal 2018, with comparable store sales increasing by 4%.
- Managed operating costs effectively, keeping them as a percentage of sales consistent or improved in key areas.
- Continued store expansion, opening 99 new stores in fiscal 2018.
- Returned significant capital to shareholders through dividends and a substantial stock repurchase program ($1.075 billion repurchased in fiscal 2018).
- Ended fiscal 2018 with a strong financial position, including $1.41 billion in cash and cash equivalents and a healthy working capital balance.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2019filed April 2, 2019Financial Statements
FY2019 against FY2018
| Line item | FY2019FY2018 | Change |
|---|---|---|
| Revenue | $14.98B$14.13B | +6.0% |
| Cost of Revenue | $10.73B$10.04B | +6.8% |
| Gross Profit | $4.26B$4.09B | +4.0% |
| SG&A Expenses | $2.22B$2.04B | +8.5% |
| Operating Expenses | $12.93B$12.09B | +6.9% |
| Interest Expense | $17.90M$18.58M | −3.6% |
| Net Income | $1.59B$1.36B | +16.5% |
| EPS (Basic) | $4.30$3.58 | +20.1% |
| EPS (Diluted) | $4.26$3.55 | +20.0% |
| Shares Outstanding (Basic) | 369.53M381.17M | −3.1% |
| Shares Outstanding (Diluted) | 372.68M384.33M | −3.0% |
05—Questions
Frequently Asked Questions
What is Ross Stores' core business strategy?
Ross Stores operates as an off-price retailer, focusing on offering 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. This strategy is executed through two main brands: Ross Dress for Less and dd's DISCOUNTS, each targeting slightly different customer demographics and price points.
How does Ross Stores manage its inventory and sourcing?
The company utilizes opportunistic buying strategies, purchasing merchandise from vendors through various methods, including close-outs, manufacturer overruns, and canceled orders. A significant portion of inventory is 'packaway' merchandise, bought in advance to be stored and released later, enabling the company to secure strong discounts. This approach allows them to offer compelling value to customers while adapting to market opportunities.
What are the primary risks highlighted in the filing?
Key risks include intense competition in the retail apparel market, potential adverse impacts from changes in consumer spending habits and preferences, unseasonable weather affecting shopping patterns, macroeconomic conditions influencing consumer confidence and disposable income, and the company's ability to effectively manage inventory and markdowns. Additionally, risks related to supply chain disruptions, information security breaches, and international sourcing are also noted.
What is the company's approach to returning capital to shareholders?
Ross Stores actively returns capital to shareholders through a combination of quarterly cash dividends and a significant stock repurchase program. In fiscal year 2018, the company repurchased approximately $1.075 billion of its common stock and paid substantial dividends. A new, two-year $2.55 billion stock repurchase program was approved in March 2019, indicating ongoing commitment to shareholder returns.
06—Continue