01—Abstract
Summary
Summary of the 10-K filed March 28, 2023. Cited figures are marked; the original filing is the authoritative source.
Ross Stores, Inc. (ROST) operates a successful off-price retail model with two distinct brands: Ross Dress for Less and dd's DISCOUNTS.
The company continues to demonstrate resilience and strategic focus despite navigating a challenging macroeconomic environment characterized by inflation and shifting consumer spending habits. With a robust store base and a commitment to value, Ross Stores is well-positioned to capitalize on the increasing consumer demand for bargains.
The company's operational efficiency, effective merchandising strategies, and ongoing investment in store growth and technology highlight its commitment to long-term value creation for shareholders. Investors should note the company's consistent store expansion, share repurchase programs, and dividend payments as indicators of financial health and shareholder return initiatives.
02—Key points
Key Highlights
- Operates 2,015 stores across two brands (Ross Dress for Less and dd's DISCOUNTS) in 40 states, DC, and Guam, targeting value-conscious consumers.
- Fiscal 2022 sales were $18.7 billion, a slight decrease of 1.2% year-over-year, primarily due to a 4% decline in comparable store sales driven by inflation impacting consumer demand, partially offset by net new store openings.
- The company opened 99 new stores in fiscal 2022 and plans to open approximately 100 new stores in fiscal 2023, reflecting a continued focus on strategic physical expansion.
- Fiscal 2022 net earnings were $1.51 billion, with diluted EPS of $4.38, a decrease from the prior year's $1.72 billion net earnings and $4.87 diluted EPS.
- Maintains a strong balance sheet with $4.6 billion in unrestricted cash and cash equivalents as of January 28, 2023, supported by $1.3 billion available under its revolving credit facility.
- Returned $1.4 billion to shareholders through stock repurchases ($950 million) and dividends ($431.3 million) in fiscal 2022, underscoring a commitment to shareholder value.
- Packaway inventory represented approximately 40% of total inventories, a strategy used to secure desirable brands at competitive prices for future sale.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2023, Ross Stores, Inc. kept $0.08.
- Revenue$18.70B100.0%
- Cost of revenue−$13.95B74.6%
- Gross profit$4.75B25.4%
- Operating costs−$2.76B14.8%
- Operating income$1.99B10.6%
- Interest, other & tax−$478.3M2.6%
- Net income$1.51B8.1%
Where FY2023 revenue went
$18.70B- Cost of revenue: $13.95B, 75% of revenue
- SG&A: $2.76B, 15% of revenue
- Net income: $1.51B, 8.1% of revenue
- Interest, other & tax: $478.3M, 2.6% of revenue
Kept 8.1% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2023filed March 28, 2023Financial Statements
FY2023 against FY2022
| Line item | FY2023FY2022 | Change |
|---|---|---|
| Revenue | $18.70B$18.92B | −1.2% |
| Cost of Revenue | $13.95B$13.71B | +1.7% |
| Gross Profit | $4.75B$5.21B | −8.8% |
| SG&A Expenses | $2.76B$2.87B | −4.0% |
| Operating Expenses | $16.71B$16.66B | +0.3% |
| Operating Income | $1.99B— | — |
| Net Income | $1.51B$1.72B | −12.2% |
| EPS (Basic) | $4.40$4.90 | −10.2% |
| EPS (Diluted) | $4.38$4.87 | −10.1% |
| Shares Outstanding (Basic) | 343.45M351.50M | −2.3% |
| Shares Outstanding (Diluted) | 345.22M353.73M | −2.4% |
05—Questions
Frequently Asked Questions
What is Ross Stores' primary business strategy and how does it mitigate risks associated with the current economic climate?
Ross Stores operates an off-price retail model, offering branded apparel and home fashion at discounts of 20-60% off department store prices. This value proposition is particularly attractive to consumers during periods of inflation and economic uncertainty, as it aligns with their need to stretch household budgets. The company mitigates risks by maintaining flexible purchasing strategies, opportunistic buying, and managing inventory effectively, allowing it to adapt to changing consumer demand and sourcing opportunities. Continuous store expansion in strategic locations further supports market penetration and economies of scale.
How did Ross Stores perform financially in fiscal year 2022, and what are the key drivers of its results?
In fiscal year 2022, Ross Stores reported sales of $18.7 billion, a slight 1.2% decrease from the prior year, largely due to a 4% decline in comparable store sales. This was attributed to escalating inflationary pressures that reduced customer demand, compounded by the absence of prior-year government stimulus benefits. However, sales were partially supported by the net opening of 92 new stores. Net earnings were $1.51 billion, with diluted EPS of $4.38, down from the previous year's $1.72 billion and $4.87, respectively. The increase in cost of goods sold as a percentage of sales, driven by higher freight costs and markdowns, also impacted profitability.
What is the company's approach to store growth and capital allocation?
Ross Stores continues to pursue a strategy of physical expansion, opening 99 new stores in fiscal 2022 and planning for approximately 100 new stores in fiscal 2023. This expansion is carefully managed based on market penetration, demographics, and expected profitability. Capital is also allocated towards enhancing existing stores, investing in IT systems, and supporting distribution networks. The company demonstrates a commitment to returning capital to shareholders through robust stock repurchase programs and consistent dividend payments, reflecting confidence in its financial position and future prospects.
What are the primary risks and uncertainties facing Ross Stores, as outlined in the 10-K?
The primary risks highlighted include macroeconomic factors such as inflation, interest rates, and geopolitical events impacting consumer confidence and costs. Intense competition within the retail sector, changes in consumer spending and preferences, and the potential for adverse weather conditions are also significant concerns. Operationally, the company faces risks related to merchandise availability and quality, managing inventory and markdowns, information security breaches, and supply chain disruptions. Compliance with regulations and potential legal issues are also noted.
06—Continue