10-QPeriod: Q1 FY2002

ROSS STORES, INC. Quarterly Report for Q1 Ended May 5, 2001

Filed June 15, 2001For Securities:ROST

Summary

Ross Stores, Inc. reported its first-quarter results for the period ending May 5, 2001. While total sales increased by 6.5% year-over-year to $674.4 million, this growth was primarily driven by store expansion rather than comparable store sales, which actually declined by 3%. This decrease in comparable store sales led to reduced leverage on occupancy and administrative expenses, contributing to a lower net earnings margin of 5.1% compared to 6.4% in the prior year's quarter. Despite the pressure on sales and margins, the company's financial position remains solid. Cash and cash equivalents increased to $38.3 million. Inventory levels grew 9% year-over-year, reflecting the increased store count. The company continued its share repurchase program, buying back $33.2 million in stock during the quarter, and has ample liquidity through its credit facilities to fund operations, repurchases, and planned capital expenditures, including a new distribution center in North Carolina.

Key Highlights

  • 1Total sales increased 6.5% to $674.4 million for the first quarter, compared to $633.4 million in the prior year.
  • 2Comparable store sales decreased by 3%, indicating a slowdown in sales at existing locations.
  • 3Net earnings decreased to $34.7 million ($0.43 per diluted share) from $40.8 million ($0.47 per diluted share) in the prior year's quarter, reflecting margin pressure.
  • 4The company repurchased approximately 1.6 million shares of common stock for $33.2 million during the quarter as part of its ongoing share repurchase program.
  • 5Inventories increased by 9% to $607.3 million, reflecting expansion and potentially cautious inventory management.
  • 6The company is planning to build a new 1.3 million square foot distribution center near Charlotte, North Carolina, to be financed through an operating lease.
  • 7Liquidity remains strong, with $38.3 million in cash and cash equivalents and access to significant revolving credit facilities.

Frequently Asked Questions

The sales increase of 6.5% is primarily attributed to the addition of new stores opened since the prior year's comparable period, rather than an increase in sales at existing stores, as comparable store sales declined by 3%.

Net earnings decreased because of a decline in comparable store sales. This led to reduced leverage on occupancy and selling, general, and administrative expenses, causing these costs to rise as a percentage of sales, thereby pressuring the overall profit margin.

Ross Stores continued its share repurchase program, buying back $33.2 million worth of stock in the quarter. The company also pays dividends, and has repurchased a total of 11.7 million shares for $202.6 million under its current program as of May 5, 2001.

The company maintains a strong liquidity position with substantial cash reserves and access to credit facilities. It is planning significant capital expenditures, including a new distribution center, and expects its cash flows from operations and credit lines to be adequate to meet these needs.