10-QPeriod: Q2 FY2003

ROSS STORES, INC. Quarterly Report for Q2 Ended Aug 3, 2002

Filed September 16, 2002For Securities:ROST

Summary

Ross Stores, Inc. reported strong financial performance for the quarter and six months ended August 3, 2002. Total sales increased by 21% and 21.3% respectively compared to the prior year periods, driven by a robust 9% and 10% comparable store sales increase. This sales growth, combined with improved gross margins and effective expense management, led to a significant rise in net earnings. The company's balance sheet reflects substantial growth in assets, particularly merchandise inventory and cash. Liabilities also increased, primarily due to a significant rise in accounts payable, indicating strong inventory turnover and supplier relationships. The company's financial position remains solid, with a healthy, albeit slightly decreased, current ratio, and a strong focus on returning capital to shareholders through share repurchases and dividends.

Key Highlights

  • 1Significant Sales Growth: Total sales surged by 21% for the three months and 21.3% for the six months ended August 3, 2002, compared to the prior year.
  • 2Strong Comparable Store Sales: Comparable store sales increased by a healthy 9% for the quarter and 10% for the six-month period, indicating continued customer demand.
  • 3Improved Profitability: Net earnings increased significantly, driven by higher sales, better gross margins, and leverage on operating expenses.
  • 4Robust Cash Flow from Operations: Operating activities generated $178.3 million in cash for the six-month period, a substantial increase from $85.5 million in the prior year.
  • 5Active Share Repurchase Program: The company repurchased approximately $79.4 million of its common stock during the six months, demonstrating a commitment to shareholder value.
  • 6Expansion Continues: The company opened 17 net new stores in the quarter, bringing the total to 487, indicating ongoing strategic expansion.
  • 7Increased Cash and Equivalents: Cash and cash equivalents grew to $95.3 million from $40.4 million at the start of the period, providing strong liquidity.

Frequently Asked Questions

The increase in sales was driven by two main factors: a strong 9% comparable store sales increase for the quarter and the opening of 17 net new stores. This indicates both strong performance in existing locations and successful expansion.

Ross Stores effectively managed costs. The cost of goods sold and occupancy as a percentage of sales decreased due to lower markdowns and freight costs. General, selling, and administrative expenses also showed leverage as a percentage of sales due to higher comparable store sales, contributing to improved net earnings.

The company is actively returning capital to shareholders through a significant stock repurchase program, having bought back $79.4 million in the first six months of the fiscal year. They also continue to pay quarterly cash dividends.

Management anticipates the competitive climate will continue and plans to address it by effectively executing and refining its existing strategies, including its ongoing store expansion program. They also focus on purchasing attractive name-brand merchandise at discounts.