10-QPeriod: Q3 FY2006

ROSS STORES, INC. Quarterly Report for Q3 Ended Oct 29, 2005

Filed December 7, 2005For Securities:ROST

Summary

Ross Stores, Inc. reported strong sales growth for the nine months ending October 29, 2005, with total sales increasing by 16.7% to $3.53 billion, driven by both new store openings and a 6% comparable store sales increase. Net earnings for the nine-month period were $128.7 million, a slight increase from the prior year, and diluted EPS rose to $0.87. The company continues its aggressive store expansion, ending the period with 735 stores, an increase of 84 net new stores year-over-year. Financially, Ross Stores demonstrated robust operating cash flow generation, increasing significantly to $264.2 million for the nine-month period. The company also announced a new two-year stock repurchase program of up to $400 million, underscoring its commitment to returning capital to shareholders. While cost of goods sold as a percentage of sales saw a slight increase, management is focused on strengthening its off-price model and expanding its market share.

Key Highlights

  • 1Total sales for the nine months ended October 29, 2005, increased by 16.7% to $3.53 billion, compared to $3.03 billion in the prior year.
  • 2Net earnings for the nine-month period were $128.7 million, up from $118.1 million in the same period last year.
  • 3Diluted earnings per share (EPS) increased to $0.87 for the nine months ended October 29, 2005, from $0.78 in the prior year.
  • 4The company expanded its store base, ending the period with 735 stores, an increase of 84 net new stores compared to the prior year.
  • 5Operating cash flow for the nine months ended October 29, 2005, was $264.2 million, a significant increase from $114.9 million in the prior year.
  • 6A new two-year stock repurchase program of up to $400 million was authorized in November 2005.
  • 7The company's off-price model continues to gain traction, with off-price share of total apparel sales growing.

Frequently Asked Questions

The primary drivers of sales growth were the opening of 84 net new stores and a 6% increase in comparable store sales. This indicates successful store expansion and growth in same-store performance.

Net earnings increased from $118.1 million to $128.7 million for the nine-month period, resulting in an improved diluted EPS of $0.87 compared to $0.78 in the prior year. This improvement was achieved despite some pressures on the cost of goods sold.

Ross Stores is actively returning value to shareholders through its stock repurchase program. In November 2005, a new two-year program of up to $400 million was authorized. The company also declared quarterly cash dividends, with a recent declaration of $0.06 per share.

Yes, the company restated prior year interim financial statements primarily due to changes in accounting for tenant improvement allowances and rent holidays under operating leases, as well as a change in the presentation of the tax benefit from equity issuance in the cash flow statement.