Summary
Ross Stores, Inc. reported solid financial results for the first quarter of fiscal year 2007, ending May 5, 2007. The company demonstrated revenue growth driven by its store expansion strategy, with a 9.2% increase in sales compared to the prior year's first quarter. This growth was primarily attributed to the addition of 84 net new stores, expanding the company's footprint to 830 Ross Dress for Less and dd's DISCOUNTS locations. Net earnings also saw a healthy increase of 13.2%, resulting in diluted EPS of $0.48, up from $0.41 in the prior year. The company's gross margin improved due to lower markdowns and reduced shortage accruals, which helped offset increased freight and occupancy costs. While the company continues to expand its physical presence, comparable store sales growth remained flat year-over-year, indicating a focus on new store performance rather than same-store traffic. The balance sheet shows a strong liquidity position, though cash and cash equivalents decreased due to increased inventory purchases and capital expenditures related to store openings. Management expressed confidence in their off-price strategy and plans for continued store growth, aligning with the broader trend of expansion in the off-price sector. Investors should note the ongoing investment in new stores as a key driver of top-line growth, alongside the company's efforts to manage costs and improve merchandise margins.
Key Highlights
- 1Sales increased by 9.2% to $1.41 billion, driven by the opening of 84 net new stores, expanding the store count to 830.
- 2Net earnings grew by 13.2% to $67.0 million, leading to a 17% increase in diluted Earnings Per Share (EPS) to $0.48.
- 3Cost of goods sold as a percentage of sales decreased by 60 basis points, primarily due to improved merchandise gross margin from lower markdowns and shortage accruals.
- 4Selling, general, and administrative expenses as a percentage of sales increased by 30 basis points, mainly due to higher store operating costs associated with new store openings.
- 5The company repurchased approximately 1.5 million shares of common stock for $50.9 million during the quarter under its stock repurchase program.
- 6Cash provided by operating activities was negative $66.0 million, a significant decrease from $105.5 million in the prior year, largely due to changes in accounts payable timing.
- 7Capital expenditures totaled $47.4 million, primarily for opening new stores and system enhancements, with a full-year forecast of $290 million.