10-QPeriod: Q2 FY2010

ROSS STORES, INC. Quarterly Report for Q2 Ended Aug 1, 2009

Filed September 9, 2009For Securities:ROST

Summary

Ross Stores, Inc. reported a strong second quarter for fiscal year 2009, with net sales increasing by 7.8% to $1.77 billion and net earnings rising by 45% to $103.4 million compared to the prior year period. Diluted earnings per share (EPS) saw a significant increase of 52% to $0.82. This performance was driven by both comparable store sales growth of 3% and the addition of 47 net new stores. The company demonstrated improved profitability as evidenced by a decrease in cost of goods sold as a percentage of sales, primarily due to higher merchandise gross margin and reduced freight costs. Financially, the company maintained a healthy liquidity position, with cash and cash equivalents increasing substantially. Operating cash flow saw a significant boost, driven in part by improved accounts payable leverage. While capital expenditures for store expansion continued, the company remained committed to returning value to shareholders through its stock repurchase program and consistent dividend payments, reinforcing investor confidence in its operational resilience and financial management during a challenging economic period.

Financial Highlights

46 data points
Beta

Revenue

$1.77B

25.9% Gross Margin

Net Income

$103.41M

5.8% Net Margin

EPS (Diluted)

$0.20

Total Assets

$2.60B

Cash & Equivalents

$520.42M

Free Cash Flow

$126.42M

Financial Statements
Beta
Revenue$1.77B
Cost of Revenue$1.31B
Gross Profit$457.50M
SG&A Expenses$286.16M
Operating Expenses$1.60B
Net Income$103.41M
EPS (Basic)$0.21
EPS (Diluted)$0.20
Shares Outstanding (Basic)493.87M
Shares Outstanding (Diluted)502.63M

Key Highlights

  • 1Net sales increased by 7.8% to $1.77 billion for the three months ended August 1, 2009, compared to $1.64 billion in the prior year period.
  • 2Net earnings surged by 45% to $103.4 million for the quarter, with diluted EPS growing 52% to $0.82.
  • 3Comparable store sales increased by 3% for the quarter, indicating continued consumer demand for the company's off-price offerings.
  • 4Cost of goods sold as a percentage of sales decreased by approximately 240 basis points, driven by improved merchandise gross margin and lower freight costs.
  • 5Cash and cash equivalents increased significantly to $520.4 million as of August 1, 2009, up from $309.6 million at the start of the fiscal year.
  • 6The company continued its share repurchase program, buying back approximately 1.95 million shares for $146 million during the third month of the quarter.
  • 7Ross Stores maintained a strong liquidity position with $600 million in available revolving credit and adequate cash flows from operations to fund planned investments.

Frequently Asked Questions

Ross Stores reported a strong second quarter for fiscal year 2009. Net sales increased by 7.8% to $1.77 billion, and net earnings rose by 45% to $103.4 million. Diluted earnings per share (EPS) saw a significant increase of 52% to $0.82. This growth was fueled by comparable store sales growth of 3% and the addition of new store locations.

The decrease in cost of goods sold as a percentage of sales was primarily attributed to a 145 basis point increase in merchandise gross margin, a 75 basis point reduction in freight costs, and a 25 basis point reduction in occupancy expense. These favorable trends helped offset minor increases in buying and incentive costs.

The company demonstrated a strong liquidity position. Cash and cash equivalents increased to $520.4 million. Net cash provided by operating activities was $414.0 million for the six-month period, an increase from the prior year, partly due to improved accounts payable leverage. Ross Stores has a $600 million revolving credit facility and uses cash flow from operations to fund capital expenditures for store openings, stock repurchases, and dividends.

Ross Stores continues its expansion strategy, opening 38 new stores in the first six months of fiscal 2009. The company forecasts approximately $180 million in capital expenditures for fiscal year 2009, which will be used for opening new stores, relocating or upgrading existing ones, and investing in systems and infrastructure. These expenditures are expected to be funded by operating cash flows.