10-QPeriod: Q3 FY2011

ROSS STORES, INC. Quarterly Report for Q3 Ended Oct 30, 2010

Filed December 8, 2010For Securities:ROST

Summary

Ross Stores, Inc. (ROST) reported strong financial results for the nine months ended October 30, 2010, demonstrating significant growth and profitability. Sales increased by 10% year-over-year, driven by both the opening of new stores and a healthy 6% comparable store sales growth. Net earnings saw a substantial 31% increase, leading to a 36% rise in diluted earnings per share (EPS) to $3.26. This performance highlights the company's effective operational strategies and its ability to navigate the competitive retail landscape. The company's financial health remains robust, with a solid balance sheet and positive cash flow from operations. Despite a decrease in operating cash flow compared to the prior year, primarily due to higher inventory levels and bonus payments, the company continues to invest in growth through capital expenditures for new stores and system enhancements. Ross Stores also returned significant capital to shareholders through a substantial stock repurchase program and dividend payments, signaling confidence in its future prospects.

Financial Highlights

46 data points
Beta

Revenue

$1.87B

27.1% Gross Margin

Net Income

$121.38M

6.5% Net Margin

EPS (Diluted)

$0.26

Total Assets

$2.96B

Cash & Equivalents

$732.80M

Free Cash Flow

$60.39M

Financial Statements
Beta
Revenue$1.87B
Cost of Revenue$1.37B
Gross Profit$508.81M
SG&A Expenses$312.28M
Operating Expenses$1.68B
Net Income$121.38M
EPS (Basic)$0.26
EPS (Diluted)$0.26
Shares Outstanding (Basic)468.16M
Shares Outstanding (Diluted)476.07M

Key Highlights

  • 1Sales for the nine months ended October 30, 2010, increased by 10% to $5.72 billion, compared to $5.20 billion in the prior year, driven by 49 net new stores and 6% comparable store sales growth.
  • 2Net earnings for the nine months increased by 31% to $393 million, with diluted earnings per share (EPS) rising 36% to $3.26 from $2.39 in the prior year.
  • 3Gross profit margins improved, with cost of goods sold as a percentage of sales decreasing by 140 basis points for the nine-month period due to higher merchandise gross margin, leveraged occupancy, and improved distribution costs.
  • 4The company continued its store expansion, opening 56 new stores during the nine months ended October 30, 2010, increasing the total store count to 1,057.
  • 5Significant capital was returned to shareholders through a $287.3 million stock repurchase program and $58.3 million in dividend payments during the nine-month period.
  • 6The company maintained a strong liquidity position with $732.8 million in cash and cash equivalents and an undrawn $600 million revolving credit facility.
  • 7Selling, general and administrative expenses as a percentage of sales decreased by 30 basis points for the nine-month period, reflecting leverage from comparable store sales gains.

Frequently Asked Questions

Ross Stores reported a 10% sales increase for the first nine months of fiscal 2010, driven by both new store openings and comparable store sales growth. The company anticipates continued sales growth, though acknowledges that future results are subject to economic conditions and competitive pressures.

For the nine months ended October 30, 2010, the cost of goods sold as a percentage of sales decreased by 140 basis points, largely due to a 100 basis point increase in merchandise gross margin and improved leverage in occupancy and distribution costs. However, inventory levels increased, impacting operating cash flow.

Ross Stores continues to expand its store base, opening 49 net new stores in the first nine months of fiscal 2010, bringing the total to 1,057. The expansion strategy focuses on market penetration, demographic characteristics, competition, and expected store profitability.

The company is actively returning value through its stock repurchase program, having repurchased approximately $287.3 million worth of shares in the first nine months of fiscal 2010. Additionally, it paid out $58.3 million in dividends during the same period.