10-QPeriod: Q1 FY2013

ROSS STORES, INC. Quarterly Report for Q1 Ended Apr 28, 2012

Filed June 6, 2012For Securities:ROST

Summary

Ross Stores, Inc. demonstrated strong performance in the first quarter of fiscal year 2012, reporting a significant increase in sales and earnings. Total sales grew by 13.6% to $2,357 million, driven by a combination of new store openings and a robust 9% increase in comparable store sales. This growth in comparable store sales, a key indicator of underlying business health, signifies the company's ability to attract and retain customers in a competitive off-price retail environment. Profitability also saw a notable improvement, with net earnings as a percentage of sales rising to 8.9% from 8.3% in the prior year. This was supported by a decrease in cost of goods sold as a percentage of sales, primarily due to improved merchandise gross margin and lower occupancy expenses. Furthermore, selling, general, and administrative expenses, as a percentage of sales, also decreased, indicating operational leverage. Diluted earnings per share surged by 26% to $0.93, benefiting from both increased net earnings and a reduction in outstanding shares due to the company's active stock repurchase program.

Financial Highlights

47 data points
Beta

Revenue

$2.36B

28.8% Gross Margin

Net Income

$208.61M

8.9% Net Margin

EPS (Diluted)

$0.47

Total Assets

$3.46B

Cash & Equivalents

$741.12M

Free Cash Flow

$239.34M

Financial Statements
Beta
Revenue$2.36B
Cost of Revenue$1.68B
Gross Profit$677.71M
SG&A Expenses$337.81M
Operating Expenses$2.02B
Net Income$208.61M
EPS (Basic)$0.47
EPS (Diluted)$0.47
Shares Outstanding (Basic)442.21M
Shares Outstanding (Diluted)449.86M

Key Highlights

  • 1Total sales increased by 13.6% to $2,357 million for the three months ended April 28, 2012.
  • 2Comparable store sales grew by a strong 9%, indicating healthy customer demand.
  • 3Net earnings as a percentage of sales improved to 8.9%, up from 8.3% in the prior year.
  • 4Selling, general, and administrative expenses as a percentage of sales decreased by 55 basis points.
  • 5Diluted earnings per share rose by 26% to $0.93.
  • 6The company opened 23 new stores during the quarter, expanding its retail footprint.
  • 7Cash provided by operating activities saw a substantial increase to $297.3 million from $41.1 million in the prior year, largely due to improved accounts payable leverage.

Frequently Asked Questions

Sales growth was driven by two primary factors: the opening of 78 net new stores between April 30, 2011, and April 28, 2012, and a significant 9% increase in comparable store sales. This comparable store sales growth indicates that existing stores are performing well and attracting more customers.

Ross Stores improved profitability through several cost management initiatives. Cost of goods sold as a percentage of sales decreased due to a 35 basis point increase in merchandise gross margin, aided by lower shrink accrual, and a 20 basis point improvement in occupancy expense. Additionally, selling, general, and administrative expenses as a percentage of sales decreased by approximately 55 basis points, largely due to operational leverage from the increase in comparable store sales.

Ross Stores is planning significant capital expenditures for fiscal year 2012, estimated between $480 million to $490 million. These investments will support the opening of new Ross and dd’s DISCOUNTS stores, store relocations/upgrades, IT systems, and enhancements to their distribution network. The company continues its strategy of opening additional stores based on market penetration and profitability potential.

The company's primary sources of funds are cash flows from operations and short-term trade credit. For the first quarter of 2012, cash provided by operating activities significantly increased due to higher accounts payable leverage. Ross Stores also has a $600 million revolving credit facility available, under which it had no borrowings outstanding as of April 28, 2012. Management expects existing cash, operating cash flows, and credit lines to be adequate for operating needs and planned investments for at least the next twelve months.