10-QPeriod: Q2 FY2015

ROSS STORES, INC. Quarterly Report for Q2 Ended Aug 2, 2014

Filed September 10, 2014For Securities:ROST

Summary

For the second quarter ended August 2, 2014, Ross Stores, Inc. (ROST) demonstrated robust financial performance, with net sales increasing by 7.0% to $2.73 billion and diluted earnings per share rising to $1.14, up from $0.98 in the prior year period. This growth was driven by a combination of new store openings and a 2% increase in comparable store sales. The company maintained strong cost management, with selling, general, and administrative expenses as a percentage of sales declining, contributing to an improved net earnings margin of 8.8% for the quarter. Financially, the company reported a healthy cash flow from operations, bolstered by effective inventory management and accounts payable leverage. Management reiterated confidence in the company's liquidity and capital resources, projecting continued capital expenditures for store expansion and other strategic initiatives. The company also continued its commitment to shareholder returns through dividend payments and a significant stock repurchase program, indicating a positive outlook on its financial health and operational execution.

Financial Highlights

48 data points
Beta

Revenue

$2.73B

28.8% Gross Margin

Net Income

$239.56M

8.8% Net Margin

EPS (Diluted)

$0.57

Total Assets

$4.17B

Cash & Equivalents

$549.78M

Free Cash Flow

$132.56M

Financial Statements
Beta
Revenue$2.73B
Cost of Revenue$1.94B
Gross Profit$785.55M
SG&A Expenses$395.23M
Operating Expenses$2.34B
Interest Expense$2.43M
Net Income$239.56M
EPS (Basic)$0.58
EPS (Diluted)$0.57
Shares Outstanding (Basic)415.13M
Shares Outstanding (Diluted)419.31M

Key Highlights

  • 1Net sales for the quarter increased by 7.0% to $2.73 billion, reflecting strong consumer demand.
  • 2Diluted earnings per share (EPS) rose to $1.14 from $0.98 in the prior year, indicating improved profitability.
  • 3Comparable store sales grew by 2%, showing consistent performance in existing locations.
  • 4The company expanded its store base, adding 85 net new stores between the comparable periods.
  • 5Selling, general, and administrative (SG&A) expenses as a percentage of sales decreased, demonstrating effective cost control.
  • 6Net cash provided by operating activities was strong at $741.8 million for the six-month period, highlighting operational efficiency.
  • 7The company repurchased approximately $277.4 million of common stock and paid $84.9 million in dividends during the six-month period, underscoring a commitment to shareholder returns.

Frequently Asked Questions

The primary drivers of Ross Stores' sales growth were the opening of 85 net new stores between the comparable periods and a 2% increase in comparable store sales.

Ross Stores effectively managed its expenses, with selling, general, and administrative (SG&A) expenses as a percentage of sales declining by 45 basis points for the quarter due to lower store operating costs and a favorable legal settlement. Cost of goods sold as a percentage of sales also saw a modest decrease.

The company reported strong cash flow from operations and maintained a revolving credit facility. Management expressed confidence in their liquidity and capital resources to fund operations, planned capital expenditures, stock repurchases, and dividend payments. They also continue to execute on their stock repurchase program and pay dividends.

The company is involved in class action lawsuits alleging wage and hour violations and other legal proceedings. However, management stated that the resolution of these matters is not expected to have a material adverse effect on the company's financial condition, results of operations, or cash flows.