10-Q/APeriod: Q1 FY2017

ROSS STORES, INC. Quarterly Report (Amendment) for Q1 Ended Apr 30, 2016

Filed July 7, 2016For Securities:ROST

Summary

Ross Stores, Inc. reported solid performance for the first quarter ended April 30, 2016, demonstrating continued sales growth and improved earnings per share compared to the prior year. Sales increased by 5.1% to $3.1 billion, driven by a comparable store sales growth of 2% and the opening of new locations. This expansion, part of the company's ongoing strategy, contributed to an increase in the store count to 1,473. The company managed its costs effectively, although the cost of goods sold as a percentage of sales saw a slight increase due to new distribution center expenses. Diluted Earnings Per Share (EPS) rose to $0.73 from $0.69 in the prior year period, reflecting both increased net earnings and a reduction in outstanding shares due to the company's active stock repurchase program. The company maintained a strong liquidity position, with a significant increase in cash and cash equivalents driven by robust operating cash flows. Capital expenditures remained focused on store expansion and improvements, funded primarily through operations and existing cash. Ross Stores also continued its commitment to returning value to shareholders through dividend payments and share repurchases, highlighting a healthy financial outlook and a disciplined approach to capital allocation. Management expressed confidence in their ability to navigate the competitive retail landscape and meet financial obligations.

Financial Highlights

48 data points
Beta

Revenue

$3.09B

29.5% Gross Margin

Net Income

$290.63M

9.4% Net Margin

EPS (Diluted)

$0.73

Total Assets

$5.11B

Cash & Equivalents

$910.02M

Free Cash Flow

$389.36M

Financial Statements
Beta
Revenue$3.09B
Cost of Revenue$2.18B
Gross Profit$912.79M
SG&A Expenses$436.92M
Operating Expenses$2.62B
Interest Expense$4.64M
Net Income$290.63M
EPS (Basic)$0.73
EPS (Diluted)$0.73
Shares Outstanding (Basic)395.80M
Shares Outstanding (Diluted)398.81M

Key Highlights

  • 1Sales increased by 5.1% to $3.1 billion for the first quarter ended April 30, 2016.
  • 2Comparable store sales grew by 2% year-over-year.
  • 3Net earnings increased to $290.6 million from $282.2 million in the prior year period.
  • 4Diluted Earnings Per Share (EPS) rose to $0.73 from $0.69.
  • 5The company opened 28 new stores during the quarter, expanding its total store count to 1,473.
  • 6Cash provided by operating activities increased to $469.1 million.
  • 7The company repurchased approximately 3.1 million shares of common stock for $175.8 million during the quarter.

Frequently Asked Questions

Sales growth was driven by two primary factors: the opening of 74 net new stores between May 2, 2015, and April 30, 2016, and a 2% increase in comparable store sales. This indicates both successful expansion and continued performance from existing stores.

While overall sales increased, the cost of goods sold as a percentage of sales saw a slight increase of approximately 10 basis points. This was mainly attributed to higher distribution expenses from a new distribution center and timing of packaway costs, partially offset by improved merchandise margins and lower buying costs. Selling, general, and administrative expenses also increased as a percentage of sales due to the lack of leverage from the modest comparable store sales increase and higher hourly wages.

Ross Stores demonstrates a commitment to returning capital to shareholders. In the first quarter, the company paid cash dividends totaling $54.2 million and repurchased approximately 3.1 million shares of common stock for $175.8 million under its authorized stock repurchase program. They also acquired treasury stock related to employee stock compensation plans. This reflects a balanced approach to reinvestment in the business and shareholder returns.

The company continues its expansion strategy, opening 28 net new stores in the quarter and reaching a total of 1,473 stores. They are forecasting approximately $425 million in capital expenditures for fiscal year 2016, which includes funding for new store openings, upgrades to existing stores, and investments in IT systems and infrastructure, primarily funded by cash flows from operations and existing cash.