10-QPeriod: Q3 FY2017

ROSS STORES, INC. Quarterly Report for Q3 Ended Oct 29, 2016

Filed December 7, 2016For Securities:ROST

Summary

Ross Stores, Inc. reported strong financial performance for the third quarter and the first nine months of fiscal year 2016, ended October 29, 2016. The company demonstrated robust sales growth, driven by both new store openings and a healthy increase in comparable store sales. This top-line growth translated into improved profitability, with net earnings and earnings per share showing significant year-over-year increases. The company's off-price strategy continues to resonate with consumers, evidenced by the consistent sales momentum. Management's focus on merchandise margin and operational efficiency contributed to improved cost of goods sold as a percentage of sales. While SG&A expenses saw a slight increase as a percentage of sales due to higher wages, overall profitability metrics remained strong, reflecting effective cost management and successful sales strategies. The company also continued to return capital to shareholders through share repurchases and dividends, underscoring its commitment to shareholder value.

Financial Highlights

48 data points
Beta

Revenue

$3.09B

28.5% Gross Margin

Net Income

$244.55M

7.9% Net Margin

EPS (Diluted)

$0.62

Total Assets

$5.35B

Cash & Equivalents

$878.81M

Free Cash Flow

$176.66M

Financial Statements
Beta
Revenue$3.09B
Cost of Revenue$2.21B
Gross Profit$880.60M
SG&A Expenses$490.17M
Operating Expenses$2.70B
Interest Expense$4.64M
Net Income$244.55M
EPS (Basic)$0.63
EPS (Diluted)$0.62
Shares Outstanding (Basic)390.87M
Shares Outstanding (Diluted)393.37M

Key Highlights

  • 1Net sales for the third quarter increased by 10.9% to $3.09 billion, with comparable store sales up 7%.
  • 2For the nine-month period, net sales grew 7.7% to $9.36 billion, with comparable store sales increasing by 4%.
  • 3Diluted earnings per share (EPS) for the third quarter rose to $0.62, a significant increase from $0.53 in the prior year's quarter.
  • 4Nine-month diluted EPS reached $2.06, up from $1.85 in the comparable period last year.
  • 5Cost of goods sold as a percentage of sales improved for both the quarter (down 50 basis points) and the nine-month period (down 35 basis points), driven by increased merchandise margin.
  • 6The company repurchased approximately $530.3 million of its common stock in each of the nine-month periods ending October 29, 2016, and October 31, 2015.
  • 7Ross Stores expanded its store base, opening 34 net new stores in the third quarter, bringing the total to 1,535 stores.

Frequently Asked Questions

Sales growth was driven by two primary factors: the opening of net new stores and a healthy increase in comparable store sales. For the third quarter, sales increased by 10.9%, with 7% of that coming from comparable store sales growth, indicating strong performance in existing locations, complemented by expansion.

Profitability improved significantly. Net earnings increased for both the three and nine-month periods. Diluted earnings per share (EPS) saw a notable rise, with the third quarter EPS at $0.62 (up from $0.53) and the nine-month EPS at $2.06 (up from $1.85). This improvement was supported by increased sales and better cost management, particularly in the cost of goods sold.

Ross Stores actively returns capital to shareholders through a combination of stock repurchase programs and cash dividends. In the nine-month period ending October 29, 2016, the company repurchased approximately $530.3 million of its common stock, alongside paying out significant cash dividends, demonstrating a commitment to enhancing shareholder value.

The company continues to expand its store footprint as part of its growth strategy. In the third quarter of fiscal year 2016, Ross Stores opened 34 net new stores, bringing its total store count to 1,535. This expansion is strategically driven by market penetration, demographics, and competition.