10-QPeriod: Q3 FY2018

ROSS STORES, INC. Quarterly Report for Q3 Ended Oct 28, 2017

Filed December 6, 2017For Securities:ROST

Summary

Ross Stores, Inc. reported strong financial results for the third quarter and first nine months of fiscal year 2017. Sales increased by 7.8% in the quarter and 7.6% year-to-date, driven by both new store openings and a 4% increase in comparable store sales. Net earnings also saw significant growth, rising to $274.4 million for the quarter and $912.0 million for the nine months. The company demonstrated effective cost management, with cost of goods sold and SG&A expenses as a percentage of sales improving, contributing to higher net earnings margins. Cash flow from operations remained robust, increasing to $1.17 billion for the nine-month period. The company continued to return capital to shareholders through dividends and a substantial stock repurchase program, utilizing $648.8 million for buybacks in the nine-month period. Ross Stores maintained a strong balance sheet with substantial cash and cash equivalents, indicating sound financial health and flexibility for future growth and shareholder returns.

Financial Highlights

50 data points
Beta

Revenue

$3.33B

28.8% Gross Margin

Net Income

$274.45M

8.2% Net Margin

EPS (Diluted)

$0.72

Total Assets

$5.77B

Cash & Equivalents

$1.14B

Free Cash Flow

$270.18M

Financial Statements
Beta
Revenue$3.33B
Cost of Revenue$2.37B
Gross Profit$959.75M
SG&A Expenses$517.30M
Operating Expenses$2.89B
Interest Expense$4.64M
Net Income$274.45M
EPS (Basic)$0.72
EPS (Diluted)$0.72
Shares Outstanding (Basic)379.43M
Shares Outstanding (Diluted)382.13M

Key Highlights

  • 1Sales increased by 7.8% to $3.33 billion in Q3 FY2017, and by 7.6% to $10.07 billion for the first nine months.
  • 2Comparable store sales grew by 4% for both the third quarter and the first nine months.
  • 3Net earnings increased by 12.2% to $274.4 million for the quarter and by 11.6% to $912.0 million for the nine months.
  • 4Diluted Earnings Per Share (EPS) rose to $0.72 in Q3 FY2017 from $0.62 in the prior year's quarter, and to $2.36 year-to-date from $2.06.
  • 5Operating cash flow was strong, with $1.17 billion generated in the first nine months, up from $1.03 billion in the prior year.
  • 6The company repurchased $648.8 million of common stock in the first nine months, indicating a commitment to returning capital to shareholders.
  • 7The store base expanded to 1,627 stores by the end of the period, up from 1,535 in the prior year, reflecting continued growth strategy.

Frequently Asked Questions

Sales growth was driven by two key factors: the opening of net new stores, which added to the total store count, and a 4% increase in comparable store sales, indicating healthy performance from existing locations.

Profitability improved significantly. Net earnings increased by 12.2% for the quarter and 11.6% for the nine months. This was supported by improvements in gross margin and operating expense leverage, as cost of goods sold and SG&A as a percentage of sales decreased.

Ross Stores is actively returning capital through two primary methods: paying cash dividends and executing a robust stock repurchase program. In the first nine months of fiscal 2017, the company paid $186.5 million in dividends and repurchased $648.8 million of its common stock.

The company is managing inventory by reviewing its age and condition, replenishing stores, and liquidating slower-moving items. Packaway inventory, which is stored for later release, was 46% of total inventory at the end of the period, a slight decrease from the prior year, suggesting efficient inventory management to meet customer demand and maximize bargains.