10-QPeriod: Q3 FY2021

ROSS STORES, INC. Quarterly Report for Q3 Ended Oct 31, 2020

Filed December 9, 2020For Securities:ROST

Summary

Ross Stores, Inc. (ROST) reported its Q3 2020 results on December 9, 2020, for the period ending October 30, 2020. The company experienced a significant sales decline of 28.8% for the first nine months of fiscal 2020 compared to the prior year, primarily due to the impact of COVID-19 related store closures and reduced customer demand. While the third quarter showed some recovery with a 2.5% sales decrease and a 3% decline in comparable store sales, the overall financial performance for the nine-month period resulted in a net loss of $152.6 million, a sharp contrast to the strong net earnings of $1.2 billion in the prior year. Despite the challenging operating environment, Ross Stores focused on financial flexibility. The company significantly strengthened its liquidity position, ending the quarter with over $5.2 billion in liquidity, including $4.4 billion in unrestricted cash. This was supported by strategic debt management, including issuing $2.0 billion in senior notes in April 2020 and refinancing $775 million of higher-interest debt with $1.0 billion in lower-interest notes in the third quarter. The company also suspended its stock repurchase program and dividends to preserve capital. Management expects the pandemic's adverse effects to continue, but believes its liquidity and strategic actions provide a stable footing.

Financial Highlights

49 data points
Beta

Revenue

$3.75B

27.8% Gross Margin

Net Income

$131.20M

3.5% Net Margin

EPS (Diluted)

$0.37

Total Assets

$12.57B

Cash & Equivalents

$4.42B

Free Cash Flow

$1.52B

Financial Statements
Beta
Revenue$3.75B
Cost of Revenue$2.71B
Gross Profit$1.04B
SG&A Expenses$877.86M
Operating Expenses$3.62B
Net Income$131.20M
EPS (Basic)$0.37
EPS (Diluted)$0.37
Shares Outstanding (Basic)352.48M
Shares Outstanding (Diluted)354.46M

Key Highlights

  • 1Total sales for the nine months ended October 31, 2020, decreased by 28.8% to $8.3 billion from $11.6 billion in the prior year, largely due to COVID-19 impacts.
  • 2The company reported a net loss of $152.6 million for the nine months ended October 31, 2020, compared to a net earning of $1.2 billion in the same period last year.
  • 3Quarterly sales for the three months ended October 31, 2020, saw a smaller decline of 2.5% ($3.8 billion vs $3.7 billion), with comparable store sales down 3%.
  • 4Ross Stores significantly bolstered its liquidity, ending the quarter with $5.2 billion in total liquidity, including $4.4 billion in unrestricted cash.
  • 5The company undertook substantial debt refinancing activities, including issuing $2.0 billion in senior notes and later refinancing $775 million at a lower interest rate, ultimately repaying $800 million from its revolving credit facility.
  • 6Stock repurchase programs and quarterly dividends were suspended in response to the pandemic to conserve cash.
  • 7Store count increased to 1,869 locations at the end of the period, up from 1,810 in the prior year, with 39 new stores opened in the third quarter.

Frequently Asked Questions

The primary driver of the significant sales decline was the impact of the COVID-19 pandemic, which led to temporary store closures from March 2020 through a portion of the second fiscal quarter, and continued negative impacts on customer demand following reopenings.

Ross Stores has proactively managed its liquidity by suspending its stock repurchase program and quarterly dividends, borrowing $800 million from its revolving credit facility, completing a $2.0 billion senior notes offering, and refinancing a portion of its debt at lower interest rates. The company also focused on expense reductions and capital expenditure management. This resulted in a strong liquidity position of over $5.2 billion at the end of the quarter.

Management expects the adverse effects of the COVID-19 pandemic and related economic disruptions to continue through the remainder of fiscal 2020 and potentially beyond. The company anticipates ongoing uncertainty regarding consumer behavior, potential resurgences of the virus, and the possibility of further operational disruptions.

While the company reduced its planned new store openings for fiscal 2020 due to the pandemic, it did open 39 net new stores in the third quarter. Its long-term expansion strategy remains focused on market penetration, demographics, competition, and expected store profitability, with ongoing evaluation of opportunistic real estate acquisitions.