10-QPeriod: Q1 FY2023

ROSS STORES, INC. Quarterly Report for Q1 Ended Apr 30, 2022

Filed June 8, 2022For Securities:ROST

Summary

Ross Stores, Inc. reported a challenging first quarter for fiscal year 2022, with sales and net earnings declining compared to the prior year. Sales decreased by 4.1% to $4.33 billion, and diluted earnings per share fell to $0.97 from $1.34, impacted by a 7% decline in comparable store sales. This performance was attributed to a difficult macroeconomic environment, including heightened inflation, supply chain disruptions, and increased freight and wage costs, which offset the benefits of an 85-store net increase in the store base. Despite the headwinds, the company continues to invest in growth, opening 30 new stores in the quarter and planning for approximately 100 new stores throughout the year. The company also demonstrated a commitment to shareholder returns through its stock repurchase program, buying back $239.6 million worth of shares in the quarter, and a regular quarterly dividend payment. Management anticipates these cost pressures will persist throughout fiscal year 2022, but expresses confidence in their ability to navigate these challenges and maintain liquidity.

Financial Highlights

47 data points
Beta

Revenue

$4.33B

26.2% Gross Margin

Net Income

$338.44M

7.8% Net Margin

EPS (Diluted)

$0.97

Total Assets

$13.23B

Cash & Equivalents

$4.08B

Free Cash Flow

-$526.12M

Financial Statements
Beta
Revenue$4.33B
Cost of Revenue$3.20B
Gross Profit$1.14B
SG&A Expenses$669.50M
Operating Expenses$3.88B
Net Income$338.44M
EPS (Basic)$0.98
EPS (Diluted)$0.97
Shares Outstanding (Basic)347.05M
Shares Outstanding (Diluted)348.82M

Key Highlights

  • 1Net sales for the first quarter decreased by 4.1% to $4.33 billion compared to $4.52 billion in the prior year's first quarter.
  • 2Comparable store sales declined by 7% compared to a strong 13% increase in the prior year, reflecting challenging macroeconomic conditions.
  • 3Diluted earnings per share (EPS) decreased to $0.97 from $1.34 in the same period last year.
  • 4Cost of goods sold as a percentage of sales increased by 295 basis points, largely due to higher freight and wage costs.
  • 5The company opened 30 new stores in the quarter and plans to open approximately 100 new stores for the full fiscal year, expanding its store base to 1,951 locations.
  • 6Ross Stores repurchased $239.6 million of common stock in the quarter under its new $1.9 billion repurchase program.
  • 7The company ended the quarter with $4.0 billion in unrestricted cash and $1.3 billion available under its revolving credit facility, indicating strong liquidity.

Frequently Asked Questions

The primary drivers of the sales decline were a 7% decrease in comparable store sales, attributed to challenging macroeconomic conditions such as heightened inflation impacting consumer disposable income, and ongoing supply chain disruptions. These factors offset the positive impact from the net addition of 85 stores.

Ross Stores expects higher freight costs, distribution expenses, and wages to continue throughout fiscal year 2022. These pressures, driven by industry-wide supply chain congestion and inflation, are expected to impact operating costs.

The company continues to return value to shareholders through dividends and share repurchases. In the first quarter, they declared a quarterly cash dividend of $0.310 per share and repurchased approximately $239.6 million of common stock under their new $1.9 billion repurchase program, demonstrating a commitment to shareholder returns.

Ross Stores' growth strategy includes the continued expansion of its store base, with plans to open approximately 100 new stores in fiscal year 2022. They are also focused on strengthening their merchant organization, diversifying their merchandise mix, and enhancing their systems to improve merchandise offerings.