10-QPeriod: Q2 FY2025

ROSS STORES, INC. Quarterly Report for Q2 Ended Aug 3, 2024

Filed September 11, 2024For Securities:ROST

Summary

Ross Stores, Inc. reported strong financial results for the second quarter and the first half of fiscal year 2024, demonstrating robust sales growth and improved profitability. Total sales increased by 7.1% for the quarter and 7.6% for the half, driven by a notable comparable store sales increase of 4% for the quarter and 3% for the half, along with the successful integration of 87 net new stores. The company demonstrated solid expense management, with cost of goods sold and selling, general, and administrative expenses decreasing as a percentage of sales. This operational efficiency, coupled with higher interest income, contributed to a significant expansion in net earnings margin, which grew to 10.0% for both the quarter and the half, up from 9.0% and 8.7% respectively in the prior year periods. Diluted EPS also saw a substantial increase, reflecting both the profit growth and a reduction in outstanding shares due to share repurchases. Financially, Ross Stores maintains a strong liquidity position with substantial cash and cash equivalents. The company continues to return capital to shareholders through dividends and an active share repurchase program, further underscoring its financial health and confidence in future performance. The outlook remains positive, with the company well-positioned to navigate the current economic environment by focusing on value and strategic store expansion.

Financial Highlights

49 data points
Beta

Revenue

$5.29B

28.3% Gross Margin

Net Income

$527.15M

10.0% Net Margin

EPS (Diluted)

$1.59

Total Assets

$14.68B

Cash & Equivalents

$4.67B

Free Cash Flow

$394.63M

Financial Statements
Beta
Revenue$5.29B
Cost of Revenue$3.79B
Gross Profit$1.50B
SG&A Expenses$836.36M
Operating Expenses$4.58B
Operating Income$659.23M
Net Income$527.15M
EPS (Basic)$1.60
EPS (Diluted)$1.59
Shares Outstanding (Basic)329.39M
Shares Outstanding (Diluted)331.51M

Key Highlights

  • 1Total sales grew 7.1% to $5.29 billion for the second quarter and 7.6% to $10.15 billion for the first half of fiscal 2024.
  • 2Comparable store sales increased by a strong 4% for the second quarter and 3% for the first half, indicating healthy consumer demand.
  • 3Net earnings increased by 18% to $527.1 million for the quarter and 24% to $1.02 billion for the half, with net earnings as a percentage of sales improving to 10.0% in both periods.
  • 4Diluted EPS rose significantly to $1.59 for the quarter and $3.05 for the half, up from $1.32 and $2.41 respectively in the prior year.
  • 5The company continues its strategic store expansion, opening 24 new stores in Q2 fiscal 2024, on track to open approximately 90 new stores for the full year.
  • 6Shareholder returns remain a priority, with $525 million in common stock repurchased and $122.5 million in dividends paid during the first half of fiscal 2024.
  • 7The company maintains a robust financial position with $4.7 billion in cash and cash equivalents at the end of the second quarter, alongside an undrawn $1.3 billion credit facility.

Frequently Asked Questions

Sales growth was primarily driven by two key factors: comparable store sales increases, which indicate healthy customer traffic and spending at existing locations, and the strategic opening of new stores. The company added 87 net new stores between the prior year's comparable period and August 3, 2024, significantly contributing to overall revenue expansion.

Ross Stores demonstrated effective cost management. Cost of goods sold as a percentage of sales decreased due to lower distribution, buying, and domestic freight costs, although merchandise margin saw some pressure. Selling, general, and administrative (SG&A) expenses also decreased as a percentage of sales, primarily due to higher sales volume and lower incentive compensation expenses. These efficiencies contributed to improved profitability.

The company exhibits a strong financial position. It ended the second quarter with approximately $4.7 billion in cash and cash equivalents and has an available $1.3 billion credit facility, providing significant liquidity. Management expects these resources, combined with operating cash flows, to be sufficient to meet operating needs, capital investments, debt obligations, and shareholder returns for at least the next 12 months.

Ross Stores is actively returning value to shareholders through two main avenues: dividends and share repurchases. The company declared a quarterly cash dividend of $0.3675 per share. Additionally, it has a substantial share repurchase program, having repurchased $525 million of its common stock in the first half of fiscal 2024 under a new $2.1 billion program approved in March 2024.