ROSS STORES INC

Previous wording

Ross Stores, Inc. operates two brands of off-price retail apparel and home fashion stores—Ross Dress for Less® (“Ross”) and dd’s DISCOUNTS®. Ross is the largest off-price apparel and home fashion chain in the United States, with 1,775 locations in 43 states, the District of Columbia, and Guam, as of May 4, 2024. Ross offers first-quality, in-season, name brand and designer apparel, accessories, footwear, and home fashions for the entire family at savings of 20% to 60% off department and specialty store regular prices every day. We also operate 352 dd’s DISCOUNTS stores in 22 states as of May 4, 2024 that feature a more moderately-priced assortment of first-quality, in-season, name brand apparel, accessories, footwear, and home fashions for the entire family at savings of 20% to 70% off moderate department and discount store regular prices every day.

Current wording

Ross Stores, Inc. operates two brands of off-price retail apparel and home fashion stores—Ross Dress for Less® (“Ross”) and dd’s DISCOUNTS®. Ross is the largest off-price apparel and home fashion chain in the United States, with 1,795 locations in 43 states, the District of Columbia, and Guam, as of August 3, 2024. Ross offers first-quality, in-season, name brand and designer apparel, accessories, footwear, and home fashions for the entire family at savings of 20% to 60% off department and specialty store regular prices every day. We also operate 353 dd’s DISCOUNTS stores in 22 states as of August 3, 2024 that feature a more moderately-priced assortment of first-quality, in-season, name brand apparel, accessories, footwear, and home fashions for the entire family at savings of 20% to 70% off moderate department and discount store regular prices every day.

Previous wording

There remains ongoing uncertainty in the current macroeconomic and geopolitical environments, and prolonged inflationary pressures continue to negatively impact the purchasing power of our low-to-moderate income customers. Through these ongoing pressures and uncertainty, we remain focused on offering our customers the best branded values possible throughout our stores. In addition, we plan to carefully manage our expenses and inventory, while closely monitoring market share trends for the off-price industry. We believe our market share can continue to grow through continued focus on bringing value and convenience to our consumers.

Current wording

Our low-to-moderate income customers continue to face persistently high costs for necessities, pressuring their discretionary spending amidst a volatile external environment. Through these ongoing pressures and uncertainty, we remain focused on offering our customers the best branded values possible throughout our stores. In addition, we plan to carefully manage our expenses and inventory, while closely monitoring market share trends for the off-price industry. We believe our market share can continue to grow through continued focus on bringing value and convenience to our consumers.

Previous wording

The following table summarizes the financial results for the three month periods ended May 4, 2024 and April 29, 2023:

Current wording

The following table summarizes our financial results for the three and six month periods ended August 3, 2024 and July 29, 2023:

Previous wording

We opened 18 new stores in the first quarter of fiscal 2024 and expect to open a total of approximately 90 new stores this year.

Current wording

We opened 24 new stores in the second quarter of fiscal 2024 and remain on track to open a total of approximately 90 new stores this year.

Previous wording

The following table summarizes the stores opened and closed during the three month periods ended May 4, 2024 and April 29, 2023:

Current wording

The following table summarizes the stores opened and closed during the three and six month periods ended August 3, 2024 and July 29, 2023:

Previous wording

Sales. Sales for the three month period ended May 4, 2024 increased $363.4 million, or 8.1%, compared to the three month period ended April 29, 2023, primarily due to the opening of 93 net new stores between April 29, 2023 and May 4, 2024 and a 3% comparable store sales increase.

Current wording

Sales for the six month period ended August 3, 2024 increased $716.0 million, or 7.6%, compared to the six month period ended July 29, 2023, primarily due to the opening of 87 net new stores between July 29, 2023 and August 3, 2024 and a 3% comparable store sales increase.

Previous wording

Our sales mix for the three month periods ended May 4, 2024 and April 29, 2023 is shown below:

Current wording

Our sales mix for the three and six month periods ended August 3, 2024 and July 29, 2023 is shown below:

Previous wording

Cost of goods sold. Cost of goods sold for the three month period ended May 4, 2024 increased $198.1 million compared to the three month period ended April 29, 2023, primarily due to higher sales from the opening of 93 net new stores between April 29, 2023 and May 4, 2024 and the 3% comparable store sales increase, partially offset by lower distribution costs and lower buying costs primarily due to lower incentive compensation expense.

Current wording

Cost of goods sold. Cost of goods sold for the three month period ended August 3, 2024 increased $222.6 million compared to the three month period ended July 29, 2023, primarily due to the 4% comparable store sales increase and higher sales from the opening of 87 net new stores between July 29, 2023 and August 3, 2024, partially offset by lower distribution costs and lower buying costs primarily due to lower incentive compensation expense.

Previous wording

Cost of goods sold as a percentage of sales for the three month period ended May 4, 2024 decreased approximately 140 basis points compared to the three month period ended April 29, 2023, primarily due to a 75 basis points decrease in distribution costs, a 50 basis point decrease in buying costs primarily due to lower incentive compensation expense, and a

Current wording

Cost of goods sold as a percentage of sales for the three month period ended August 3, 2024 decreased approximately 60 basis points compared to the three month period ended July 29, 2023, primarily due to a 70 basis point decrease in distribution costs, a 55 basis point decrease in buying costs primarily due to lower incentive compensation expense, and a 15 basis point decrease in domestic freight costs. Partially offsetting these items was an 80 basis point decrease in merchandise margin, primarily due to our continued efforts to offer more sharply priced branded bargains.

Previous wording

We expect the decline in merchandise margin as a percentage of sales to continue through fiscal 2024 as we build on our efforts to offer more sharply priced brands throughout our stores. We expect this decline will be offset by lower distribution costs, domestic freight costs, and incentive compensation expense.

Current wording

We expect lower incentive compensation expense, domestic freight costs, and distribution costs as a percentage of sales to continue through the remainder of fiscal 2024, offset by lower merchandise margins as we build on our efforts to offer more sharply priced branded bargains throughout our stores.

Previous wording

Selling, general and administrative expenses. For the three month period ended May 4, 2024, selling, general and administrative expenses (“SG&A”) increased $30.1 million compared to the three month period ended April 29, 2023, primarily due to higher store wages and the opening of 93 net new stores between April 29, 2023 and May 4, 2024.

Current wording

Selling, general and administrative expenses. For the three and six month periods ended August 3, 2024, selling, general and administrative expenses (“SG&A”) increased $28.5 million and $58.5 million, respectively, compared to the three and six month periods ended July 29, 2023, primarily due to the opening of 87 net new stores between July 29, 2023 and August 3, 2024.

Previous wording

SG&A as a percentage of sales for the three month period ended May 4, 2024 decreased 65 basis points compared to the three month period ended April 29, 2023, primarily due to higher sales and lower incentive compensation expense.

Current wording

SG&A as a percentage of sales for the three and six month periods ended August 3, 2024 decreased 55 and 60 basis points, respectively, compared to the three and six month periods ended July 29, 2023, primarily due to higher sales and lower incentive compensation expense.

Previous wording

We expect lower incentive compensation expense to continue in fiscal 2024.

Current wording

We expect lower incentive compensation expense as a percentage of sales to continue through the remainder of fiscal 2024.

Previous wording

Interest income, net. For the three month period ended May 4, 2024, interest income, net increased $14.6 million compared to the three month period ended April 29, 2023, primarily due to increased interest income from higher interest rates and higher cash balances.

Current wording

Interest income, net. For the three and six month periods ended August 3, 2024, interest income, net increased $6.1 million and $20.7 million, respectively, compared to the three and six month periods ended July 29, 2023, primarily due to increased interest income from higher interest rates and higher cash balances.

Previous wording

The table below shows the components of interest income, net for the three month periods ended May 4, 2024 and April 29, 2023:

Current wording

The table below shows the components of interest income, net for the three and six month periods ended August 3, 2024 and July 29, 2023:

Previous wording

Taxes on earnings. Our effective tax rates for the three month periods ended May 4, 2024 and April 29, 2023 were approximately 23% and 24%, respectively. Our effective tax rate is impacted by changes in tax laws and accounting guidance, location of new stores, level of earnings, tax effects associated with stock-based compensation, and the resolution of tax positions with various tax authorities.

Current wording

Taxes on earnings. Our effective tax rate for the three month periods ended August 3, 2024 and July 29, 2023 was approximately 25%. Our effective tax rate for the six month periods ended August 3, 2024 and July 29, 2023 was approximately 24%. Our effective tax rate is impacted by changes in tax laws and accounting guidance, location of new stores, level of earnings, tax effects associated with stock-based compensation, and the resolution of tax positions with various tax authorities.

Previous wording

Net earnings. Net earnings as a percentage of sales for the three month periods ended May 4, 2024 and April 29, 2023 were 10.0% and 8.3%, respectively. Net earnings as a percentage of sales for the three month period ended May 4, 2024 were higher primarily due to lower cost of goods sold, lower SG&A expenses, and higher interest income.

Current wording

Net earnings. Net earnings as a percentage of sales for the three month periods ended August 3, 2024 and July 29, 2023 were 10.0% and 9.0%, respectively. Net earnings as a percentage of sales for the three month period ended August 3, 2024 were higher primarily due to lower cost of goods sold and lower SG&A expenses.

Previous wording

Earnings per share. Diluted earnings per share for the three month period ended May 4, 2024 was $1.46 compared to $1.09 for the three month period ended April 29, 2023. The $0.37 increase in the diluted earnings per share for the three month period ended May 4, 2024 was primarily attributable to a 31% increase in net earnings and a 3% reduction in weighted-average diluted shares outstanding largely due to stock repurchases under our stock repurchase program.

Current wording

The $0.27 increase in the diluted earnings per share for the three month period ended August 3, 2024 was primarily attributable to an 18% increase in net earnings and a 2% reduction in weighted-average diluted shares outstanding largely due to stock repurchases under our stock repurchase program. The $0.64 increase in the diluted earnings per share for the six month period ended August 3, 2024 was primarily attributable to a 24% increase in net earnings and a 3% reduction in weighted-average diluted shares outstanding largely due to stock repurchases under our stock repurchase program.

Previous wording

Net cash provided by operating activities was $368.9 million for the three month period ended May 4, 2024. This was primarily driven bynet earnings excluding non-cash expenses for depreciation, amortization, and stock-based compensation, partially offset by the payment of fiscal 2023 incentive bonuses. Net cash provided by operating activities was $413.2 million for the three month period ended April 29, 2023. This was primarily driven by net earnings and higher accounts payable leverage (defined as accounts payable divided by merchandise inventory).

Current wording

Net cash provided by operating activities was $961.0 million for the six month period ended August 3, 2024. This was primarily driven by net earnings excluding non-cash expenses for depreciation, amortization, and stock-based compensation, partially offset by the payment of fiscal 2023 incentive bonuses. Net cash provided by operating activities was $1.1 billion for the six month period ended July 29, 2023. This was primarily driven by net earnings excluding non-cash expenses for depreciation, amortization, and stock-based compensation.

Previous wording

The decrease in cash flow provided by operating activities for the three month period ended May 4, 2024 compared to the same period in the prior year was primarily driven by higher incentive compensation payments and lower accounts payable leverage, partially offset by higher net earnings.

Current wording

The decrease in cash flow provided by operating activities for the six month period ended August 3, 2024 compared to the same period in the prior fiscal year was primarily driven by higher incentive compensation payments and lower accounts payable leverage (defined as accounts payable divided by merchandise inventory), partially offset by higher net earnings.

Previous wording

Accounts payable leverage was 86% and 92% as of May 4, 2024 and April 29, 2023, respectively. The decrease in accounts payable leverage was primarily due to the timing of inventory receipts and related payments versus last year.

Current wording

Accounts payable leverage was 89% and 94% as of August 3, 2024 and July 29, 2023, respectively. The decrease in accounts payable leverage was primarily due to the timing of inventory receipts and related payments versus last year.

Previous wording

Changes in packaway inventory levels impact our operating cash flow. As of May 4, 2024, packaway inventory was 41% of total inventory, compared to 40% at the end of fiscal 2023.

Current wording

Changes in packaway inventory levels impact our operating cash flow. As of August 3, 2024, packaway inventory was 39% of total inventory, compared to 40% at the end of fiscal 2023.

Previous wording

Net cash used in investing activities was $136.2 million and $167.3 million for the three month periods ended May 4, 2024 and April 29, 2023, respectively, and was related to our capital expenditures. Our capital expenditures include costs to build, expand, and improve distribution centers, open new stores and improve existing stores, and for various other expenditures related to our information technology systems and buying and corporate offices.

Current wording

Net cash used in investing activities was $333.7 million and $363.5 million for the six month periods ended August 3, 2024 and July 29, 2023, respectively, and was related to our capital expenditures. Our capital expenditures include costs to build, expand, and improve distribution centers, to open new stores and improve existing stores, and for various other expenditures related to our information technology systems and buying and corporate offices.

Previous wording

The decrease in cash used in investing activities for the three month period ended May 4, 2024, compared to the same period in the prior year, was primarily due to a reduction in capital expenditures related to our new Buckeye, Arizona distribution center.

Current wording

The decrease in cash used in investing activities for the six month period ended August 3, 2024, compared to the same period in the prior fiscal year, was primarily due to lower capital expenditures in the current year related to our new Buckeye, Arizona distribution center, partially offset by the purchase of land for our next distribution center.

Previous wording

Capital expenditures for fiscal 2024 are currently projected to be approximately $840 million. Our planned capital expenditures for fiscal 2024 are for investments in our supply chain to support long-term growth, including construction of our next distribution centers, investments in our information technology systems, costs for fixtures and leasehold improvements to open new Ross and dd’s DISCOUNTS stores, and for various other expenditures related to our stores, distribution centers, and buying and corporate offices. We expect to fund capital expenditures with available cash.

Current wording

Capital expenditures for fiscal 2024 are currently projected to be approximately $780 million. Our planned capital expenditures for fiscal 2024 are for investments in our supply chain to support long-term growth, including construction of our next distribution centers, investments in our information technology systems, costs for fixtures and leasehold improvements to open new Ross and dd’s DISCOUNTS stores, and for various other expenditures related to our stores, distribution centers, and buying and corporate offices. We expect to fund capital expenditures with available cash.

Previous wording

Net cash used in financing activities was $450.0 million and $380.6 million for the three month periods ended May 4, 2024 and April 29, 2023, respectively, primarily resulting from stock repurchases under our stock repurchase programs and dividend payments.

Current wording

Net cash used in financing activities was $830.0 million and $719.8 million for the six month periods ended August 3, 2024 and July 29, 2023, respectively, primarily resulting from stock repurchases under our stock repurchase program and from dividend payments.

Previous wording

Other financing activities. In March 2024, our Board of Directors approved a new two-year program to repurchase up to $2.1 billion of the Company’s common stock through fiscal 2025. During thethree month period ended May 4, 2024, we repurchased 1.9 million shares of common stock for $262.5 million (excluding excise tax) under this program. For the three month period ended April 29, 2023, we repurchased 2.2 million shares of common stock for $234.5 million (excluding excise tax) under our previous publicly announced repurchase program. During the three month periods ended May 4, 2024 and April 29, 2023, we also acqu ired 0.5 million and 0.4 million shares of treasury stock, respectively, to cover employee tax withholding obligations under our employee equity compensation programs for aggregate purchase prices of approximately $70.5 million and $37.5 million, respectively.

Current wording

Other financing activities. In March 2024, our Board of Directors approved a new two-year program to repurchase up to $2.1 billion of our common stock through January 31, 2026. During thesix month period ended August 3, 2024, we repurchased 3.7 million shares of common stock for $525.0 million (excluding excise tax) under this program. For the six month period ended July 29, 2023, we repurchased 4.3 million shares of common stock for $464.9 million (excluding excise tax) under our previous, publicly announced repurchase program. During the six month periods ended August 3, 2024 and July 29, 2023, we also acquired 0.5 million and 0.4 million shares of treasury stock, respectively, to cover employee tax withholding obligations under our employee equity compensation programs, for aggregate purchase prices of approximately $71.7 million and $38.4 million, respectively.

Previous wording

On May 22, 2024, our Board of Directors declared a quarterly cash dividend of $0.3675 per common share, payable on June 28, 2024. The Board of Directors declared a cash dividend of $0.3675 per common share in March 2024, and $0.3350 per common share in February, May, August, and November 2023.

Current wording

On August 21, 2024, our Board of Directors declared a quarterly cash dividend of $0.3675 per common share, payable on September 30, 2024. The Board of Directors declared a cash dividend of $0.3675 per common share in March and May 2024, and $0.3350 per common share in February, May, August, and November 2023.

Previous wording

For the three month periods ended May 4, 2024 and April 29, 2023, we paid cash dividends of $123.3 million and $114.8 million, respectively.

Current wording

For the six month periods ended August 3, 2024 and July 29, 2023, we paid cash dividends of $245.8 million and $228.8 million, respectively.

Previous wording

We ended the first quarter of fiscal 2024 with $4.7 billion of unrestricted cash balances, which were held primarily in overnight money market funds invested in U.S. treasury and government instruments across a highly diversified set of banks and other financial institutions. We also have $1.3 billion available under our Credit Facility. We estimate that existing cash and cash equivalent balances, cash flows from operations, bank credit facility, and trade credit are adequate to meet our operating cash needs and to fund our planned capital investments, debt repayments, interest payments, common stock repurchases, and quarterly dividend payments for at least the next 12 months.

Current wording

We ended the second quarter of fiscal 2024 with $4.7 billion of unrestricted cash balances, which were held primarily in overnight money market funds invested in U.S. treasury and government instruments across a highly diversified set of banks and other financial institutions. We also have $1.3 billion available under our Credit Facility. We estimate that existing cash and cash equivalent balances, cash flows from operations, our bank credit facility, and trade credit are adequate to meet our operating cash needs and to fund our planned capital investments, debt repayments, interest payments, common stock repurchases, and quarterly dividend payments for at least the next 12 months.

Previous wording

Standby letters of credit and collateral trust. We use standby letters of credit outside of our revolving credit facility and a funded trust to collateralize some of our insurance obligations. As of May 4, 2024, February 3, 2024, and April 29, 2023, we had $2.2 million, $2.2 million, and $2.6 million, respectively, in standby letters of credit outstanding. As of May 4, 2024, February 3, 2024, and April 29, 2023, we had $61.6 million, $60.8 million, and $58.4 million, respectively, held in a collateral trust. The standby letters of credit are collateralized by restricted cash and the collateral trust consists of restricted cash and cash equivalents.

Current wording

Standby letters of credit and collateral trust. We use standby letters of credit outside of our revolving credit facility and a funded trust to collateralize some of our insurance obligations. As of August 3, 2024, February 3, 2024, and July 29, 2023, we had $2.2 million, $2.2 million, and $2.6 million, respectively, in standby letters of credit outstanding. As of August 3, 2024, February 3, 2024, and July 29, 2023, we had $62.4 million, $60.8 million, and $59.1 million, respectively, held in a collateral trust. The standby letters of credit are collateralized by restricted cash and the collateral trust consists of restricted cash and cash equivalents.

Previous wording

During the first quarter of fiscal 2024, there were no significant changes to the critical accounting estimates discussed in our Annual Report on Form 10-K for the year ended February 3, 2024.

Current wording

During the second quarter of fiscal 2024, there were no significant changes to the critical accounting estimates discussed in our Annual Report on Form 10-K for the year ended February 3, 2024.

Previous wording

Future impact from inflation, interest rate increases, ongoing military conflicts and economic sanctions, climate change, pandemics, and other economic, regulatory, consumer spending, and industry trends that could potentially adversely affect our revenue, profitability, operating conditions, and growth are difficult to predict. Our forward-looking statements are subject to risks and uncertainties which could cause our actual results to differ materially from those forward-looking statements and our previous expectations, plans, and projections. Such risks and uncertainties are not limited to but may include:

Current wording

Future impact from inflation, interest rate changes, ongoing military conflicts and economic sanctions, climate change, pandemics, natural disasters, and other economic, regulatory, consumer spending, and industry trends that could potentially adversely affect our revenue, profitability, operating conditions, and growth are difficult to predict. Our forward-looking statements are subject to risks and uncertainties which could cause our actual results to differ materially from those forward-looking statements and our previous expectations, plans, and projections. Such risks and uncertainties are not limited to but may include:

Previous wording

•Uncertainties arising from the macroeconomic environment, including inflation, high interest rates, housing costs, energy and fuel costs, financial and credit market conditions, recession concerns, geopolitical conditions, public health and public safety issues that affect our costs, consumer confidence, and consumer disposable income and shopping behavior as well as costs.

Current wording

•Uncertainties arising from the macroeconomic environment, including inflation, high interest rates, housing costs, energy and fuel costs, financial and credit market conditions, recession concerns, geopolitical conditions, and public health and public safety issues that affect consumer confidence, and consumer disposable income, and shopping behavior, as well as our costs.

Previous wording

•Information or data security breaches, including cyber-attacks on our transaction processing and computer information systems, which could disrupt our operations, and result in theft or unauthorized disclosure of our confidential and valuable business information, such as customer, credit card, employee, or other private and valuable information that we handle in the ordinary course of our business.

Current wording

•Information or data security breaches, including cyber-attacks on our transaction processing and computer information systems, which could disrupt our operations, and result in theft or unauthorized disclosure of confidential and valuable business information, such as customer, credit card, employee, or other private and valuable information that we handle in the ordinary course of our business.

Previous wording

•Our need to obtain acceptable new store sites with favorable consumer demographics to achieve our planned new store openings.

Current wording

•Our need to obtain acceptable new store sites with favorable consumer demographics to achieve our planned store openings.

Previous wording

•Our need to expand in existing markets and enter new geographic markets in order to achieve planned market penetration.

Current wording

•Our need to expand in existing markets and enter new geographic markets in order to achieve planned growth and market penetration.

Previous wording

•A public health or public safety crisis, demonstrations, natural or a man-made disaster in California or in another region where we have a concentration of stores, offices, or a distribution center, that could harm our business.

Current wording

•A public health or public safety crisis, or a natural or man-made disaster in California or another region where we have a concentration of stores, offices, or a distribution center, that could harm our business.