ROSS STORES INC

Three and Six Months Ended August 3, 2024 and July 29, 2023

(Unaudited)

Note A: Summary of Significant Accounting Policies

Basis of presentation. The accompanying unaudited interim condensed consolidated financial statements have been prepared from the records of Ross Stores, Inc. and subsidiaries (the “Company”) without audit and, in the opinion of management, include all adjustments (consisting of only normal, recurring adjustments) necessary to present fairly the Company’s financial position as of August 3, 2024 and July 29, 2023, and the results of operations, comprehensive income, and stockholders’ equity for the three and six month periods ended August 3, 2024 and July 29, 2023, and the cash flows for the six month periods ended August 3, 2024 and July 29, 2023. The Condensed Consolidated Balance Sheet as of February 3, 2024, presented herein, has been derived from the Company’s audited consolidated financial statements for the fiscal year then ended.

Certain information and disclosures normally included in the notes to annual consolidated financial statements prepared in accordance with Generally Accepted Accounting Principles in the United States of America (“GAAP”) have been condensed or omitted for purposes of these interim condensed consolidated financial statements. The interim condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements, including notes thereto, contained in the Company’s Annual Report on Form 10-K for the year ended February 3, 2024.

The results of operations, comprehensive income, and stockholders’ equity for the three and six month periods ended August 3, 2024 and July 29, 2023, and the cash flows for the six month periods ended August 3, 2024 and July 29, 2023 presented herein are not necessarily indicative of the results to be expected for the full fiscal year. The fiscal year ending February 1, 2025 is referred to as fiscal 2024 and is a 52-week year. The fiscal year ended February 3, 2024 is referred to as fiscal 2023 and was a 53-week year.

Use of accounting estimates. The preparation of financial statements in conformity with GAAP requires the Company to make estimates and assumptions that affect the reported amounts of assets, liabilities, and disclosures of contingent assets and liabilities at the date of the condensed consolidated financial statements, and the reported amounts of revenue and expenses during the reporting period. Actual results could differ materially from the Company’s estimates. The Company’s significant accounting estimates include valuation reserves for inventory, packaway and other inventory carrying costs, useful lives of fixed assets, insurance reserves, reserves for uncertain tax positions, and legal claims.

Revenue recognition. The following sales mix table disaggregates revenue by merchandise category for the three and six month periods ended August 3, 2024 and July 29, 2023:

Cash and cash equivalents. Cash equivalents consist of highly liquid, fixed income instruments purchased with an original maturity of three months or less. The institutions where these instruments are held could potentially subject the Company to concentrations of credit risk. The Company manages its risk associated with these instruments primarily by holding its cash and cash equivalents across a highly diversified set of banks and other financial institutions.

Restricted cash and cash equivalents. The Company uses standby letters of credit in addition to a funded trust to collateralize certain insurance obligations. These restricted funds are invested in bank deposits, money market mutual funds, and U.S. Government and agency securities, and cannot be withdrawn from the Company’s account without the prior written consent of the secured parties. The standby letters of credit are collateralized by restricted cash. As of August 3, 2024, February 3, 2024, and July 29, 2023, the Company 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, the Company had $62.4 million, $60.8 million, and $59.1 million, respectively, in a collateral trust. The classification between current and long-term is based on the timing of expected payments of the obligations.

The following table provides a reconciliation of cash, cash equivalents, and restricted cash and cash equivalents in the Condensed Consolidated Balance Sheets, that reconcile to the amounts shown on the Condensed Consolidated Statements of Cash Flows:

Property and equipment. As of August 3, 2024 and July 29, 2023, the Company had $33.9 million and $34.6 million, respectively, of property and equipment purchased but not yet paid. These purchases are included in Property and equipment, Accounts payable, and Accrued expenses and other in the accompanying Condensed Consolidated Balance Sheets.

Operating leases. Supplemental cash flow disclosures related to operating lease assets obtained in exchange for operating lease liabilities (includes new leases and remeasurements or modifications of existing leases) were as follows:

Cash dividends. On August 21, 2024, the Company’s Board of Directors declared a quarterly cash dividend of $0.3675 per common share, payable on September 30, 2024. The Company’s 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.

Stock repurchase program. In March 2024, the Company’s Board of Directors approved a newtwo-year program to repurchase up to $2.1 billion of the Company’s common stock through January 31, 2026. During thesix month period ended August 3, 2024, the Company repurchased 3.7 million shares of common stock for $525.0 million (excluding excise tax) under this program. During the six month period ended July 29, 2023, the Company repurchased 4.3 million shares of common stock for $464.9 million (excluding excise tax) under the previous, publicly announced repurchase program.

Litigation, claims, and assessments. Like many retailers, the Company has been named in class/representative action lawsuits, primarily in California, alleging violations by the Company of wage and hour laws. Class/representative action litigation remains pending as of August 3, 2024.

The Company is also party to various other legal and regulatory proceedings arising in the normal course of business. Actions filed against the Company may include commercial, product and product safety, consumer, intellectual property, environmental, and labor and employment-related claims, including lawsuits in which private plaintiffs or governmental agencies allege that the Company violated federal, state, and/or local laws. Actions against the Company are in various procedural stages. Many of these proceedings raise factual and legal issues and are subject to uncertainties.

In the opinion of management, the resolution of currently pending class/representative action litigation and other currently pending legal and regulatory proceedings will not have a material adverse effect on the Company’s financial condition, results of operations, or cash flows.

Supply chain finance program. The Company facilitates a voluntary supply chain finance program (the “program”) to provide certain suppliers with the opportunity to sell their receivables due from the Company to participating financial institutions at the sole discretion of both the suppliers and the financial institutions. A third-party bank administers the program. The Company’s responsibility is limited to making payments on the terms originally negotiated with each supplier, regardless of whether a supplier sells its receivable to a financial institution. The Company is not a party to the agreements between the participating financial institutions and the suppliers in connection with the program and receives no financial incentives from the suppliers or the financial institutions. No guarantees are provided by the Company under the program, and the Company’s rights and obligations to its suppliers are not affected by the program. The range of payment terms negotiated with suppliers is consistent, irrespective of whether a supplier participates in the program.

All outstanding payments owed under the program are recorded within Accounts payable in the Condensed Consolidated Balance Sheets. The Company accounts for all payments made under the program as a reduction to operating cash flows in Accounts payable within the Condensed Consolidated Statements of Cash Flows. The amounts owed to participating financial institutions under the program and included in Accounts payable were $182.5 million, $146.9 million, and $165.6 million at August 3, 2024, February 3, 2024, and July 29, 2023, respectively.

Recently adopted accounting standards. In September 2022, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2022-04, Liabilities — Supplier Finance Programs (Subtopic 405-50): Disclosure of Supplier Finance Program Obligations, to enhance transparency about an entity’s use of supplier finance programs. The ASU requires enhanced and additional disclosures about the key terms of supplier finance programs, including a description of where in the financial statements any related amounts are presented. The Company adopted ASU 2022-04 in the first quarter of fiscal 2023 on a retrospective basis, excluding the annual rollforward requirement which will be adopted on a prospective basis in its fiscal 2024 Annual Report on Form 10-K. The adoption of this standard did not have a material impact on the Company’s condensed consolidated financial statements for thethree and six month periods ended August 3, 2024, and is not expected to have a material impact on the Company’s fiscal 2024 consolidated financial statements.

Recently issued accounting standards. In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. The ASU is intended to enhance the transparency and decision usefulness of income tax disclosures. It requires the Company to disclose disaggregated jurisdictional and categorical information for the tax rate reconciliation and the amount of income taxes paid as well as additional income tax related amounts. The new guidance is effective for annual reporting periods beginning after December 15, 2024, with retrospective application permitted. The Company is currently evaluating the impact of this guidance on its disclosures in the consolidated financial statements.

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. The ASU is intended to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. The standard is effective for annual reporting periods beginning after December 15, 2023, and interim periods beginning after December 15, 2024. The Company is currently evaluating the impact of this guidance on its disclosures in the consolidated financial statements.

Note B: Fair Value Measurements

Accounting standards pertaining to fair value measurements establish a three-tier fair value hierarchy which prioritizes the inputs used in measuring fair value. The inputs used to measure fair value include: Level 1, observable inputs such as quoted prices in active markets; Level 2, inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3, unobservable inputs in which little or no market data exists. This fair value hierarchy requires the Company to develop its own assumptions, maximize the use of observable inputs, and minimize the use of unobservable inputs when measuring fair value. Corporate and U.S. government and agency securities are classified within Level 1 because these securities are valued using quoted market prices.

The fair value of the Company’s financial instruments are as follows:

The underlying assets in the Company’s nonqualified deferred compensation program as of August 3, 2024, February 3, 2024, and July 29, 2023 (included in Other long-term assets and in Other long-term liabilities) primarily consist of participant-directed money market, stock, and bond funds. The fair value measurement for funds with quoted market prices in active markets (Level 1) are as follows:

Note C: Stock-Based Compensation

For the three and six month periods ended August 3, 2024 and July 29, 2023, the Company recognized stock-based compensation expense as follows:

Total stock-based compensation expense recognized in the Company’s Condensed Consolidated Statements of Earnings for the three and six month periods ended August 3, 2024 and July 29, 2023 is as follows:

The tax benefits related to stock-based compensation expense for the three and six month periods ended August 3, 2024 were $7.1 million and $15.0 million, respectively. The tax benefits related to stock-based compensation expense for the three and six month periods ended July 29, 2023 were $8.2 million and $15.2 million, respectively.

Restricted stock awards. The Company grants shares of restricted stock or restricted stock units to directors, officers, and key employees. The market value of shares of restricted stock and restricted stock units at the date of grant is amortized to expense over the vesting period of generally three tofive years.

Performance share awards. The Company has a performance share award program for senior executives. A performance share award represents a right to receive shares of restricted stock on a specified settlement date based on the Company’s attainment of a performance goal during the performance period, which is the Company’s fiscal year. If attained, the restricted stock then vests over a service period, generally three years from the date the performance award was granted.

As of August 3, 2024, shares related to unvested restricted stock, restricted stock units, and performance share awards totaled 3.9 million shares. A summary of restricted stock, restricted stock units, and performance share award activity for the six month period ended August 3, 2024, is presented below:

The unamortized compensation expense at August 3, 2024 was $235.7 million which is expected to be recognized over a weighted-average remaining period of 1.9 years. The unamortized compensation expense at July 29, 2023 was $217.6 million which was expected to be recognized over a weighted-average remaining period of 2.1 years.

Shares repurchased for tax withholding are considered treasury shares which are available for reissuance. During the three and six month periods ended August 3, 2024, shares purchased by the Company for tax withholding totaled 8,942 and 493,797, respectively. During the three and six month periods ended July 29, 2023, shares purchased by the Company for tax withholding totaled 8,842 and 376,128, respectively.

Employee stock purchase plan. Under the Employee Stock Purchase Plan (“ESPP”), eligible employees participating in the quarterly offering period can choose to have up to the lesser of 10% of their annual base earnings or the IRS annual share purchase limit of $25,000 in aggregate market value withheld to purchase the Company’s common stock. The purchase price of the stock is 85% of the closing market price on the date of purchase. Purchases occur on a quarterly basis (on the last trading day of each calendar quarter). The Company recognizes expense for ESPP purchase rights equal to the value of the 15% discount given on the purchase date.

Note D: Earnings Per Share

The Company computes and reports both basic earnings per share (“EPS”) and diluted EPS. Basic EPS is computed by dividing net earnings by the weighted-average number of common shares outstanding for the period. Diluted EPS is computed by dividing net earnings by the sum of the weighted-average number of common shares and dilutive common stock equivalents outstanding during the period. Diluted EPS reflects the total potential dilution that could occur from outstanding equity plan awards and unvested shares of both performance and non-performance based awards of restricted stock and restricted stock units.

Shares are excluded from the calculation of diluted EPS if their effect would have been anti-dilutive to the calculation of diluted EPS. For the three and six month periods ended August 3, 2024, approximately 2,000 and 3,000 weighted-average shares were excluded from the calculation of diluted EPS, respectively. For the three and six month periods ended July 29, 2023, approximately 14,000 and 18,000 weighted-average shares were excluded from the calculation of diluted EPS, respectively.

The following is a reconciliation of the number of shares (denominator) used in the basic and diluted EPS computations:

Note E: Debt

Senior Notes. Unsecured senior debt (the “Senior Notes”), net of unamortized discounts and debt issuance costs, consisted of the following:

1 Netof unamortized discounts and debt issuance costs of $12.1 million, $14.3 million, and $16.4 million as of August 3, 2024, February 3, 2024, and July 29, 2023, respectively.

Interest on all Senior Notes is payable semi-annually and the Senior Notes are subject to prepayment penalties for early payment of principal.

The aggregate fair value of theseven outstanding series of Senior Notes was approximately $2.4 billion as of August 3, 2024, and approximately $2.3 billion as of February 3, 2024 and July 29, 2023. The fair value is estimated by obtaining comparable market quotes which are considered to be Level 1 inputs under the fair value measurements and disclosures guidance.

Revolving credit facilities. The Company’s $1.3 billion senior unsecured revolving credit facility (“Credit Facility”) expires in February 2027 and may be extended at the Company’s request for up totwo additionalone-year periods subject to customary conditions. The Credit Facility contains a $300 million sublimit for issuance of standby letters of credit. It also contains an option allowing the Company to increase the size of its Credit Facility by up to an additional $700 million, with the agreement of the committing lenders. Interest on borrowings under this Credit Facility is a term rate based on the Secured Overnight Financing Rate (“Term SOFR”) (or an alternate benchmark rate, if Term SOFR is no longer available) plus an applicable margin and is payable quarterly and upon maturity.

The Credit Facility is subject to a quarterly Consolidated Adjusted Debt to Consolidated EBITDAR financial leverage ratio covenant. As of August 3, 2024, the Company was in compliance with the financial covenant, hadno borrowings or standby letters of credit outstanding under the Credit Facility, and the$1.3 billion Credit Facility remained in place and available.

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

Note F: Taxes on Earnings

The Company’s effective tax rate for the three month periods ended August 3, 2024 and July 29, 2023 was approximately 25%. The Company’s effective tax rate for the six month periods ended August 3, 2024 and July 29, 2023 was approximately 24%. The Company’s 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.

As of August 3, 2024, February 3, 2024, and July 29, 2023, the reserves for unrecognized tax benefits were $63.2 million, $58.6 million, and $63.3 million, inclusive of $8.0 million, $6.2 million, and $7.5 million of related interest and penalties, respectively. The Company accounts for interest and penalties related to unrecognized tax benefits as a part of its provision for taxes on earnings. If recognized, $50.2 million would impact the Company’s effective tax rate. It is reasonably possible that certain federal and state tax matters may be concluded or statutes of limitations may lapse during the next 12 months. Accordingly, the total amount of unrecognized tax benefits may decrease by up to $11.7 million. The difference between the total amount of unrecognized tax benefits and the amounts that would impact the effective tax rate relates to amounts attributable to deferred income tax assets and liabilities. These amounts are net of federal and state income taxes.

The Company is open to audit by the Internal Revenue Service under the statute of limitations for fiscal years 2020 through 2023. The Company’s state income tax returns are generally open to audit under the various statutes of limitations for fiscal years 2019 through 2023. Certain state tax returns are currently under audit by various tax authorities. The Company does not expect the results of these audits to have a material impact on the condensed consolidated financial statements.

In December 2021, the Organization for Economic Co-operation and Development released Pillar Two Model Rules (“Pillar Two”), which provide for a global minimum tax of 15% on multinational entities. Although the United States has not yet adopted Pillar Two, several countries enacted Pillar Two with an initial effective date of January 1, 2024. The impact of Pillar Two on the Company’s effective tax rate is expected to be minimal for fiscal 2024. The Company will continue to monitor future Pillar Two legislation in relevant jurisdictions for any impacts to its effective tax rate.