ROSS STORES, INC.

Previous wording

This section and other parts of this Form 10-Q contain forward-looking statements that involve risks and uncertainties. Our actual results may differ materially from the results discussed in the forward-looking statements. Factors that might cause such differences include, but are not limited to, those discussed below under the caption “Forward-Looking Statements” and also those in Part II, Item 1A. Risk Factors of this Form 10-Q, and Part I, Item 1A. Risk Factors of our Annual Report on Form 10-K for fiscal 2024. The following discussion should be read in conjunction with the condensed consolidated financial statements and notes thereto included elsewhere in this Quarterly Report on Form 10-Q and in conjunction with the consolidated financial statements and notes thereto in our Annual Report on Form 10-K for fiscal 2024. All information is based on our fiscal calendar.

Current wording

This section and other parts of this Form 10-Q contain forward-looking statements that involve risks and uncertainties. Our actual results may differ materially from the results discussed in the forward-looking statements. Factors that might cause such differences include, but are not limited to, those discussed below under the caption “Forward-Looking Statements” and also those in Part I, Item 1A. Risk Factors of our Annual Report on Form 10-K for fiscal 2025. The following discussion should be read in conjunction with the condensed consolidated financial statements and notes thereto included elsewhere in this Quarterly Report on Form 10-Q and in conjunction with the consolidated financial statements and notes thereto in our Annual Report on Form 10-K for fiscal 2025. All information is based on our fiscal calendar.

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 1,909 locations in 44 states, the District of Columbia, Guam, and Puerto Rico as of November 1, 2025. 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 364 dd’s DISCOUNTS stores in 22 states as of November 1, 2025 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 1,917 locations in 44 states, the District of Columbia, Guam, and Puerto Rico as of May 2, 2026. Ross offers first-quality, in-season, brand name 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 365 dd’s DISCOUNTS stores in 23 states as of May 2, 2026 that feature a more moderately-priced assortment of first-quality, in-season 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.

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Stores. The following table summarizes the stores opened and closed during the three and nine month periods ended November 1, 2025 and November 2, 2024:

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The following table summarizes the stores opened and closed during the three month periods ended May 2, 2026 and May 3, 2025:

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Our long-term strategy is to open additional stores based on market penetration, local demographic characteristics, competition, expected store profitability, and the ability to leverage overhead expenses. We continually evaluate opportunistic real estate acquisitions and opportunities for potential new store locations. We also evaluate our current store locations and determine store closures based on similar criteria. We continue to believe that customers’ focus on value and convenience provides opportunities for us to gain market share.

Current wording

Our long-term strategy is to open additional stores based on market penetration, local demographic characteristics, competition, expected store profitability, and the ability to leverage overhead expenses. We continually evaluate opportunistic real estate acquisitions and opportunities for potential new store locations. We also evaluate our current store locations and determine store closures based on similar criteria. We continue to believe that customers’ focus on value and convenience supports opportunities to expand our reach and serve more customers over time.

Previous wording

Metrics relating to customer purchasing behavior, such as “traffic” (defined as the number of transactions) and “basket” (defined as average transaction value), may provide additional insight into our comp store sales results (see Sales discussion).

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Metrics relating to customer purchasing behavior, such as “traffic” (defined as the number of transactions) and “basket” (defined as average transaction value), may provide additional insight into our comp store sales results (see Sales discussion below).

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The following table summarizes our financial results for the three and nine month periods ended November 1, 2025 and November 2, 2024:

Current wording

The following table summarizes our financial results for the three month periods ended May 2, 2026 and May 3, 2025:

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Sales. Sales for the three month period ended November 1, 2025 increased $0.5 billion, or 10%, compared to the three month period ended November 2, 2024. This was primarily due to the 7% increase in comp store sales of $0.3 billion and an increase in non-comp store sales of $0.2 billion. The 7% comp store sales increase was driven equally by basket and traffic.

Current wording

Sales. Sales for the three month period ended May 2, 2026 increased by approximately $1,026 million, or 21%, compared to the three month period ended May 3, 2025. This was primarily due to the 17% increase in comp store sales of $841 million and an increase in non-comp store sales of $185 million. The 17% increase in comp store sales was primarily driven by an approximately 11% increase in traffic and 6% increase in basket.

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Our sales mix for the three and nine month periods ended November 1, 2025 and November 2, 2024 is shown below:

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Our sales mix for the three month periods ended May 2, 2026 and May 3, 2025 is shown below:

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Cost of goods sold. Cost of goods sold for the three and nine month periods ended November 1, 2025 increased $0.4 billion and $0.7 billion, respectively, compared to the three and nine month periods ended November 2, 2024, primarily due to the increases in sales.

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Cost of goods sold. Cost of goods sold for the three month period ended May 2, 2026 increased by approximately $649 million compared to the three month period ended May 3, 2025, primarily due to the increase in sales.

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Selling, general and administrative expenses. For the three and nine month periods ended November 1, 2025, selling, general and administrative expenses (“SG&A”) increased $0.1 billion and $0.2 billion, respectively, compared to the three and nine month periods ended November 2, 2024, primarily due to higher store-related costs.

Current wording

Selling, general and administrative expenses. For the three month period ended May 2, 2026, selling, general and administrative expenses (“SG&A”) increased by approximately $179 million, compared to the three month period ended May 3, 2025, primarily due to higher store-related costs.

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Operating income. Operating income as a percentage of sales for the three and nine month periods ended November 1, 2025 decreased by 35 basis points and 45 basis points, respectively, compared to the three and nine month periods ended November 2, 2024, primarily driven by the increase in cost of goods sold as a percentage of sales period-over-period.

Current wording

Operating income. Operating income as a percentage of sales for the three month period ended May 2, 2026 increased by approximately 120 basis points compared to the three month period ended May 3, 2025, primarily driven by the decrease in cost of goods sold as a percentage of sales period-over-period, partially offset by the increase in SG&A as a percentage of sales period-over-period.

Previous wording

Taxes on earnings. 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. Our effective tax rate for the three month period ended November 1, 2025 was approximately 25%, compared to approximately 24% for the three month period ended November 2, 2024. Our effective tax rate for the nine month period ended November 1, 2025 was approximately 25%, compared to approximately 24% for the nine month period ended November 2, 2024. The increases in the effective tax rates for the three and nine month periods ended November 1, 2025 compared to the three and nine month periods ended November 2, 2024 were primarily due to the tax effects associated with stock-based compensation.

Current wording

Taxes on earnings. Our effective tax rates for the three month periods ended May 2, 2026 and May 3, 2025 were approximately 22.4% and 25.2%, respectively. The decrease of 2.8% in the effective tax rate for the first quarter of fiscal 2026 compared to the first quarter of fiscal 2025 was primarily due to the tax effects associated with stock-based compensation. Our effective tax rate represents the applicable combined federal and state statutory rates reduced by the federal benefit of state taxes deductible on federal returns. 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.

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Earnings per share. Diluted earnings per share for the three month period ended November 1, 2025 was $1.58 compared to $1.48 for the three month period ended November 2, 2024. The $0.10, or 7%, increase in the diluted earnings per share for the three month period ended November 1, 2025 was primarily attributable to an approximately 5% increase in net earnings and a 2% reduction in weighted-average diluted shares outstanding, largely due to stock repurchases under our stock repurchase program.

Current wording

Earnings per share. Diluted earnings per share for the three month period ended May 2, 2026 was $2.02 compared to $1.47 for the three month period ended May 3, 2025. The $0.55, or 37%, increase in diluted earnings per share for the three month period ended May 2, 2026 was primarily attributable to an approximately 36% increase in net earnings and 1% reduction in weighted-average diluted shares outstanding, largely due to stock repurchases under our stock repurchase program.

Previous wording

The primary sources of funds for our business activities are cash flows from operations and short-term trade credit. Our primary ongoing cash requirements are for merchandise inventory purchases, payroll, operating and variable lease costs, taxes, capital expenditures related to new and existing stores, and investments in distribution centers, information systems, and buying and corporate offices. We also use cash to repurchase stock under active stock repurchase programs, repay debt as it becomes due, and pay dividends. The $500 million principal amount of our 0.875% Senior Notes is due in April 2026. In April 2025, we repaid at maturity $700 million of our Senior Notes. In the third quarter of fiscal 2024, we repaid at maturity $250 million of 3.357% Senior Notes.

Current wording

The primary sources of funds for our business activities are cash flows from operations and short-term trade credit. Our primary ongoing cash requirements are for merchandise inventory purchases, payroll, operating and variable lease costs, taxes, capital expenditures related to our new and existing stores, and investments in distribution centers, information systems, and buying and corporate offices. We also use cash to repurchase stock under active stock repurchase programs, repay debt as it becomes due, and pay dividends. In April 2026, we repaid at maturity $500 million of Senior Notes, and in April 2025, we repaid at maturity $700 million of Senior Notes. As of May 2, 2026, we had $242 million principal amount of Senior Notes that will reach maturity in 2027.

Previous wording

The $0.4 billion increase in cash flow provided by operating activities for the nine month period ended November 1, 2025 compared to the same period in the prior fiscal year was primarily driven by higher accounts payable leverage (defined as Accounts payable divided by Merchandise inventory), lower taxes paid, and lower incentive bonus payments. Accounts payable leverage was 85% and 82% as of November 1, 2025 and November 2, 2024, respectively. The increase in accounts payable leverage was primarily due to the timing of inventory receipts and related payments versus last year.

Current wording

Net cash provided by operating activities for the three month period ended May 2, 2026 increased by approximately $426 million compared to the three month period ended May 3, 2025, primarily due to higher net earnings, higher accounts payable leverage (defined as Accounts payable divided by Merchandise inventory), and higher current year incentive compensation accruals. Accounts payable leverage was 89% and 81% as of May 2, 2026 and May 3, 2025, respectively. The increase in accounts payable leverage was primarily due to the timing of inventory receipts and related payments versus last year.

Previous wording

As a regular part of our business, packaway inventory levels will vary over time based on availability of compelling merchandise purchase opportunities in the marketplace and our decisions on the timing for release of that inventory to our stores. Packaway merchandise is purchased with the intent that it will be stored in our warehouses until a later date. The timing of the release of packaway inventory to our stores is principally driven by the product mix and seasonality of the merchandise, and its relation to our store merchandise assortment plans. As such, the aging of packaway varies by merchandise category and seasonality of purchase, but typically packaway remains in storage for less than six months. We expect to continue to take advantage of packaway inventory opportunities to maximize our ability to deliver bargains to our customers.

Current wording

Packaway merchandise is purchased with the intent that it will be stored in our warehouses until a later date. As a regular part of our business, packaway inventory levels will vary over time based on availability of compelling merchandise purchase opportunities in the marketplace and our decisions on the timing for release of that inventory to our stores. The timing of the release of packaway inventory to our stores is principally driven by the product mix and seasonality of the merchandise, and its relation to our store merchandise assortment plans. As such, the aging of packaway varies by merchandise category and seasonality of purchase, but typically packaway remains in storage for less than six months. We expect to continue to take advantage of packaway inventory opportunities to maximize our ability to deliver bargains to our customers.

Previous wording

Changes in packaway inventory levels affect our operating cash flow. As of November 1, 2025, February 1, 2025, and November 2, 2024 packaway inventory was 36%, 41%, and 38% of total inventory, respectively.

Current wording

Changes in packaway inventory levels affect our operating cash flow. As of May 2, 2026, January 31, 2026, and May 3, 2025 packaway inventory was 36%, 37%, and 41% of total inventory, respectively.

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Capital expenditures for fiscal 2025 are currently projected to be approximately $800 million. Our remaining planned capital expenditures for fiscal 2025 are for costs related to existing and future new stores, investment in our supply chain to support long-term growth, including construction of our next distribution center, investment in our information technology systems, 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 2026 are projected to be approximately $1.1 billion. Our planned capital expenditures for fiscal 2026 include costs to open new stores and improve existing stores, investments in our supply chain to support long-term growth, including construction of our next distribution centers, investments in our information technology systems, 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

Revolving credit facilities. In June 2025, we entered into a $1.3 billion 2025 Credit Facility, which replaced our previous $1.3 billion unsecured credit facility. As of November 1, 2025, we had no borrowings or standby letters of credit outstanding under the 2025 Credit Facility, our 2025 Credit Facility remained in place and available, and we were in compliance with the financial covenant. Refer to Note E: Debt in the Notes to Condensed Consolidated Financial Statementsfor additional information.

Current wording

Revolving credit facility. As of May 2, 2026, we had no borrowings or standby letters of credit outstanding under the Credit Facility, and we were in compliance with the financial covenant. Refer to Note E: Debt in the Notes to Condensed Consolidated Financial Statementsfor additional information.

Previous wording

Senior notes. As of November 1, 2025, we had approximately $1.5 billion of outstanding unsecured Senior Notes, of which $499 million was classified in Current Liabilities on our Condensed Consolidated Balance Sheet for the period ended November 1, 2025. Refer to Note E: Debt in the Notes to Condensed Consolidated Financial Statements for additional information.

Current wording

Senior notes. As of May 2, 2026, we had approximately $1.0 billion of outstanding Senior Notes, of which $241 million was classified in Current Liabilities on our Condensed Consolidated Balance Sheet for the period ended May 2, 2026. Refer to Note E: Debt in the Notes to Condensed Consolidated Financial Statements for additional information.

Previous wording

Other financing activities. In March 2024, our Board of Directors approved a two-year program to repurchase up to $2.1 billion of our common stock through fiscal 2025. During the nine month period ended November 1, 2025, we repurchased 5.6 million shares of common stock for $787.5 million (excluding excise tax) under this program. As of November 1, 2025, there was $262.5 million available for repurchase under this program.

Current wording

Stock Repurchases. In March 2026, our Board of Directors approved a new, two-year program to repurchase up to $2.55 billion of our common stock through January 29, 2028. During the three month period ended May 2, 2026, we repurchased 1.5 million shares of common stock for $318.7 million (excluding excise tax) under this program. Refer to Note A: Summary of Significant Accounting Policies in the Notes to the Condensed Consolidated Financial Statements for additional information relating to our stock repurchase program.

Previous wording

On November 19, 2025, our Board of Directors declared a quarterly cash dividend of $0.4050 per common share, payable on December 31, 2025. The Board of Directors declared quarterly cash dividends of $0.4050 per common share in March, May, and August 2025, and $0.3675 per common share in March, May, August, and November 2024.

Current wording

Our Board of Directors declared a quarterly cash dividend of $0.4450 per common share in March 2026. Our Board of Directors declared a quarterly cash dividend of $0.4050 per common share in March, May, August, and November 2025.

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For the nine month periods ended November 1, 2025 and November 2, 2024, we paid cash dividends of $397.2 million and $367.5 million, respectively.

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For the three month periods ended May 2, 2026 and May 3, 2025, we paid cash dividends of $143.6 million and $133.3 million, respectively.

Previous wording

Short-term trade credit represents a significant source of financing for merchandise inventory. Trade credit arises from customary payment terms and trade practices with our vendors. We regularly review the adequacy of credit available to us from all sources, and expect to be able to maintain adequate trade credit, bank credit, and other credit sources to meet our capital and liquidity requirements.

Current wording

Other financing activities. Short-term trade credit represents a significant source of financing for merchandise inventory. Trade credit arises from customary payment terms and trade practices with our vendors. We regularly review the adequacy of credit available to us from all sources, and expect to be able to maintain adequate trade credit, bank credit, and other credit sources to meet our capital and liquidity requirements.

Previous wording

We ended the third quarter of fiscal 2025 with $4.1 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 2025 Credit Facility. We estimate that existing cash and cash equivalent balances, cash flows from operations, our 2025 Credit Facility, and trade credit are adequate to meet our operating cash needs and to fund our common stock repurchases, planned capital investments, quarterly dividend payments, debt repayments, and interest payments, for at least the next 12 months.

Current wording

We ended the first quarter of fiscal 2026 with $4.1 billion of unrestricted cash balances, which were held primarily in bank deposits, money market mutual funds, and U.S. Government and agency securities 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 Credit Facility, and trade credit are adequate to meet our operating cash needs and to fund our common stock repurchases, planned capital investments, quarterly dividend payments, debt repayments, and interest payments, for at least the next 12 months.

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During the third quarter of fiscal 2025, there were no significant changes to the critical accounting estimates discussed in our Annual Report on Form 10-K for the year ended February 1, 2025.

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During the first quarter of fiscal 2026, there were no significant changes to the critical accounting estimates discussed in our Annual Report on Form 10-K for the year ended January 31, 2026.

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Future impact from inflation, interest rate changes, tariffs, ongoing military conflicts and economic sanctions, climate change, extreme weather, 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:

Current wording

Future impact from inflation, changes in tariffs on imported goods, interest rate changes, ongoing military conflicts and economic sanctions, extreme weather, public health crises (including pandemics), natural disasters, and other economic, regulatory, consumer spending, and industry events and 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. Risks and uncertainties, any of which could adversely affect our sales, profitability, and growth, and harm our business may include (but are not limited to):

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•Unexpected changes in the level of consumer spending on, or preferences for, apparel and home-related merchandise could adversely affect us.

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•Unexpected changes in the level of consumer spending or preferences.

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•Unseasonable weather or extreme temperatures that may affect shopping patterns and consumer demand for seasonal apparel and other merchandise.

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•Adverse or unseasonable weather may affect shopping patterns and consumer demand for seasonal apparel and other merchandise, and may result in temporary store closures and disruptions in deliveries of merchandise to our stores.

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•Our dependence on the market availability, quantity, and quality of attractive brand name merchandise at desirable discounts, and on the ability of our buyers to anticipate consumer preferences and to purchase merchandise to enable us to offer customers a wide assortment of merchandise at competitive prices.

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•Our dependence on the market availability, quantity, and quality of attractive brand name merchandise at desirable discounts, and on the ability of our buyers to source and purchase merchandise to enable us to offer customers a wide assortment of merchandise at competitive prices.

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

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

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

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•Our need to obtain acceptable new store sites with favorable consumer demographics in order to achieve growth.

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•Our need to continually attract, train, and retain associates with the retail talent necessary to execute our off-price retail strategies.

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•Our need to continually attract, train, and retain associates with the retail talent necessary to execute our off-price retail strategies, as well as labor shortages, increased turnover, or increased labor costs.

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•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.

Current wording

•Information or data security breaches, including cyberattacks on our transaction processing and computer information systems, including malware intrusion, data exfiltration, identity theft, and other types of cybersecurity threats, could disrupt our operations, result in theft or unauthorized disclosure of our confidential and valuable business information or credit card and other customer information, and could disrupt our operations, damage our reputation, increase our costs, and create significant legal exposure.

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•Disruptions in our supply chain or in our information systems, including from ransomware or other cyber-attacks could impact our ability to process sales and to deliver product to our stores in a timely and cost-effective manner.

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•Disruptions in our supply chain or in our information systems could impact our ability to process sales and to deliver product to our stores in a timely and cost-effective manner.

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•Risks associated with importing and selling merchandise produced in China and other countries, including risks from supply chain disruption, shipping delays, and higher than expected ocean freight costs.

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•Risks associated with importing and selling merchandise produced in other countries.

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•Damage to our corporate reputation or brands could adversely affect our sales and operating results.

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•Damage to our corporate reputation or brands.

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•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 could harm our business.

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•A natural or man-made disaster in a region where we have a concentration of stores, offices, or a distribution center.

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•An adverse outcome in various legal, regulatory, or tax matters, or the adoption of new federal or state tax legislation that increases tax rates or adds new taxes could increase our costs.

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•An adverse outcome in various legal, regulatory, or tax matters, could damage our reputation or brand and increase our costs.