Ross Stores, Inc. - 10-Q Filing Summary
Business Context and Reporting Period
This filing is a Quarterly Report on Form 10-Q for Ross Stores, Inc., covering the three and six-month periods ended August 1, 2009. Ross is the second-largest off-price apparel and home goods retailer in the United States, operating under the banners "Ross Dress for Less" and "dd's DISCOUNTS." As of the period end, the company operated 990 stores across 27 states and Guam.
Key Financial Metrics
| Metric | Three Months Ended Aug 1, 2009 | Six Months Ended Aug 1, 2009 |
|---|---|---|
| Sales | $1,768.6 million | $3,460.2 million |
| Net Earnings | $103.4 million | $194.8 million |
| Diluted EPS | $0.82 | $1.55 |
| Operating Cash Flow (6mo) | $414.0 million | |
| Cash and Equivalents | $520.4 million (as of Aug 1, 2009) | |
| Long-Term Debt | $150.0 million (Senior Notes) | |
| Working Capital | $468.1 million | |
| Comparable Store Sales Growth | 3% (3mo) | 3% (6mo) |
Material Changes vs. Prior Period
- Revenue Growth: Sales increased 7.8% for the quarter and 8.2% for the six-month period compared to the prior year, driven by the addition of 47 net new stores and a 3% increase in comparable store sales.
- Profitability: Net earnings rose 45% for the quarter and 29% for the six-month period. Diluted EPS increased 52% (quarterly) and 37% (six-month) due to higher net earnings and a 5% reduction in weighted average shares from stock repurchases.
- Margin Expansion: Cost of goods sold as a percentage of sales decreased by 240 basis points (quarterly) and 165 basis points (six-month), primarily due to improved merchandise gross margins and reduced freight costs.
- Liquidity: Cash and cash equivalents increased by $199.1 million over the six-month period, reaching $520.4 million, supported by strong operating cash flows.
Guidance, Outlook, and Risks
- Capital Expenditures: The company forecasts approximately $180 million in capital requirements for fiscal year 2009 to fund new store openings, relocations, and system upgrades, expecting to fund these via operating cash flows.
- Dividends: The Board declared a quarterly cash dividend of $0.11 per share, payable September 30, 2009.
- Stock Repurchases: The company continues its $600 million stock repurchase program, having repurchased approximately $154.4 million of stock in the first six months of fiscal 2009.
- Risks: Key risks include economic recession impacts on consumer spending, competitive pressures, supply chain disruptions, and the availability of attractive brand-name merchandise. The company notes that future results may differ materially from forward-looking statements.
- Legal Proceedings: The company is involved in class action lawsuits regarding wage and hour claims, though management does not expect a material adverse effect on financial condition.
Investor Verification Checklist
- Verify the sustainability of the 3% comparable store sales growth in a challenging economic environment.
- Monitor the company's ability to maintain gross margin improvements as freight and occupancy costs fluctuate.
- Review the status of the $600 million revolving credit facility and compliance with debt covenants.
- Assess the impact of ongoing wage and hour litigation on future operating expenses.
- Confirm the execution of the $180 million capital expenditure plan and its effect on future store count growth.