Ross Stores Inc.

12/11/2024 | Press release | Distributed by Public on 12/11/2024 05:01

Quarterly Report for Quarter Ending November 02, 2024 (Form 10-Q)

rost-20241102
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark one)
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended November 02, 2024
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission file number: 0-14678
Ross Stores, Inc.
(Exact name of registrant as specified in its charter)
Delaware 94-1390387
(State or other jurisdiction of incorporation or (I.R.S. Employer Identification No.)
organization)
5130 Hacienda Drive, Dublin,
California
94568-7579
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (925) 965-4400
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Trading symbol Name of each exchange on which registered
Common Stock, par value $.01 ROST Nasdaq Global Select Market
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes ý No o
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Yes ý No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer ý Accelerated filer oNon-accelerated filer o Smaller reporting company ☐
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes ☐No ☒
The number of shares of Common Stock, with $.01 par value, outstanding on November 15, 2024 was 329,929,197.
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Ross Stores, Inc.
Form 10-Q
Table of Contents
Page
PART I. FINANCIAL INFORMATION
Item 1.
Financial Statements (unaudited)
Condensed Consolidated Statements of Earnings
3
Condensed Consolidated Statements of Comprehensive Income
4
Condensed Consolidated Balance Sheets
5
Condensed Consolidated Statements of Stockholders' Equity
6
Condensed Consolidated Statements of Cash Flows
8
Notes to Condensed Consolidated Financial Statements
9
Report of Independent Registered Public Accounting Firm
16
Item 2.
Management's Discussion and Analysis of Financial Condition and Results of Operations
17
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
24
Item 4.
Controls and Procedures
24
PART II. OTHER INFORMATION
Item 1.
Legal Proceedings
25
Item 1A.
Risk Factors
25
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
25
Item 5.
Other Information
25
Item 6.
Exhibits
26
Signatures
27
2
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Condensed Consolidated Statements of Earnings
Three Months Ended Nine Months Ended
($000, except stores and per share data, unaudited) November 2, 2024 October 28, 2023 November 2, 2024 October 28, 2023
Sales $ 5,071,354 $ 4,924,849 $ 15,216,940 $ 14,354,440
Costs and Expenses
Cost of goods sold 3,634,283 3,564,268 10,916,884 10,426,241
Selling, general and administrative 832,855 810,470 2,445,494 2,364,590
Interest income, net (42,527) (43,319) (131,827) (111,930)
Total costs and expenses 4,424,611 4,331,419 13,230,551 12,678,901
Earnings before taxes 646,743 593,430 1,986,389 1,675,539
Provision for taxes on earnings 157,935 146,103 482,443 410,702
Net earnings $ 488,808 $ 447,327 $ 1,503,946 $ 1,264,837
Earnings per share
Basic $ 1.49 $ 1.34 $ 4.56 $ 3.76
Diluted $ 1.48 $ 1.33 $ 4.53 $ 3.74
Weighted-average shares outstanding (000)
Basic 327,710 334,282 329,453 336,187
Diluted 329,937 336,261 331,728 338,107
The accompanying notes are an integral part of these condensed consolidated financial statements.
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Condensed Consolidated Statements of Comprehensive Income
Three Months Ended Nine Months Ended
($000, unaudited) November 2, 2024 October 28, 2023 November 2, 2024 October 28, 2023
Net earnings $ 488,808 $ 447,327 $ 1,503,946 $ 1,264,837
Other comprehensive income - - - -
Comprehensive income
$ 488,808 $ 447,327 $ 1,503,946 $ 1,264,837
The accompanying notes are an integral part of these condensed consolidated financial statements.
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Condensed Consolidated Balance Sheets
($000, except share data, unaudited) November 2, 2024 February 3, 2024 October 28, 2023
Assets
Current Assets
Cash and cash equivalents $ 4,349,262 $ 4,872,446 $ 4,499,497
Accounts receivable 176,218 130,766 171,915
Merchandise inventory 2,859,106 2,192,220 2,613,808
Prepaid expenses and other 241,703 202,706 206,725
Total current assets 7,626,289 7,398,138 7,491,945
Property and Equipment
Land and buildings 1,487,579 1,486,557 1,491,023
Fixtures and equipment 4,428,436 4,220,221 4,109,947
Leasehold improvements 1,637,771 1,577,102 1,503,769
Construction-in-progress 749,911 628,730 569,995
8,303,697 7,912,610 7,674,734
Less accumulated depreciation and amortization 4,646,018 4,380,709 4,277,215
Property and equipment, net 3,657,679 3,531,901 3,397,519
Operating lease assets 3,349,427 3,126,841 3,160,017
Other long-term assets 271,791 243,229 221,139
Total assets $ 14,905,186 $ 14,300,109 $ 14,270,620
Liabilities and Stockholders' Equity
Current Liabilities
Accounts payable $ 2,346,479 $ 1,955,850 $ 2,280,278
Accrued expenses and other 637,332 671,867 665,279
Current operating lease liabilities 699,200 683,625 680,088
Accrued payroll and benefits 459,094 548,371 509,484
Income taxes payable 2,186 76,370 20,960
Current portion of long-term debt 699,407 249,713 249,598
Total current liabilities 4,843,698 4,185,796 4,405,687
Long-term debt 1,514,452 2,211,017 2,210,073
Non-current operating lease liabilities 2,821,417 2,603,349 2,640,068
Other long-term liabilities 265,673 232,383 218,970
Deferred income taxes 196,583 196,238 212,866
Commitments and contingencies
Stockholders' Equity
Common stock, par value $.01 per share
Authorized 1,000,000,000 shares
Issued and outstanding 330,258,000, 335,172,000
and 336,952,000 shares, respectively
3,303 3,352 3,370
Additional paid-in capital 2,060,801 1,952,625 1,920,908
Treasury stock (719,410) (633,318) (633,318)
Retained earnings 3,918,669 3,548,667 3,291,996
Total stockholders' equity 5,263,363 4,871,326 4,582,956
Total liabilities and stockholders' equity $ 14,905,186 $ 14,300,109 $ 14,270,620
The accompanying notes are an integral part of these condensed consolidated financial statements.
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Condensed Consolidated Statements of Stockholders' Equity
Nine Months Ended November 2, 2024
Common stock Additional
paid-in
capital 		Treasury
stock 		Retained
earnings
($ and shares in 000, except per share data, unaudited) Shares Amount Total
Balance at February 3, 2024 335,172 $ 3,352 $ 1,952,625 $ (633,318) $ 3,548,667 $ 4,871,326
Net earnings - - - - 487,990 487,990
Common stock issued under stock plans, net of shares used for tax withholding 642 6 6,218 (70,480) - (64,256)
Stock-based compensation - - 40,447 - - 40,447
Common stock repurchased, inclusive of excise tax (1,892) (19) (9,368) - (254,870) (264,257)
Dividends declared ($0.3675 per share)
- - - - (123,298) (123,298)
Balance at May 4, 2024 333,922 $ 3,339 $ 1,989,922 $ (703,798) $ 3,658,489 $ 4,947,952
Net earnings - - - - 527,148 527,148
Common stock issued under stock plans, net of shares used for tax withholding (7) - 6,194 (1,248) - 4,946
Stock-based compensation - - 38,021 - - 38,021
Common stock repurchased, inclusive of excise tax (1,840) (18) (9,315) - (255,749) (265,082)
Dividends declared ($0.3675 per share)
- - - - (122,453) (122,453)
Balance at August 3, 2024 332,075 $ 3,321 $ 2,024,822 $ (705,046) $ 3,807,435 $ 5,130,532
Net earnings - - - - 488,808 488,808
Common stock issued under stock plans, net of shares used for tax withholding (29) - 6,351 (14,364) - (8,013)
Stock-based compensation - - 38,744 - - 38,744
Common stock repurchased, inclusive of excise tax (1,788) (18) (9,116) - (255,833) (264,967)
Dividends declared ($0.3675 per share)
- - - - (121,741) (121,741)
Balance at November 2, 2024 330,258 $ 3,303 $ 2,060,801 $ (719,410) $ 3,918,669 $ 5,263,363
The accompanying notes are an integral part of these condensed consolidated financial statements.
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Nine Months Ended October 28, 2023
Additional
paid-in
capital
Common stock Treasury
stock 		Retained
earnings
($ and shares in 000, except per share data, unaudited) Shares Amount Total
Balance at January 28, 2023 342,753 $ 3,428 $ 1,820,249 $ (584,750) $ 3,049,656 $ 4,288,583
Net earnings - - - - 371,191 371,191
Common stock issued under stock plans, net of shares used for tax withholding 461 4 6,145 (37,522) - (31,373)
Stock-based compensation - - 33,063 - - 33,063
Common stock repurchased, inclusive of excise tax (2,169) (22) (9,729) - (226,523) (236,274)
Dividends declared ($0.3350 per share)
- - - - (114,794) (114,794)
Balance at April 29, 2023 341,045 $ 3,410 $ 1,849,728 $ (622,272) $ 3,079,530 $ 4,310,396
Net earnings - - - - 446,319 446,319
Common stock issued under stock plans, net of shares used for tax withholding 89 1 6,208 (913) - 5,296
Stock-based compensation - - 39,429 - - 39,429
Common stock repurchased, inclusive of excise tax (2,152) (21) (9,959) - (222,713) (232,693)
Dividends declared ($0.3350 per share)
- - - - (114,005) (114,005)
Balance at July 29, 2023 338,982 $ 3,390 $ 1,885,406 $ (623,185) $ 3,189,131 $ 4,454,742
Net earnings - - - - 447,327 447,327
Common stock issued under stock plans, net of shares used for tax withholding 34 1 6,231 (10,133) - (3,901)
Stock-based compensation - - 38,877 - - 38,877
Common stock repurchased, inclusive of excise tax (2,064) (21) (9,606) - (231,129) (240,756)
Dividends declared ($0.3350 per share)
- - - - (113,333) (113,333)
Balance at October 28, 2023 336,952 $ 3,370 $ 1,920,908 $ (633,318) $ 3,291,996 $ 4,582,956
The accompanying notes are an integral part of these condensed consolidated financial statements.
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Condensed Consolidated Statements of Cash Flows
Nine Months Ended
($000, unaudited) November 2, 2024 October 28, 2023
Cash Flows From Operating Activities
Net earnings $ 1,503,946 $ 1,264,837
Adjustments to reconcile net earnings to net cash provided
by operating activities:
Depreciation and amortization 329,584 300,366
Stock-based compensation 117,212 111,369
Deferred income taxes 345 (4,193)
Change in assets and liabilities:
Merchandise inventory (666,886) (590,313)
Other current assets (62,793) (48,803)
Accounts payable 390,398 259,105
Other current liabilities (83,300) 284,989
Income taxes (64,016) (25,524)
Operating lease assets and liabilities, net 11,057 8,336
Other long-term, net (1,116) 5,566
Net cash provided by operating activities 1,474,431 1,565,735
Cash Flows From Investing Activities
Additions to property and equipment (514,122) (540,458)
Net cash used in investing activities (514,122) (540,458)
Cash Flows From Financing Activities
Issuance of common stock related to stock plans 18,769 18,590
Treasury stock purchased (86,092) (48,568)
Repurchase of common stock (787,479) (703,400)
Excise tax paid on repurchase of common stock (8,798) -
Dividends paid (367,492) (342,132)
Payment of long-term debt (250,000) -
Net cash used in financing activities (1,481,092) (1,075,510)
Net decrease in cash, cash equivalents, and restricted cash and cash equivalents (520,783) (50,233)
Cash, cash equivalents, and restricted cash and cash equivalents:
Beginning of period 4,935,441 4,612,241
End of period $ 4,414,658 $ 4,562,008
Supplemental Cash Flow Disclosures
Interest paid $ 80,316 $ 80,316
Income taxes paid, net $ 546,113 $ 440,419
The accompanying notes are an integral part of these condensed consolidated financial statements.
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Notes to Condensed Consolidated Financial Statements
Three and Nine Months Ended November 2, 2024 and October 28, 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 November 2, 2024 and October 28, 2023, and the results of operations, comprehensive income, and stockholders' equity for the three and nine month periods ended November 2, 2024 and October 28, 2023, and the cash flows for the nine month periods ended November 2, 2024 and October 28, 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 nine month periods ended November 2, 2024 and October 28, 2023, and the cash flows for the nine month periods ended November 2, 2024 and October 28, 2023 presented herein are not necessarily indicative of the results to be expected for the full fiscal year. The fiscal year ending February 1, 2025is 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 nine month periods ended November 2, 2024 and October 28, 2023:
Three Months Ended Nine Months Ended
November 2, 2024 October 28, 2023 November 2, 2024 October 28, 2023
Home Accents and Bed and Bath 25 % 25 % 25 % 25 %
Ladies 23 % 23 % 23 % 24 %
Men's 16 % 16 % 16 % 15 %
Accessories, Lingerie, Fine Jewelry, and Cosmetics 14 % 14 % 14 % 14 %
Shoes 13 % 13 % 13 % 13 %
Children's 9 % 9 % 9 % 9 %
Total 100 % 100 % 100 % 100 %
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.
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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 November 2, 2024, February 3, 2024, and October 28, 2023, the Company had $2.2 million, $2.2 million, and $2.6 million, respectively, in standby letters of credit outstanding. As of November 2, 2024, February 3, 2024, and October 28, 2023, the Company had $63.2 million, $60.8 million, and $59.9 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:
($000) November 2, 2024 February 3, 2024 October 28, 2023
Cash and cash equivalents $ 4,349,262 $ 4,872,446 $ 4,499,497
Restricted cash and cash equivalents included in:
Prepaid expenses and other 15,041 14,489 13,127
Other long-term assets 50,355 48,506 49,384
Total restricted cash and cash equivalents 65,396 62,995 62,511
Total cash, cash equivalents, and restricted cash and cash equivalents $ 4,414,658 $ 4,935,441 $ 4,562,008
Property and equipment. As of November 2, 2024 and October 28, 2023, the Company had $39.5 million and $47.0 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.
As of November 2, 2024, the Company had $21.1 million in Prepaid expenses and other related to a building that was reclassified as held for sale.
Operating leases.Operating lease assets obtained in exchange for operating lease liabilities (includes new leases and remeasurements or modifications of existing leases)were as follows:
Three Months Ended Nine Months Ended
($000) November 2, 2024 October 28, 2023 November 2, 2024 October 28, 2023
Operating lease assets obtained in exchange for operating lease liabilities
$ 284,516 $ 159,616 $ 725,122 $ 550,467
Cash dividends. On November 20, 2024, the Company's Board of Directors declared a quarterly cash dividend of $0.3675 per common share, payable on December 31, 2024. The Company's Board of Directors declared a cash dividend of $0.3675 per common share in March, May, and August 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 new two-yearprogram to repurchase up to $2.1 billion of the Company's common stock through January 31, 2026. During the nine month period ended November 2, 2024, the Company repurchased 5.5 million shares of common stock for $787.5 million (excluding excise tax) under this program. During the nine month period ended October 28, 2023, the Company repurchased 6.4 million shares of common stock for $703.4 million (excluding excise tax) under the previous, publicly announced stock 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 November 2, 2024.
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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 $148.8 million, $146.9 million, and $141.0 million at November 2, 2024, February 3, 2024, and October 28, 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 the three and nine month periodsended November 2, 2024, and is not expected to have a material impact on the Company's fiscal 2024 consolidated financial statements.
Recently issued accounting standards. In November 2024, the FASB issued ASU 2024-03,Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40):Disaggregation of Income Statement Expenses. The ASU is intended to enhance transparency of income statement disclosures primarily through additional disaggregation of relevant expense captions. The standard is effective for annual reporting periods beginning after December 15, 2026, and interim periods beginning after December 15, 2027, with prospective or retrospective application permitted. The Company is currently evaluating the impact of this guidance on its disclosures in the consolidated financial statements.
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.
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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:
($000) November 2, 2024 February 3, 2024 October 28, 2023
Cash and cash equivalents (Level 1)
$ 4,349,262 $ 4,872,446 $ 4,499,497
Restricted cash and cash equivalents (Level 1)
$ 65,396 $ 62,995 $ 62,511
The underlying assets in the Company's nonqualified deferred compensation program as of November 2, 2024, February 3, 2024, and October 28, 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:
($000) November 2, 2024 February 3, 2024 October 28, 2023
Nonqualified deferred compensation program (Level 1) $ 189,522 $ 165,582 $ 145,003
Note C: Stock-Based Compensation
For the three and nine month periods ended November 2, 2024 and October 28, 2023, the Company recognized stock-based compensation expense as follows:
Three Months Ended Nine Months Ended
($000) November 2, 2024 October 28, 2023 November 2, 2024 October 28, 2023
Restricted stock $ 22,781 $ 23,546 $ 67,691 $ 69,094
Performance awards 14,842 14,232 46,208 38,994
Employee stock purchase plan 1,121 1,099 3,313 3,281
Total $ 38,744 $ 38,877 $ 117,212 $ 111,369
Total stock-based compensation expense recognized in the Company's Condensed Consolidated Statements of Earnings for the three and nine month periods ended November 2, 2024 and October 28, 2023 is as follows:
Three Months Ended Nine Months Ended
Statements of Earnings Classification ($000) November 2, 2024 October 28, 2023 November 2, 2024 October 28, 2023
Cost of goods sold $ 19,125 $ 20,254 $ 55,816 $ 58,885
Selling, general and administrative 19,619 18,623 61,396 52,484
Total $ 38,744 $ 38,877 $ 117,212 $ 111,369
The tax benefits related to stock-based compensation expense for the three and nine month periods ended November 2, 2024 were $7.2 million and $22.2 million, respectively. The tax benefits related to stock-based compensation expense for the three and nine month periods ended October 28, 2023 were $7.9 million and $23.2 million, respectively.
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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 threeto five 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 November 2, 2024, shares related to unvested restricted stock, restricted stock units, and performance share awards totaled 3.7 million shares. A summary of restricted stock, restricted stock units, and performance share award activity for the nine month period ended November 2, 2024, is presented below:
Number of
shares (000) 		Weighted-average
grant date
fair value
Unvested at February 3, 2024 4,395 $ 104.52
Awarded 769 146.57
Released (1,307) 104.80
Forfeited (139) 108.50
Unvested at November 2, 2024 3,718 $ 112.97
The unamortized compensation expense at November 2, 2024 was $200.7 million which is expected to be recognized over a weighted-average remaining period of 1.8 years. The unamortized compensation expense at October 28, 2023 was $199.0 million which was expected to be recognized over a weighted-average remaining period of 2.0 years.
Shares repurchased for tax withholding are considered treasury shares which are available for reissuance. During the three and nine month periods ended November 2, 2024, shares purchased by the Company for tax withholding totaled 92,847 and 586,644, respectively. During the three and nine month periods ended October 28, 2023, shares purchased by the Company for tax withholding totaled 85,761 and 461,889, 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 nine month periods ended November 2, 2024, approximately 5,000 and 4,000 weighted-average shares were excluded from the calculation of diluted EPS, respectively. For the three and nine month periods ended October 28, 2023, approximately 14,000 and 17,000 weighted-average shares were excluded from the calculation of diluted EPS, respectively.
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The following is a reconciliation of the number of shares (denominator) used in the basic and diluted EPS computations:
Three Months Ended Nine Months Ended
Shares in (000s) Basic EPS Effect of
dilutive
common stock
equivalents 		Diluted
EPS 		Basic EPS Effect of
dilutive
common
stock
equivalents 		Diluted
EPS
November 2, 2024
Shares 327,710 2,227 329,937 329,453 2,275 331,728
Amount $ 1.49 $ (0.01) $ 1.48 $ 4.56 $ (0.03) $ 4.53
October 28, 2023
Shares
334,282 1,979 336,261 336,187 1,920 338,107
Amount
$ 1.34 $ (0.01) $ 1.33 $ 3.76 $ (0.02) $ 3.74
Note E: Debt
Senior Notes.Unsecured senior debt (the "Senior Notes"), net of unamortized discounts and debt issuance costs, consisted of the following:
($000) November 2, 2024 February 3, 2024 October 28, 2023
3.375% Senior Notes due 2024
$ - $ 249,713 $ 249,598
4.600% Senior Notes due 2025
699,407 698,441 698,120
0.875% Senior Notes due 2026
498,194 497,268 496,960
4.700% Senior Notes due 2027
240,666 240,335 240,225
4.800% Senior Notes due 2030
132,909 132,776 132,732
1.875% Senior Notes due 2031
496,247 495,820 495,678
5.450% Senior Notes due 2050
146,436 146,377 146,358
Total long-term debt1
$ 2,213,859 $ 2,460,730 $ 2,459,671
Less: current portion $ 699,407 $ 249,713 $ 249,598
Total due beyond one year $ 1,514,452 $ 2,211,017 $ 2,210,073
1 Net of unamortized discounts and debt issuance costs of $11.1 million, $14.3 million, and $15.3 million as of November 2, 2024, February 3, 2024, and October 28, 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.
In September 2024, the Company repaid at maturity the $250 millionprincipal amount of the 3.375% Senior Notes.
The aggregate fair value of the remaining six outstanding series of Senior Notes was approximately $2.1 billion as of November 2, 2024. The aggregate fair value of the seven then outstanding series of Senior Notes was approximately $2.3 billion and $2.2 billion as of February 3, 2024 and October 28, 2023, respectively. 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.
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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 to two additional one-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 November 2, 2024, the Company was in compliance with the financial covenant, had no borrowings or standby letters of credit outstanding under the Credit Facility, and the $1.3 billionCredit Facility remained in place and available.
The table below shows the components of interest income for the three and nine month periods ended November 2, 2024 and October 28, 2023:
Three Months Ended Nine Months Ended
($000) November 2, 2024 October 28, 2023 November 2, 2024 October 28, 2023
Interest expense on long-term debt $ 20,025 $ 21,159 $ 62,342 $ 63,458
Other interest expense 417 424 1,142 1,169
Capitalized interest (5,047) (3,342) (13,889) (8,268)
Interest income (57,922) (61,560) (181,422) (168,289)
Interest income, net $ (42,527) $ (43,319) $ (131,827) $ (111,930)
Note F: Taxes on Earnings
The Company's effective tax rate for the three and nine month periods ended November 2, 2024 was approximately 24%, and was approximately 25% for the three and nine month periods ended October 28, 2023. 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 November 2, 2024, February 3, 2024, and October 28, 2023, the reserves for unrecognized tax benefits were $67.1 million, $58.6 million, and $65.3 million, inclusive of $9.0 million, $6.2 million, and $8.4 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, $53.1 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 $8.5 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 2021 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.
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Report of Independent Registered Public Accounting Firm
To the Board of Directors and Stockholders of Ross Stores, Inc.:
Results of Review of Interim Financial Information
We have reviewed the accompanying condensed consolidated balance sheets of Ross Stores, Inc. and subsidiaries (the "Company") as of November 2, 2024 and October 28, 2023, the related condensed consolidated statements of earnings, comprehensive income, and stockholders' equity, for the three and nine month periods ended November 2, 2024 and October 28, 2023, and cash flows for the nine month periods ended November 2, 2024 and October 28, 2023 and the related notes (collectively referred to as the "interim financial information"). Based on our reviews, we are not aware of any material modifications that should be made to the accompanying interim financial information for it to be in conformity with accounting principles generally accepted in the United States of America.
We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheet of the Company as of February 3, 2024, and the related consolidated statements of earnings, comprehensive income, stockholders' equity, and cash flows for the year then ended (not presented herein); and in our report dated April 1, 2024, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of February 3, 2024, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.
Basis for Review Results
This interim financial information is the responsibility of the Company's management. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our reviews in accordance with standards of the PCAOB. A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the PCAOB, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.
/s/Deloitte & Touche LLP
San Francisco, California
December 10, 2024
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
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 2023. 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 2023. All information is based on our fiscal calendar.
Overview
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 1,836 locations in 43 states, the District of Columbia, and Guam, as of November 2, 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 356 dd's DISCOUNTS stores in 22 states as of November 2, 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.
Our low-to-moderate income customers continue to face persistently high costs on necessities, pressuring their discretionary spending. However, we believe there are opportunities to grow our market share through the execution of our merchandising initiatives and remain confident that our ongoing focus and commitment to deliver the most compelling values possible will best position our Company for profitable growth.
On October 28, 2024, we announced the appointment of James G. Conroy as our next Chief Executive Officer ("CEO"). Following a two-month transition period, Mr. Conroy will assume the CEO role at the beginning of the next fiscal year on February 2, 2025, at which time our current CEO, Barbara Rentler, will transition into an advisory role through March 2027.
Results of Operations
The following table summarizes our financial results for the three and nine month periods ended November 2, 2024 and October 28, 2023:
Three Months Ended Nine Months Ended
November 2, 2024 October 28, 2023 November 2, 2024 October 28, 2023
Sales
Sales (millions) $ 5,071 $ 4,925 $ 15,217 $ 14,354
Sales growth 3.0 % 7.9 % 6.0 % 6.5 %
Comparable store sales growth1
1 % 5 % 3 % 4 %
Costs and expenses (as a percent of sales)
Cost of goods sold 71.7 % 72.4 % 71.7 % 72.6 %
Selling, general and administrative 16.4 % 16.5 % 16.1 % 16.5 %
Interest income, net (0.8 %) (0.9 %) (0.9 %) (0.8 %)
Earnings before taxes (as a percent of sales) 12.7 % 12.0 % 13.1 % 11.7 %
Net earnings (as a percent of sales) 9.6 % 9.1 % 9.9 % 8.8 %
1 Comparable stores are stores open for more than 14 complete months.
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Stores. 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 opened 47 new stores in the third quarter of fiscal 2024. For the nine month period ended November 2, 2024, we opened 89new locations.
The following table summarizes the stores opened and closed during the three and nine month periods ended November 2, 2024 and October 28, 2023:
Three Months Ended Nine Months Ended
Store Count November 2, 2024 October 28, 2023 November 2, 2024 October 28, 2023
Ross Dress for Less
Beginning of the period 1,795 1,722 1,764 1,693
Opened in the period 43 43 75 72
1
Closed in the period (2) - (3) -
Total Ross Dress for Less stores end of period
1,836 1,765 1,836 1,765
dd's DISCOUNTS
Beginning of the period 353 339 345 322
Opened in the period 4 8 14 25
Closed in the period (1) - (3) -
Total dd's DISCOUNTS stores end of period
356 347 356 347
Total stores end of period 2,192 2,112 2,192 2,112
1 Includes the reopening of a store previously temporarily closed due to a weather event.
Sales.Sales for the three month period ended November 2, 2024 increased $146.5 million, or 3.0%, compared to the three month period ended October 28, 2023, primarily due to the opening of 80 net new stores between October 28, 2023 and November 2, 2024 and a 1% comparable store sales increase.
Sales for the nine month period ended November 2, 2024 increased $862.5 million, or 6.0%, compared to the nine month period ended October 28, 2023, primarily due to the opening of 80 net new stores between October 28, 2023 and November 2, 2024 and a 3% comparable store sales increase.
Our sales mix for the three and nine month periods ended November 2, 2024 and October 28, 2023 is shown below:
Three Months Ended Nine Months Ended
November 2, 2024 October 28, 2023 November 2, 2024 October 28, 2023
Home Accents and Bed and Bath 25 % 25 % 25 % 25 %
Ladies 23 % 23 % 23 % 24 %
Men's 16 % 16 % 16 % 15 %
Accessories, Lingerie, Fine Jewelry, and Cosmetics 14 % 14 % 14 % 14 %
Shoes 13 % 13 % 13 % 13 %
Children's 9 % 9 % 9 % 9 %
Total 100 % 100 % 100 % 100 %
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Cost of goods sold.Cost of goods sold for the three and nine month periods ended November 2, 2024 increased $70.0 million and $490.6 million, respectively, compared to the three and nine month periods ended October 28, 2023, primarily due to higher sales from the opening of 80 net new stores between October 28, 2023 and November 2, 2024, and the respective 1% and 3% comparable store sales increases, partially offset by lower buying costs primarily due to lower incentive compensation expense, lower distribution costs, and lower domestic freight costs.
Cost of goods sold as a percentage of sales for the three month period ended November 2, 2024 decreased approximately 70 basis points compared to the three month period ended October 28, 2023, primarily due to a 65 basis point decrease in buying costs mainly due to lower incentive compensation expense, a 50 basis point decrease in distribution costs, and a 40 basis point decrease in domestic freight costs. Partially offsetting these items was a 60 basis point decrease in merchandise margin primarily due to our continued efforts to offer more sharply priced branded bargains and a 25 basis point increase in occupancy costs.
Cost of goods sold as a percentage of sales for the nine month period ended November 2, 2024 decreased approximately 90 basis points compared to the nine month period ended October 28, 2023, primarily due to a 65 basis point decrease in distribution costs, a 60 basis point decrease in buying costs mainly due to lower incentive compensation expense, and a 30 basis point decrease in domestic freight costs. Partially offsetting these items was a 55 basis point decrease in merchandise margin primarily due to our continued efforts to offer more sharply priced branded bargains and a 10 basis point increase in occupancy costs.
In fiscal 2024, we expect lower distribution costs, domestic freight costs, and incentive compensation expense as a percentage of sales, partially offset by lower merchandise margins as we continue to build on our efforts to offer more sharply priced branded bargains throughout our stores.
Selling, general and administrative expenses.For the three and nine month periods ended November 2, 2024, selling, general and administrative expenses ("SG&A") increased $22.4 million and $80.9 million, respectively, compared to the three and nine month periods ended October 28, 2023, primarily due to the opening of 80 net new stores between October 28, 2023 and November 2, 2024, partially offset by lower incentive compensation expense.
SG&A as a percentage of sales for the three month period ended November 2, 2024 decreased 5 basis points compared to the three month period ended October 28, 2023, primarily due to lower incentive compensation expense.
SG&A as a percentage of sales for the nine month period ended November 2, 2024 decreased 40 basis points compared to the nine month period ended October 28, 2023, primarily due to higher sales and lower incentive compensation expense.
We expect lower incentive compensation expense as a percentage of sales to continue through fiscal 2024.
Interest income, net.For the three month period ended November 2, 2024, interest income, net decreased $0.8 million compared to the three month period ended October 28, 2023, primarily due to decreased interest income from lower interest rates and lower average cash balances largely due to the repayment of the $250 millionprincipal amount of the 3.375% Senior Notes in September 2024.
For the nine month period ended November 2, 2024, interest income, net increased $19.9 million compared to the nine month period ended October 28, 2023, primarily due to increased interest income from higher interest rates and higher average cash balances.
The table below shows the components of interest income, net for the three and nine month periods ended November 2, 2024 and October 28, 2023:
Three Months Ended Nine Months Ended
($000) November 2, 2024 October 28, 2023 November 2, 2024 October 28, 2023
Interest expense on long-term debt $ 20,025 $ 21,159 $ 62,342 $ 63,458
Other interest expense 417 424 1,142 1,169
Capitalized interest (5,047) (3,342) (13,889) (8,268)
Interest income (57,922) (61,560) (181,422) (168,289)
Interest income, net $ (42,527) $ (43,319) $ (131,827) $ (111,930)
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Taxes on earnings. Our effective tax rate for the three and nine month periods ended November 2, 2024 was approximately 24%, compared to approximately 25% for the three and nine month periods ended October 28, 2023. 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.
Net earnings. Net earnings as a percentage of sales for the three month periods ended November 2, 2024 and October 28, 2023 were 9.6% and 9.1%, respectively. Net earnings as a percentage of sales for the three month period ended November 2, 2024 were higher primarily due to lower cost of goods sold and lower SG&A expenses, partially offset by lower interest income.
Net earnings as a percentage of sales for the nine month periods ended November 2, 2024 and October 28, 2023 were 9.9% and 8.8%, respectively. Net earnings as a percentage of sales for the nine month period ended November 2, 2024 were higher primarily due to lower cost of goods sold, lower SG&A expenses, and higher interest income.
Earnings per share.Diluted earnings per share for the three month period ended November 2, 2024 was $1.48, compared to $1.33 for the three month period ended October 28, 2023. Diluted earnings per share for the nine month period ended November 2, 2024 was $4.53, compared to $3.74 for the nine month period ended October 28, 2023.
The $0.15 increase in the diluted earnings per share for the three month period ended November 2, 2024 was primarily attributable to a 9% 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 $0.79 increase in the diluted earnings per share for the nine month period ended November 2, 2024 was primarily attributable to a 19% increase in net earnings and a 2% reduction in weighted-average diluted shares outstanding largely due to stock repurchases under our stock repurchase program.
Financial Condition
Liquidity and Capital Resources
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, pay dividends, and repay debt as it becomes due. InSeptember 2024, werepaid at maturity the $250 millionprincipal amount of the 3.375% Senior Notes. As of November 2, 2024, we had $700 million principal amount of 4.600% Senior Notes that will reach maturity in 2025.
Nine Months Ended
($000) November 2, 2024 October 28, 2023
Cash provided by operating activities $ 1,474,431 $ 1,565,735
Cash used in investing activities (514,122) (540,458)
Cash used in financing activities (1,481,092) (1,075,510)
Net decrease in cash, cash equivalents, and restricted cash and cash equivalents $ (520,783) $ (50,233)
Operating Activities
Net cash provided by operating activities was $1.5 billion for the nine month period ended November 2, 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 $1.6 billion for the nine month period ended October 28, 2023. This was primarily driven by net earnings excluding non-cash expenses for depreciation, amortization, and stock-based compensation.
The decrease in cash flow provided by operating activities for the nine month period ended November 2, 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.
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Accounts payable leverage was 82% and 87% as of November 2, 2024 and October 28, 2023, respectively. The decrease in accounts payable leverage was primarily due to the timing of inventory receipts and related payments versus last year.
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.
Changes in packaway inventory levels impact our operating cash flow. As of November 2, 2024, packaway inventory was 38% of total inventory, compared to 40% at the end of fiscal 2023.
Investing Activities
Net cash used in investing activities was $514.1 million and $540.5 million for the nine month periods ended November 2, 2024 and October 28, 2023, respectively, and was related to our capital expenditures. Our capital expenditures include costs to open new stores and improve existing stores, to build, expand, and improve distribution centers, and for various other expenditures related to our information technology systems and buying and corporate offices.
The decrease in cash used in investing activities for the nine month period ended November 2, 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.
Capital expenditures for fiscal 2024 are currently projected to be approximately $760 million. Our planned capital expenditures for fiscal 2024 are for 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.
Financing Activities
Net cash used in financing activities was $1.5 billion and $1.1 billion for the nine month periods ended November 2, 2024 and October 28, 2023, respectively, primarily resulting from stock repurchases under our stock repurchase program, dividend payments, and the repayment of the $250 millionprincipal amount of the 3.375% Senior Notes in September 2024.
Revolving credit facilities.We have a $1.3 billion senior unsecured revolving credit facility. As of November 2, 2024, we had no borrowings or standby letters of credit outstanding under theCredit Facility, our Credit Facility remained in place and available, and we were in compliance with its financial covenant. Refer to Note E: Debt in the Notes to Condensed Consolidated Financial Statements for additional information.
Senior notes.As of November 2, 2024, we had approximately $2.2 billion of outstanding unsecured Senior Notes, of which $699.4 million was classified within Current Liabilities on our Condensed Consolidated Balance Sheet for the period ended November 2, 2024. Refer to Note E: Debt in the Notes to Condensed Consolidated Financial Statements for additional information.
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 the nine month period ended November 2, 2024, we repurchased 5.5 million shares of common stock for $787.5 million (excluding excise tax) under this program. For the nine month period ended October 28, 2023, we repurchased 6.4 million shares of common stock for $703.4 million (excluding excise tax) under our previous, publicly announced repurchase program. During the nine month periods ended November 2, 2024 and October 28, 2023, we also acquired 0.6 million and 0.5 million shares of treasury stock, respectively, to cover employee tax withholding obligations under our employee equity compensation programs, for aggregate purchase prices of approximately $86.1 million and $48.6 million, respectively.
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On November 20, 2024, our Board of Directors declared a quarterly cash dividend of $0.3675 per common share, payable on December 31, 2024. The Board of Directors declared a cash dividend of $0.3675 per common share in March, May, and August 2024, and $0.3350 per common share in February, May, August, and November 2023.
For the nine month periods ended November 2, 2024 and October 28, 2023, we paid cash dividends of $367.5 million and $342.1 million, respectively.
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.
We ended the third quarter of fiscal 2024 with $4.3 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.
Contractual Obligations and Off-Balance Sheet Arrangements
As of November 2, 2024, there have been no material changes to our contractual obligations as disclosed in our Annual Report on Form 10-K as of February 3, 2024, other than those which occur in the ordinary course of business.
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 November 2, 2024, February 3, 2024, and October 28, 2023, we had $2.2 million, $2.2 million, and $2.6 million, respectively, in standby letters of credit outstanding. As of November 2, 2024, February 3, 2024, and October 28, 2023, we had $63.2 million, $60.8 million, and $59.9 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.
Critical Accounting Estimates
During the third 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.
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Forward-Looking Statements
This report contains a number of forward-looking statements regarding, without limitation, projected sales, costs and earnings, planned new store growth, capital expenditures, liquidity, and other matters. These forward-looking statements reflect our then-current beliefs, plans, and estimates with respect to future events and our projected financial performance, operations, and competitive position. The words "plan," "expect," "target," "anticipate," "estimate," "believe," "forecast," "projected," "guidance," "outlook," "looking ahead," and similar expressions identify forward-looking statements.
Future impact from inflation, interest rate changes, ongoing military conflicts and economic sanctions, tariffs, 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:
•Uncertainties arising from the macroeconomic environment, including inflation and the price of necessities, 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, consumer disposable income, and shopping behavior, as well as our costs.
•Unexpected changes in the level of consumer spending on, or preferences for, apparel and home-related merchandise, which could adversely affect us.
•Competitive pressures in the apparel and home-related merchandise retailing industry.
•Our need to effectively manage our inventories, markdowns, and inventory shortage in order to achieve our planned gross margins.
•Changes in U.S. tax, tariff, or trade policy regarding apparel and home-related merchandise produced in other countries, which could adversely affect our business.
•Risks associated with importing and selling merchandise produced in other countries, including risks from supply chain disruption, shipping delays, and higher than expected ocean freight costs.
•Unseasonable weather or extreme temperatures that may affect shopping patterns and consumer demand for seasonal apparel and other merchandise.
•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.
•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.
•Disruptions in our supply chain or in our information systems, including from ransomware or other cyber-attacks, that could impact our ability to process sales and to deliver product to our stores in a timely and cost-effective manner.
•Our need to obtain acceptable new store sites with favorable consumer demographics to achieve our planned store openings.
•Our need to expand in existing markets and enter new geographic markets in order to achieve planned growth and market penetration.
•Consumer problems or legal issues involving the quality, safety, or authenticity of products we sell, which could harm our reputation, result in lost sales, and/or increase our costs.
•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, that could increase our costs.
•Damage to our corporate reputation or brands that could adversely affect our sales and operating results.
•Our need to continually attract, train, and retain associates with the retail talent necessary to execute our off-price retail strategies.
•Our need to effectively advertise and market our business.
•Possible volatility in our revenues and earnings.
•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.
•Our need to maintain sufficient liquidity to support our continuing operations and our new store openings.
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The factors underlying our forecasts are dynamic and subject to change. As a result, any forecasts or forward-looking statements speak only as of the date they are given and do not necessarily reflect our outlook at any other point in time. We disclaim any obligation to update or revise these forward-looking statements.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are exposed to market risks, which primarily include changes in interest rates. We do not engage in financial transactions for trading or speculative purposes.
We may occasionally use forward contracts to hedge against fluctuations in foreign currency prices. We had no outstanding forward contracts as of November 2, 2024.
Interest that is payable on our Credit Facility is based on variable interest rates and is therefore affected by changes in market interest rates. As of November 2, 2024, we had no borrowings outstanding under the Credit Facility.
As of November 2, 2024, we had outstanding six series of unsecured Senior Notes. Interest that is payable on all series of our Senior Notes is based on fixed interest rates, and is therefore unaffected by changes in market interest rates.
We receive interest payments on our cash and cash equivalents and restricted cash and cash equivalents. Changes in interest rates may impact the interest income we recognize in the future.
A hypothetical 100 basis point increase or decrease in prevailing market interest rates would not have had a material negative impact on our financial position, results of operations, cash flows, or the fair values of our cash and cash equivalents and restricted cash and cash equivalents as of and for the three month or nine month periods ended November 2, 2024. We do not consider the potential losses in future earnings and cash flows from reasonably possible, near-term changes in interest rates to be material.
ITEM 4. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive Officer andChief Financial Officer, conducted an evaluation of the effectiveness of our "disclosure controls and procedures" (as defined in Exchange Act Rule 13a-15(e)) as of the end of the period covered by this report. Our disclosure controls and procedures are designed to provide reasonable assurance of achieving their objectives. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective at that reasonable assurance level as of the end of the period covered by this report.
It should be noted that any system of controls, however well designed and operated, can provide only reasonable, and not absolute, assurance that the objectives of the system will be met. In addition, the design of any control system is based in part upon certain assumptions about the likelihood of future events.
Quarterly Evaluation of Changes in Internal Control Over Financial Reporting
Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, also conducted an evaluation of our internal control over financial reporting to determine whether any change occurred during the third fiscal quarter of 2024 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. Based on that evaluation, our management concluded that there was no such change during the third fiscal quarter of 2024.
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PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The matters under the caption "Litigation, claims, and assessments" in Note A of Notes to Condensed Consolidated Financial Statements are incorporated herein by reference.
ITEM 1A. RISK FACTORS
See Part I, Item 1A of our Annual Report on Form 10-K for the fiscal year ended February 3, 2024 for a description of risks and uncertainties associated with our business.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Information regarding shares of common stock we repurchased during the third quarter of fiscal 2024 is as follows:
Total number of shares
(or units) purchased1
Average price
paid per share
(or unit) 		Total number of
shares
(or units)
purchased as
part of publicly
announced
plans or
programs
Maximum number
(or approximate
dollar value) of
shares (or units)
that may yet be
purchased under
the plans or
programs ($000)
Period
August
(8/4/2024 - 8/31/2024) 462,230 $144.38 462,230 $ 1,508,280
September
(9/1/2024-10/5/2024) 799,393 $151.55 706,546 $ 1,401,500
October
(10/6/2024- 11/2/2024) 619,346 $143.67 619,346 $ 1,312,520
Total 1,880,969 $147.19 1,788,122 $ 1,312,520
1 We acquired 92,847 shares of treasury stock during the quarter ended November 2, 2024. Treasury stock includes shares acquired from employees for tax withholding purposes related to vesting of restricted stock grants.
InMarch 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.
ITEM 5. OTHER INFORMATION
Insider Adoption of Trading Arrangements:
During the three months ended November 2, 2024, none of our directors or executive officers informed us of the adoption or termination of a "Rule 10b5-1 trading arrangement" or "non-Rule 10b5-1 trading arrangement," except as follows:
On September 30, 2024, Michael J. Hartshorn, Group President and Chief Operating Officer, and a member of our Board of Directors, adopted a trading plan intended to satisfy the affirmative defense of Rule 10b5-1(c) to sell up to 40,000 shares of common stock. Unless otherwise terminated pursuant to its terms, the plan will terminate on September 30, 2025, or when all shares under the plan are sold.
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ITEM 6. EXHIBITS
Exhibit
Number Exhibit
3.1
3.2
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Letter re: Unaudited Interim Financial Information from Deloitte & Touche LLP dated December 10, 2024.
31.1
Certification of Chief Executive Officer Pursuant to Sarbanes-Oxley Act Section 302(a).
31.2
Certification of Chief Financial Officer Pursuant to Sarbanes-Oxley Act Section 302(a).
32.1
Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350.
32.2
Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350.
101.INS XBRL Instance Document. (The instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.)
101.SCH Inline XBRL Taxonomy Extension Schema
101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase
101.DEF Inline XBRL Taxonomy Extension Definition Linkbase
101.LAB Inline XBRL Taxonomy Extension Label Linkbase
101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase
104 Cover Page Interactive Data File. (The cover page interactive data file does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.)
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned thereunto duly authorized.
ROSS STORES, INC.
(Registrant)
Date: December 10, 2024
By: 		/s/Jeffrey P. Burrill
Jeffrey P. Burrill
Senior Vice President, Chief Accounting Officer and Corporate Controller (Principal Accounting Officer)
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