Market Overview

Ross Stores Reports Second Quarter Earnings, Provides Second Half 2018 Guidance and Increases Long-Term Store Growth Potential

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Ross Stores, Inc. (NASDAQ:ROST) today reported earnings per share for
the second quarter ended August 4, 2018 of $1.04, up from $.82 last
year. Net earnings grew to $389 million, compared to $317 million in the
prior year. Sales rose 9% to $3.7 billion, with comparable store sales
up 5% over the 13 weeks ended August 5, 2017. This is on top of a 4%
increase in same store sales for the 13 weeks ended July 29, 2017.

For the six months ended August 4, 2018, earnings per share were $2.15,
up from $1.64 last year. Net earnings were $808 million versus $638
million in the first half of 2017. Sales for the first six months of
2018 rose 9% to $7.3 billion, with comparable store sales up 4% over the
26 weeks ended August 5, 2017. This compares to a same store sales gain
of 4% for the 26 weeks ended July 29, 2017. Both the second quarter and
year-to-date earnings results include the benefit of tax reform
legislation.

Barbara Rentler, Chief Executive Officer, commented, "We are pleased
with the above-plan growth we delivered in both sales and earnings in
the second quarter. Though better than expected, operating margin of
13.8% was down from last year as higher merchandise margin and leverage
on occupancy and buying costs were more than offset by a combination of
unfavorable timing of packaway-related expenses, higher freight costs,
and this year's wage investments."

Ms. Rentler continued, "During the second quarter and first six months
of fiscal 2018, we repurchased 3.2 million and 6.5 million shares of
common stock, respectively, for an aggregate price of $273 million in
the quarter and $529 million year-to-date. As planned, we expect to buy
back a total of $1.075 billion in common stock during fiscal 2018."

Looking ahead to the second half, Ms. Rentler said, "While we hope to do
better, given our robust multi-year comparisons, we continue to forecast
same store sales to grow 1% to 2% for both third and fourth quarters. If
sales perform in line with this guidance, earnings per share for the
third quarter ending November 3, 2018 are forecasted to be $.84 to $.88,
up from $.72 a year ago. For the 13 weeks ending February 2, 2019,
earnings per share are projected to be $1.02 to $1.07 versus $1.19 for
the 14 weeks ended February 3, 2018. Last year's fourth quarter included
a per share benefit of $.14 from a one-time revaluation of deferred
taxes and $.10 from the 53rd week. Based on our first half
results and second half guidance, earnings per share for the 52 weeks
ending February 2, 2019 are now planned to be in the range of $4.01 to
$4.10."

Commenting on the Company's future expansion prospects, Ms. Rentler
said, "We are excited to announce that we have raised our long-term
projected store potential to 3,000 locations, up from the previous
target of 2,500. This is based on our research that indicates we can now
further increase penetration in both existing and new markets. As a
result, we believe that Ross Dress for Less can grow to about 2,400
locations across the country, up from our prior target of 2,000, and
that dd's DISCOUNTS can ultimately become a chain of approximately 600
stores, versus our previous projection of 500. This higher store
potential provides us with a considerable amount of long-term growth
opportunities given our current store base of 1,453 Ross Dress for Less
and 227 dd's DISCOUNTS."

The Company will host a conference call on Thursday, August 23, 2018 at
4:15 p.m. Eastern time to provide additional details concerning its
second quarter results and management's outlook for the remainder of the
year. A real-time audio webcast of the conference call will be available
in the Investors section of the Company's website, located at www.rossstores.com.
An audio playback will be available at 404-537-3406, PIN #6066259 until
8:00 p.m. Eastern time on August 30, 2018, as well as on the Company's
website.

Forward-Looking Statements: This
press release contains forward-looking statements regarding expected
sales, earnings levels, new store growth opportunity, and other
financial results in future periods that are subject to risks and
uncertainties which could cause our actual results to differ materially
from management's current expectations. The words "plan," "expect,"
"target," "anticipate," "estimate," "believe," "forecast," "projected,"
"guidance," "outlook," "looking ahead" and similar expressions identify
forward-looking statements. Risk factors for Ross Dress for Less
®
("Ross") and dd's DISCOUNTS® include
without limitation, competitive pressures in the apparel or home-related
merchandise retailing industry; changes in the level of consumer
spending on or preferences for apparel and home-related merchandise;
market availability, quantity, and quality of attractive brand name
merchandise at desirable discounts and our buyers' ability to purchase
merchandise that enables us to offer customers a wide assortment of
merchandise at competitive prices; impacts from the macro-economic
environment, financial and credit markets, and geopolitical conditions
that affect consumer confidence and consumer disposable income; our
ability to continually attract, train, and retain associates to execute
our off-price strategies; unseasonable weather that 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; potential information or data security
breaches, including cyber-attacks on our transaction processing and
computer information systems, which could result in theft or
unauthorized disclosure of customer, credit card, employee, or other
private and valuable information that we handle in the ordinary course
of our business; potential disruptions in our supply chain or
information systems; 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; our ability to
effectively manage our inventories, markdowns, and inventory shortage to
achieve planned gross margin; changes in U.S. tax or tariff policy
regarding apparel and home-related merchandise produced in other
countries that could adversely affect our business; volatility in
revenues and earnings; an adverse outcome in various legal, regulatory,
or tax matters; a natural or man-made disaster in California or in
another region where we have a concentration of stores, offices, or a
distribution center; unexpected issues or costs from expanding in
existing markets and entering new geographic markets; obtaining
acceptable new store sites with favorable consumer demographics; damage
to our corporate reputation or brands; effectively advertising and
marketing our brands; issues from selling and importing merchandise
produced in other countries; and maintaining sufficient liquidity to
support our continuing operations, new store and distribution center
growth plans, and stock repurchase and dividend programs. Other risk
factors are set forth in our SEC filings including without limitation,
the Form 10-K for fiscal 2017, and Form 10-Q and Form 8-Ks for fiscal
2018.
The factors underlying our forecasts are dynamic and
subject to change.
As a result, our forecasts speak only as of
the date they are given and do not necessarily reflect our outlook at
any other point in time.
We do not undertake to update or revise
these forward-looking statements.

Ross Stores, Inc. is an S&P 500, Fortune 500, and Nasdaq 100 (ROST)
company headquartered in Dublin, California, with fiscal 2017 revenues
of $14.1 billion. The Company operates Ross Dress for Less®
("Ross"), the largest off-price apparel and home fashion chain in the
United States with 1,453 locations in 38 states, the District of
Columbia, and Guam as of August 4, 2018. 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. The Company
also operates 227 dd's DISCOUNTS® in 18 states as of August
4, 2018 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.
Additional information is available at www.rossstores.com.

 
Ross Stores, Inc.
Condensed Consolidated Statements of Earnings
             
 
Three Months Ended Six Months Ended
($000, except stores and per share data, unaudited)   August 4, 2018   July 29, 2017   August 4, 2018   July 29, 2017
 
Sales $ 3,737,926 $ 3,431,603 $ 7,326,545 $ 6,738,032
 
Costs and Expenses
Cost of goods sold 2,666,983 2,420,942 5,189,202 4,750,908
Selling, general and administrative 554,581 498,276 1,079,004 973,095
Interest (income) expense, net   (1,393 )     2,341     (1,896 )     5,510
Total costs and expenses 3,220,171 2,921,559 6,266,310 5,729,513
 
Earnings before taxes 517,755 510,044 1,060,235 1,008,519
Provision for taxes on earnings   128,351       193,505     252,579       370,962
Net earnings $ 389,404     $ 316,539   $ 807,656     $ 637,557
 
Earnings per share
Basic $ 1.05 $ 0.83 $ 2.17 $ 1.66
Diluted $ 1.04 $ 0.82 $ 2.15 $ 1.64
                       
 
Weighted average shares outstanding (000)
Basic 371,031 383,011 372,414 384,722
Diluted 373,717 385,571 375,336 387,657
                       
 
Dividends
Cash dividends declared per share $ 0.225 $ 0.160 $ 0.450 $ 0.320
                       
 
Stores open at end of period       1,680       1,589     1,680       1,589
         
Ross Stores, Inc.
Condensed Consolidated Balance Sheets
 
 
($000, unaudited)         August 4, 2018   July 29, 2017
Assets
 
Current Assets
Cash and cash equivalents $ 1,386,935 $ 1,150,932
Accounts receivable 121,508 103,359
Merchandise inventory 1,698,390 1,608,333
Prepaid expenses and other   172,822     141,793
Total current assets 3,379,655 3,004,417
 
Property and equipment, net 2,384,301 2,327,113
Long-term investments 709 1,259
Other long-term assets   199,091     181,690
Total assets $ 5,963,756   $ 5,514,479
 
Liabilities and Stockholders' Equity
 
Current Liabilities
Accounts payable $ 1,184,422 $ 1,172,847
Accrued expenses and other 427,875 411,083
Accrued payroll and benefits 280,861 245,031
Current portion of long-term debt   84,989     -
Total current liabilities 1,978,147 1,828,961
 
Long-term debt 312,217 396,729
Other long-term liabilities 374,587 319,770
Deferred income taxes 114,195 129,135
 
Commitments and contingencies
 
Stockholders' Equity   3,184,610     2,839,884
Total liabilities and stockholders' equity         $ 5,963,756   $ 5,514,479
 
Ross Stores, Inc.
Condensed Consolidated Statements of Cash Flows
       
 
Six Months Ended
($000, unaudited)   August 4, 2018   July 29,20171
 
Cash Flows From Operating Activities
Net earnings $ 807,656 $ 637,557
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation and amortization 162,403 150,905
Stock-based compensation 47,580 42,719
Deferred income taxes 21,664 8,426
Change in assets and liabilities:
Merchandise inventory (56,654 ) (95,447 )
Other current assets (75,762 ) (56,520 )
Accounts payable 122,008 154,828
Other current liabilities (29,348 ) (59,104 )
Other long-term, net   14,637       14,595  
Net cash provided by operating activities   1,014,184       797,959  
 
Cash Flows From Investing Activities
Additions to property and equipment (178,635 ) (169,316 )
Proceeds from investments   505       -  
Net cash used in investing activities   (178,130 )     (169,316 )
 
Cash Flows From Financing Activities
Issuance of common stock related to stock plans 9,817 9,157
Treasury stock purchased (51,061 ) (43,163 )
Repurchase of common stock (528,580 ) (430,085 )
Dividends paid   (169,971 )     (124,962 )
Net cash used in financing activities   (739,795 )     (589,053 )
 
Net increase in cash, cash equivalents, and restricted cash and cash
equivalents
96,259 39,590
 
Cash, cash equivalents, and restricted cash and cash equivalents:
Beginning of period1   1,353,272       1,176,180  
End of period $ 1,449,531     $ 1,215,770  
 
Reconciliations:
Cash and cash equivalents $ 1,386,935 $ 1,150,932
Restricted cash and cash equivalents included in prepaid expenses
and other
8,961 12,990
Restricted cash and cash equivalents included in other long-term
assets
  53,635       51,848  
Total cash, cash equivalents, and restricted cash and cash
equivalents:
$ 1,449,531     $ 1,215,770  
 
Supplemental Cash Flow Disclosures
Interest paid $ 9,053 $ 9,053
Income taxes paid   $ 232,528     $ 379,154  
1 As the result of the adoption of ASU 2016-18, Statement
of Cash Flow (Topic 230): Restricted Cash
, the prior year
amounts were retrospectively adjusted to include restricted cash and
cash equivalents.

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