Ross Stores Reports Second Quarter Earnings

·8 min read

Provides Second Half and Updated Fiscal 2022 Guidance

DUBLIN, Calif., August 18, 2022--(BUSINESS WIRE)--Ross Stores, Inc. (NASDAQ: ROST) today reported earnings per share for the 13 weeks ended July 30, 2022 of $1.11 on net income of $385 million. These results compare to $1.39 per share on net earnings of $494 million for the 13 weeks ended July 31, 2021. Sales for the second quarter of 2022 were $4.6 billion versus $4.8 billion in the prior year period. Comparable store sales were down 7% on top of a robust 15% gain in the second quarter of 2021, which was the strongest period of last year.

For the six months ended July 30, 2022, earnings per share were $2.08 on net income of $723 million. These results compare to earnings per share of $2.73 on net earnings of $971 million in the first half of 2021. Sales for the first six months of 2022 were $8.9 billion, with comparable store sales down 7% versus a 14% gain in the first half of 2021.

Barbara Rentler, Chief Executive Officer, commented, "We are disappointed with our sales results, which were impacted by the mounting inflationary pressures our customers faced as well as an increasingly promotional retail environment. Earnings came in above our guidance range primarily due to lower incentive costs resulting from the below plan topline performance."

She continued, "Second quarter operating margin of 11.3% was down from 14.1% in the prior year period, reflecting the deleveraging effect from the same store sales decline, higher markdowns given the sales underperformance, and ongoing headwinds from increased freight costs that did not begin rising until the second half of 2021. These expense pressures were partially offset by lower incentive and COVID costs."

Ms. Rentler further noted, "During the second quarter, we repurchased 2.9 million shares of common stock for an aggregate price of $235 million. As previously announced, we expect to buy back $950 million of common stock during fiscal 2022 under our two-year $1.9 billion repurchase program that extends through fiscal 2023."

Second Half and Updated Fiscal 2022 Guidance

Looking ahead, Ms. Rentler commented, "Given our first half results, as well as the increasingly challenging and unpredictable macro-economic landscape and today’s more promotional retail environment, we believe it is prudent to adopt a more conservative outlook for the balance of the year. While we hope to do better, we are now planning third quarter same store sales to decline 7% to 9% versus a strong 14% gain last year. For the fourth quarter, same store sales are forecast to be down 4% to 7% on top of a 9% increase for the same period a year ago."

She continued, "If the second half performs in line with these updated sales assumptions, earnings per share for the third quarter are projected to be $0.72 to $0.83 versus $1.09 last year and $1.04 to $1.21 for the fourth quarter, compared to $1.04 in 2021. Based on our first half results and second half guidance, earnings per share for fiscal year 2022 are now planned to be in the range of $3.84 to $4.12 versus $4.87 last year."

Ms. Rentler concluded, "We are facing a very difficult and uncertain macro-economic environment that we expect will continue to strain our customers’ discretionary spending. Though 2022 will likely remain a challenging year for our Company, we believe our value-focused business model and our strong financial position will enable us to manage through these economic pressures and rebound over time."

The Company will host a conference call on Thursday, August 18, 2022 at 4:15 p.m. Eastern time to provide additional details concerning its second quarter results and management’s outlook for the second half and fiscal year 2022. 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 201-612-7415, PIN #13732145 until 8:00 p.m. Eastern time on August 25, 2022, as well as on the Company’s website.

Forward-Looking Statements: This press release and the related conference call remarks contain forward-looking statements regarding projected sales and earnings, planned new store growth, and other financial results and market conditions 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, the uncertainties and potential for the recurrence of significant business disruptions arising from the COVID-19 pandemic, including its unknown duration, the potential for new virus variants and future resurgences, as well as possible mandates or restrictions, and the potential adverse impact on consumer demand and our business; changes in the level of consumer spending on or preferences for apparel and home-related merchandise; impacts from the macro-economic environment, including inflation, housing costs, energy and fuel costs, financial and credit markets, and interest rates, recession concerns, geopolitical conditions (including the current Russia-Ukraine conflict), unemployment levels or public health issues (such as pandemics) that affect consumer confidence and consumer disposable income; our need to effectively manage our inventories, markdowns, and inventory shortage to achieve planned gross margins; competitive pressures in the apparel or home-related merchandise retailing industry; issues associated with importing and selling merchandise produced in other countries, including risks from supply chain disruptions due to port of exit/entry congestion, shipping delays and ocean freight cost increases, and risks from other supply chain related disruptions, including those due to COVID-19 closures; unseasonable weather that may affect shopping patterns and consumer demand for seasonal apparel and other merchandise, and that may result in temporary store closures and disruptions in deliveries of merchandise to our stores; market availability, quantity, and quality of attractive brand name merchandise at desirable discounts and our buyers’ ability to anticipate consumer preferences and to purchase merchandise that enables us to offer customers a wide assortment of merchandise at competitive prices; potential 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 information systems, including from ransomware or other cyberattacks; 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, could increase our costs; damage to our corporate reputation or brands; our need to continually attract, train, and retain associates to execute our off-price strategies; our need to effectively advertise and market our business; changes in U.S. tax, tariff, or trade policy regarding apparel and home-related merchandise produced in other countries that could adversely affect our business; volatility in revenues and earnings; an additional pandemic, 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; and maintaining sufficient liquidity to support our continuing operations, new store openings, and ongoing capital expenditure plans. Other risk factors are set forth in our SEC filings including without limitation, the Form 10-K for fiscal 2021 and fiscal 2022 Form 10-Q and 8-Ks on file with the SEC. 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 2021 revenues of $18.9 billion. Currently, the Company operates Ross Dress for Less® ("Ross"), the largest off-price apparel and home fashion chain in the United States with 1,669 locations in 40 states, the District of Columbia, and Guam. 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 311 dd’s DISCOUNTS® stores in 21 states 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)

July 30, 2022

July 31, 2021

July 30, 2022

July 31, 2021

Sales

$

4,583,009

$

4,804,974

$

8,916,109

$

9,321,054

Costs and Expenses

Cost of goods sold

3,399,535

3,410,871

6,595,981

6,609,267

Selling, general and administrative

667,063

717,788

1,336,559

1,392,841

Interest expense, net

10,667

18,707

28,363

37,756

Total costs and expenses

4,077,265

4,147,366

7,960,903

8,039,864

Earnings before taxes

505,744

657,608

955,206

1,281,190

Provision for taxes on earnings

121,227

163,350

232,244

310,453

Net earnings

$

384,517

$

494,258

$

722,962

$

970,737

Earnings per share

Basic

$

1.11

$

1.40

$

2.09

$

2.75

Diluted

$

1.11

$

1.39

$

2.08

$

2.73

Weighted-average shares outstanding (000)

Basic

344,884

352,865

345,969

352,927

Diluted

346,106

354,935

347,470

355,161

Store count at end of period

1,980

1,896

1,980

1,896

Ross Stores, Inc.

Condensed Consolidated Balance Sheets

($000, unaudited)

July 30, 2022

July 31, 2021

Assets

Current Assets

Cash and cash equivalents

$

3,903,670

$

5,569,071

Accounts receivable

167,503

159,163

Merchandise inventory

2,716,878

1,751,027

Prepaid expenses and other

197,020

193,588

Total current assets

6,985,071

7,672,849

Property and equipment, net

2,929,774

2,746,208

Operating lease assets

3,025,814

2,973,907

Other long-term assets

239,263

248,436

Total assets

$

13,179,922

$

13,641,400

Liabilities and Stockholders’ Equity

Current Liabilities

Accounts payable

$

2,085,680

$

2,588,551

Accrued expenses and other

611,186

609,719

Current operating lease liabilities

647,504

608,123

Accrued payroll and benefits

300,611

445,307

Income taxed payable

-

19,526

Current portion of long-term debt

-

64,964

Total current liabilities

3,644,981

4,336,190

Long-term debt

2,454,413

2,450,245

Non-current operating lease liabilities

2,525,512

2,503,332

Other long-term liabilities

231,285

292,715

Deferred income taxes

196,780

154,932

Commitments and contingencies

Stockholders’ Equity

4,126,951

3,903,986

Total liabilities and stockholders’ equity

$

13,179,922

$

13,641,400

Ross Stores, Inc.

Condensed Consolidated Statements of Cash Flows

Six Months Ended

($000, unaudited)

July 30, 2022

July 31, 2021

Cash Flows From Operating Activities

Net earnings

$

722,962

$

970,737

Adjustments to reconcile net earnings to net cash (used in) provided by operating activities:

Depreciation and amortization

189,181

174,094

Stock-based compensation

62,874

58,258

Deferred income taxes

59,138

33,065

Change in assets and liabilities:

Merchandise inventory

(454,605)

(242,045)

Other current assets

(71,290)

(63,420)

Accounts payable

(288,454)

360,891

Other current liabilities

(265,399)

77,963

Income taxes

(13,941)

(27,596)

Operating lease assets and liabilities, net

4,660

2,654

Other long-term, net

(1,391)

794

Net cash (used in) provided by operating activities

(56,265)

1,345,395

Cash Flows From Investing Activities

Additions to property and equipment

(243,346)

(254,437)

Net cash used in investing activities

(243,346)

(254,437)

Cash Flows From Financing Activities

Issuance of common stock related to stock plans

11,892

12,534

Treasury stock purchased

(38,634)

(49,015)

Repurchase of common stock

(475,000)

(175,784)

Dividends paid

(217,193)

(203,384)

Net cash used in financing activities

(718,935)

(415,649)

Net (decrease) increase in cash, cash equivalents, and restricted cash and cash equivalents

(1,018,546)

675,309

Cash, cash equivalents, and restricted cash and cash equivalents:

Beginning of period

4,982,382

4,953,769

End of period

$

3,963,836

$

5,629,078

Reconciliations:

Cash and cash equivalents

$

3,903,670

$

5,569,071

Restricted cash and cash equivalents included in prepaid expenses and other

11,432

10,801

Restricted cash and cash equivalents included in other long-term assets

48,734

49,206

Total cash, cash equivalents, and restricted cash and cash equivalents:

$

3,963,836

$

5,629,078

Supplemental Cash Flow Disclosures

Interest paid

$

40,158

$

42,051

Income taxes paid

$

187,047

$

304,984

View source version on businesswire.com: https://www.businesswire.com/news/home/20220818005610/en/

Contacts

Adam Orvos
Executive Vice President, Chief Financial Officer
(925) 965-4550

Connie Kao
Group Vice President, Investor Relations
(925) 965-4668
connie.kao@ros.com