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ROSS STORES, INC. (ROST)

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ROSS STORES : Reports Record First Quarter Earnings and 61% Increase in EPS

05/20/2010 | 08:35am US/Eastern

PLEASANTON, Calif., May 20 /PRNewswire-FirstCall/ -- Ross Stores, Inc. (Nasdaq: ROST) today reported earnings per share for the 13 weeks ended May 1, 2010 of $1.16, up from $.72 for the quarter ended May 2, 2009. These results represent a 61% increase on top of 20% growth in the prior year. Net earnings for the first quarter of 2010 rose 56% to a record $142.3 million, up from $91.4 million in the first quarter of 2009. Sales for the 13 weeks ended May 1, 2010 grew 14% to $1.935 billion, with comparable store sales up 10% on top of a 3% gain in the prior year.

Michael Balmuth, Vice Chairman and Chief Executive Officer, commented, "We are very pleased with our exceptional first quarter performance, which was driven by robust sales gains and record levels of profitability that were well ahead of plan. We believe our results continue to benefit from the superior execution of our off-price strategies combined with our favorable position as a value retailer in the current economic and retail environment."

Mr. Balmuth continued, "Operating margin for the quarter grew about 320 basis points to a record 12.1%. The largest driver of this increase was a 230 basis point improvement in gross margin, which benefited mainly from higher merchandise gross margin and leverage on occupancy and distribution expenses as a percent of sales. Selling, general and administrative costs as a percent of sales declined by about 90 basis points, primarily due to leverage from the strong gains in same store sales."

Discussing the Company's financial condition, Mr. Balmuth noted, "Our balance sheet and cash flows remain healthy, and we continue to enhance stockholder returns through our stock repurchase and dividend programs. During the first three months of fiscal 2010, we repurchased 1.8 million shares of common stock for an aggregate purchase price of $94 million. We remain on track to complete by the end of fiscal 2010 approximately $375 million of our current two-year $750 million stock repurchase authorization."

Looking ahead, Mr. Balmuth said, "For the second quarter ending July 31, 2010, we continue to forecast a same store sales gain of 3% to 4% and earnings per share growth of 16% to 21% to $.95 to $.99, up from $.82 in the same period last year. For the 2010 fiscal year ending January 29, 2011, EPS is projected to grow 16% to 20% to $4.11 to $4.24, up from $3.54 in fiscal 2009. These forecasted increases are especially noteworthy considering they are on top of robust 52% gains in earnings per share for both the second quarter and full year in 2009."

The Company will provide additional details concerning its first quarter results and management's outlook for the second quarter and the full year on a conference call to be held on Thursday, May 20, 2010 at 11:00 a.m. Eastern time. Participants may listen to a real time audio webcast of the conference call by visiting the Investors section of the Company's website located at www.rossstores.com. A recorded version of the call will also be available at the website address, and via a telephone recording through 8:00 p.m. Eastern time on Thursday, May 27, 2010 at 706-645-9291, ID # 55962228.

Forward-Looking Statements: This press release and the recorded comments and transcript on our corporate website contain forward-looking statements regarding expected sales and earnings levels 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," "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 industry; changes in the level of consumer spending on or preferences for apparel or home-related merchandise, including the potential impact from the macro-economic environment, uncertainty in financial and credit markets, and changes in geopolitical conditions; unseasonable weather trends; disruptions in supply chain; lower than planned gross margin, including higher than planned markdowns and higher than expected inventory shortage; greater than planned operating costs; our ability to continue to purchase attractive brand-name merchandise at desirable discounts; our ability to attract and retain personnel with the retail talent necessary to execute our strategies; our ability to effectively operate our various supply chain, core merchandising and other information systems; our ability to improve our merchandising capabilities through the recent implementation of new processes and systems enhancements; achieving and maintaining targeted levels of productivity and efficiency in our distribution centers; and obtaining acceptable new store locations. Other risk factors are detailed in our SEC filings including, without limitation, the Form 10-K for fiscal 2009 and Form 8-Ks for fiscal 2010. 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., an S&P 500, Fortune 500 and Nasdaq 100 (ROST) company headquartered in Pleasanton, California, is the nation's second largest off-price retailer with fiscal 2009 revenues of $7.2 billion. As of May 1, 2010 the Company operated 967 Ross Dress for Less(®) ("Ross") stores and 54 dd's DISCOUNTS(®) locations, compared to 922 Ross and 52 dd's DISCOUNTS locations at the end of the same period last year. Ross offers first-quality, in-season, name brand and designer apparel, accessories, footwear and home fashions for the entire family at everyday savings of 20 to 60 percent off department and specialty store regular prices. dd's DISCOUNTS features a more moderately-priced assortment of first-quality, in-season, name brand apparel, accessories, footwear and home fashions for the entire family at everyday savings of 20 to 70 percent off moderate department and discount store regular prices. Additional information is available at www.rossstores.com.

                            Ross Stores, Inc.
              Condensed Consolidated Statements of Earnings

                                                       Three Months Ended
                                                       ------------------
                                                     May 1,            May 2,
    ($000, except stores and per share
     data, unaudited)                                  2010              2009
    ----------------------------------                 ----              ----

    Sales                                        $1,934,778        $1,691,599

    Costs and Expenses
      Costs of goods sold                         1,406,082         1,268,709
      Selling, general and administrative           294,472           272,030
      Interest expense, net                           2,388             1,656
                                                      -----             -----
        Total costs and expenses                  1,702,942         1,542,395

    Earnings before taxes                           231,836           149,204
    Provision for taxes on earnings                  89,489            57,817
    Net earnings                                   $142,347           $91,387
                                                   ========           =======

    Earnings per share
      Basic                                           $1.19             $0.73
      Diluted                                         $1.16             $0.72



    Weighted average shares outstanding
     (000)
      Basic                                         119,829           124,692
      Diluted                                       122,332           126,564



    Dividends
      Cash dividends declared per share                  $-                $-



    Stores open at end of period                      1,021               974

                         Ross Stores, Inc.
               Condensed Consolidated Balance Sheets

                                              May 1,            May 2,
    ($000, unaudited)                           2010              2009
    -----------------                           ----              ----
    Assets

    Current Assets
      Cash and cash equivalents             $823,652          $459,302
      Short-term investments                   1,941             1,033
      Accounts receivable                     54,268            50,098
      Merchandise inventory                  908,065           917,661
      Prepaid expenses and other              67,895            65,557
      Deferred income taxes                    3,923            13,487
                                               -----            ------
        Total current assets               1,859,744         1,507,138

    Property and equipment, net              933,654           942,432
    Long-term investments                     15,857            33,411
    Other long-term assets                    73,352            59,139
    Total assets                          $2,882,607        $2,542,120
                                          ==========        ==========

    Liabilities and Stockholders'
     Equity

    Current Liabilities
      Accounts payable                      $748,779          $682,251
      Accrued expenses and other             231,927           225,564
      Accrued payroll and benefits           148,913           134,571
      Income taxes payable                    99,932            46,333
                                              ------            ------
        Total current liabilities          1,229,551         1,088,719

    Long-term debt                           150,000           150,000
    Other long-term liabilities              185,375           163,687
    Deferred income taxes                     88,328           103,956

    Commitments and contingencies

    Stockholders' Equity                   1,229,353         1,035,758
    Total liabilities and
     stockholders' equity                 $2,882,607        $2,542,120
                                          ==========        ==========

                             Ross Stores, Inc.
              Condensed Consolidated Statements of Cash Flows

                                                  Three Months Ended
                                                  ------------------
                                                May 1,            May 2,
    ($000, unaudited)                             2010              2009
    -----------------                             ----              ----

    Cash Flows From Operating Activities
    Net earnings                              $142,347           $91,387
    Adjustments to reconcile net earnings
     to net cash
    provided by operating activities:
      Depreciation and amortization             39,844            37,556
      Stock-based compensation                   8,910             6,497
      Deferred income taxes                    (14,772)            7,405
      Tax benefit from equity issuance           6,810             2,821
      Excess tax benefit from stock-based
       compensation                             (6,482)           (2,064)
      Change in assets and liabilities:
        Merchandise inventory                  (35,567)          (36,603)
        Other current assets                   (19,311)          (19,244)
        Accounts payable                       110,149           159,514
        Other current liabilities              (43,557)           (6,455)
        Other long-term, net                       810               (82)
                                                   ---               ---
        Net cash provided by operating
         activities                            189,181           240,732
                                               -------           -------

    Cash Flows From Investing Activities
    Additions to property and equipment        (35,519)          (33,914)
    Proceeds from sales of property and
     equipment                                       -                10
    Purchases of investments                         -            (1,481)
    Proceeds from investments                      848             6,058
                                                   ---             -----
        Net cash used in investing activities  (34,671)          (29,327)
                                               -------           -------

    Cash Flows From Financing Activities
    Excess tax benefit from stock-based
     compensation                                6,482             2,064
    Issuance of common stock related to
     stock plans                                15,004            19,689
    Treasury stock purchased                    (6,776)           (4,073)
    Repurchase of common stock                 (94,298)          (77,171)
    Dividends paid                             (19,613)          (13,967)
                                               -------           -------
        Net cash used in financing activities  (99,201)          (73,458)
                                               -------           -------

    Net increase in cash and cash
     equivalents                                55,309           137,947

    Cash and cash equivalents:
        Beginning of period                    768,343           321,355
                                               -------           -------
        End of period                         $823,652          $459,302
                                              ========          ========

    Supplemental Cash Flow Disclosures
    Interest paid                                   $-                $-
    Income taxes paid                          $47,250            $9,866

    Non-Cash Investing Activities
    Increase in fair value of investment
     securities                                    $44              $209

SOURCE Ross Stores, Inc.

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