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ROSS STORES, INC. (ROST)

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Ross Stores, Inc. : Ross Stores Reports Strong First Quarter Earnings, Raises Fiscal Year 2012 Guidance and Increases Long-Term Store Growth Potential

05/17/2012 | 08:35am US/Eastern
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PLEASANTON, Calif., May 17, 2012 /PRNewswire/ -- Ross Stores, Inc. (Nasdaq: ROST) today reported earnings per share for the 13 weeks ended April 28, 2012 of $.93, up from a split-adjusted $.74 for the 13 weeks ended April 30, 2011. These results represent a 26% increase on top of a 28% gain in last year's first quarter. Net earnings for the 2012 first quarter grew to $208.6 million, up 21% from $173.0 million in the prior year. Sales for the quarter ended April 28, 2012 increased 14% to $2.357 billion, with comparable store sales up a strong 9% on top of a 3% gain in 2011.

Michael Balmuth, Vice Chairman and Chief Executive Officer, commented, "We are pleased with our much better-than-expected financial results in the first quarter. Our robust sales and earnings were driven mainly by our ongoing ability to deliver a wide array of fresh and exciting name brand bargains to today's value-focused consumers. In addition, we believe that favorable weather across many of our markets also contributed to our above-plan performance."

Mr. Balmuth continued, "Operating margin for the period grew about 70 basis points to a record 14.4% driven primarily by leverage on selling, general and administrative expenses from the robust gains in same store sales. Cost of goods sold as a percent of sales improved by 15 basis points from the prior year, as higher merchandise gross margin and leverage on occupancy were partially offset by increases in distribution, freight and buying costs."

Mr. Balmuth also noted, "We continued to enhance stockholder returns through our stock repurchase and dividend programs in the first quarter. During the first three months of fiscal 2012, we repurchased 2.0 million shares of common stock for an aggregate price of
$111 million. We remain on track to buy back a total of $450 million in common stock during fiscal 2012 to complete the two-year $900 million program authorized in early 2011."

Looking ahead, Mr. Balmuth said, "For the second quarter ending July 28, 2012, we are now forecasting same store sales to increase 3% to 4% and earnings per share of $.72 to $.75, up from last year's $.64. This represents 13% to 17% projected growth on top of a 20% increase in the second quarter of 2011. In addition, we are raising our 2012 earnings per share guidance for the 53 weeks ending February 2, 2013 to $3.26 to $3.37, above our initial guidance of $3.12 to $3.27 and compared to $2.86 in fiscal 2011."

Commenting on the Company's future expansion plans, Mr. Balmuth said, "We are pleased to announce that we have increased our long-term projected store potential to 2,500 locations in the United States. Our current research and proven ability to cluster stores closer together indicate that we can more fully saturate existing and new markets. As a result, we now believe that Ross Dress for Less can grow to approximately 2,000 locations across the country, up from our prior target of 1,500. We continue to believe that dd's DISCOUNTS can become a chain of about 500 stores. Combined, we therefore have the ability over time to more than double the size of our Company domestically."

The Company will provide additional details about its first quarter results and management's outlook for the second quarter on a conference call to be held on Thursday, May 17, 2012 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 24, 2012 at 404-537-3406, ID # 80147849.

Forward-Looking Statements: This press release and the recorded comments on our corporate website contain forward-looking statements regarding expected sales, earnings levels 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," "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; the impact from the macro-economic environment and financial and credit markets including but not limited to interest rates, recession, inflation, deflation, energy costs, tax rates and policy, unemployment trends, and fluctuating commodity costs; changes in geopolitical and geoeconomic 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 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 set forth in our SEC filings including without limitation, the Form 10-K for fiscal 2011 and Form 8-Ks for fiscal 2012. 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 Pleasanton, California, with fiscal 2011 revenues of $8.6 billion. The Company operates Ross Dress for Less® ("Ross"), the largest off-price apparel and home fashion chain in the United States with 1,051 locations in 30 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 everyday savings of 20% to 60% off department and specialty store regular prices. The Company also operates 95 dd's DISCOUNTS® in eight 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 everyday savings of 20% to 70% off moderate department and discount store regular prices. Additional information is available at www.rossstores.com.

    Contact: John G. Call            Bobbi Chaville
    --------
              Group Senior Vice
              President,             Senior Director, Investor Relations
             Chief Financial Officer (925) 965-4289
             (925) 965-4315          bobbi.chaville@ros.com
                                                                                                                                      
                                                            Ross Stores, Inc.
                                              Condensed Consolidated Statements of Earnings
                                                                                                                                    
                                                              Three Months Ended
                                                              ------------------
                                                                           April 28,                            April 30,
    ($000, except stores and per share data,
     unaudited)                                                                   2012                                 2011
    ----------------------------------------                                      ----                                 ----
                                                                                                                                    
    Sales                                                                 $2,356,841                           $2,074,576
                                                                                                                                    
    Costs and Expenses
                      Costs of
                      goods sold                                           1,679,127                            1,481,206
                      Selling,
                      general and
                      administrative                                         337,811                              309,160
                      Interest
                      expense, net                                             2,232                                2,495
                                                                                                                           
                     Total costs and expenses                              2,019,170                            1,792,861
                                                                                                                                    
    Earnings before taxes                                                    337,671                              281,715
    Provision for taxes on earnings                                          129,058                              108,742
    Net earnings                                                            $208,613                             $172,973
                                                                            ========                             ========
                                                                                                                                    
    Earnings per share (1)
                     Basic                                                     $0.94                                $0.75
                     Diluted                                                   $0.93                                $0.74
                                                                                                                                    
                                                                                                                                    
    Weighted average shares outstanding (000) (1)
                     Basic                                                   221,104                              229,528
                     Diluted                                                 224,929                              233,547
                                                                                                                                    
                                                                                                                                    
    Dividends (1)
                      Cash
                      dividends
                      declared per
                      share                                        $               -                    $               -
                                                                                                                                    
                                                                                                                                    
    Stores open at end of period                                               1,146                                1,068
                                                                                                                                    
    (1) All share and per share amounts have been adjusted for the two-for-one stock split effective December 15, 2011.
                                                                                                                                    

                                                                                                                                   
                                                          Ross Stores, Inc.
                                                Condensed Consolidated Balance Sheets
                                                                                                                                 
                                                                                April 28,                             April 30,
    ($000, unaudited)                                                                  2012                                  2011
    ----------------                                                                   ----                                  ----
    Assets
                                                                                                                                 
    Current Assets
                      Cash and cash
                      equivalents                                                $741,117                              $671,005
                      Short-term
                      investments                                                     463                                 3,275
                      Accounts
                      receivable                                                   66,632                                61,683
                      Merchandise
                      inventory                                                 1,134,703                             1,172,716
                      Prepaid
                      expenses and
                      other                                                       104,216                                72,900
                      Deferred
                      income taxes                                                 11,854                                15,662
                                                                                                    
                     Total current assets                                       2,058,985                             1,997,241
                                                                                                                                 
    Property and equipment, net                                                 1,246,601                             1,005,674
    Long-term investments                                                           5,614                                12,191
    Other long-term assets                                                        146,286                                86,888
    Total assets                                                               $3,457,486                            $3,101,994
                                                                               ==========                            ==========
                                                                                                                                 
    Liabilities and Stockholders' Equity
                                                                                                                                 
    Current Liabilities
                      Accounts
                      payable                                                    $830,044                              $742,600
                      Accrued
                      expenses and
                      other                                                       284,108                               265,586
                      Accrued
                      payroll and
                      benefits                                                    148,770                               141,268
                      Income taxes
                      payable                                                     107,715                                89,340
                                                                                                    
                      Total current
                      liabilities                                               1,370,637                             1,238,794
                                                                                                                                 
    Long-term debt                                                                150,000                               150,000
    Other long-term liabilities                                                   211,777                               200,575
    Deferred income taxes                                                         114,437                               106,519
                                                                                                                                 
    Commitments and contingencies
                                                                                                                                 
    Stockholders' Equity                                                        1,610,635                             1,406,106
    Total liabilities and stockholders'
     equity                                                                    $3,457,486                            $3,101,994
                                                                               ==========                            ==========
                                                                                                                                 
                                                                                                                                 

                                                                                                                                          
                                                              Ross Stores, Inc.
                                               Condensed Consolidated Statements of Cash Flows
                                                                                                                                        
                                                                         Three Months Ended
                                                                         ------------------
                                                                                      April 28,                              April 30,
    ($000, unaudited)                                                                        2012                                   2011
    ----------------                                                                         ----                                   ----
                                                                                                                                        
    Cash Flows From Operating Activities
    Net earnings                                                                       $208,613                               $172,973
    Adjustments to reconcile net earnings to net cash
    provided by operating activities:
                         Depreciation and
                         amortization                                                    43,136                                 39,934
                         Stock-based
                         compensation                                                    11,587                                  9,894
                         Deferred income
                         taxes                                                             (339)                                 9,657
                         Tax benefit from
                         equity issuance                                                 23,123                                 10,021
                         Excess tax
                         benefit from
                         stock-based
                         compensation                                                   (22,662)                                (9,727)
                         Change in assets
                         and
                         liabilities:
                        Merchandise inventory                                            (4,633)                               (85,799)
                        Other current assets                                            (28,890)                               (25,392)
                        Accounts payable                                                100,177                                  1,120
                        Other current liabilities                                       (33,792)                               (80,429)
                        Other long-term, net                                              1,010                                 (1,201)
                                                                                          -----                                 ------
                         Net cash provided by operating
                         activities                                                     297,330                                 41,051
                                                                                        -------                                 ------
                                                                                                                                        
    Cash Flows From Investing Activities
    Additions to property and equipment                                                 (57,993)                               (70,096)
    Increase in restricted cash and investments                                         (13,410)                                     -
    Purchases of investments                                                               (424)                                     -
    Proceeds from investments                                                               618                                  1,814
                         Net cash used in investing
                         activities                                                     (71,209)                               (68,282)
                                                                                        -------                                -------
                                                                                                                                        
    Cash Flows From Financing Activities
    Excess tax benefit from stock-based compensation                                     22,662                                  9,727
    Issuance of common stock related to stock plans                                       7,955                                  5,827
    Treasury stock purchased                                                            (23,123)                               (12,837)
    Repurchase of common stock                                                         (110,614)                              (112,500)
    Dividends paid                                                                      (31,719)                               (25,905)
                         Net cash used in financing
                         activities                                                    (134,839)                              (135,688)
                                                                                       --------                               --------
                                                                                                                                        
    Net increase (decrease) in cash and cash
     equivalents                                                                         91,282                               (162,919)
                                                                                                                                        
    Cash and cash equivalents:
                        Beginning of period                                             649,835                                833,924
                                                                                        -------                                -------
                        End of period                                                  $741,117                               $671,005
                                                                                       ========                               ========
                                                                                                                                        
    Supplemental Cash Flow Disclosures
    Interest paid                                                            $                -                      $               -
    Income taxes paid                                                                   $30,258                                $54,705
                                                                                                                                        
    Non-Cash Investing Activities
    Decrease in fair value of investment securities                                        $(13)                                   $(4)
                                                                                                                                        

SOURCE Ross Stores, Inc.

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