Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Consolidated Statements of Earnings

		Year Ended				Year Ended				Year Ended
($000, except per share data)		January 28, 2017				January 30, 2016				January 31, 2015
Sales		$	12,866,757			$	11,939,999			$	11,041,677
Costs and Expenses
Cost of goods sold		9,173,705				8,576,873				7,937,956
Selling, general and administrative		1,890,408				1,738,755				1,615,371
Interest expense, net		16,488				12,612				2,984
Total costs and expenses		11,080,601				10,328,240				9,556,311
Earnings before taxes		1,786,156				1,611,759				1,485,366
Provision for taxes on earnings		668,502				591,098				560,642
Net earnings		$	1,117,654			$	1,020,661			$	924,724
Earnings per share
Basic		$	2.85			$	2.53			$	2.24
Diluted		$	2.83			$	2.51			$	2.21
Weighted average shares outstanding (000)
Basic		392,124				403,034				413,553
Diluted		394,958				406,405				418,077
The accompanying notes are an integral part of these consolidated financial statements.

Consolidated Statements of Comprehensive Income

		Year Ended				Year Ended				Year Ended
($000)		January 28, 2017				January 30, 2016				January 31, 2015
Net earnings		$	1,117,654			$	1,020,661			$	924,724
Other comprehensive income (loss):
Change in unrealized loss on investments, net of tax		(91		)		(148		)		(59		)
Comprehensive income		$	1,117,563			$	1,020,513			$	924,665
The accompanying notes are an integral part of these consolidated financial statements.

Consolidated Balance Sheets

($000, except share data)	January 28, 2017				January 30, 2016
Assets
Current Assets
Cash and cash equivalents	$	1,111,599			$	761,602
Short-term investments	—				1,737
Accounts receivable	75,154				73,627
Merchandise inventory	1,512,886				1,419,104
Prepaid expenses and other	113,410				116,125
Total current assets	2,813,049				2,372,195
Property and Equipment
Land and buildings	1,101,334				1,084,328
Fixtures and equipment	2,421,645				2,244,790
Leasehold improvements	998,508				920,392
Construction-in-progress	69,767				90,399
	4,591,254				4,339,909
Less accumulated depreciation and amortization	2,263,206				1,997,003
Property and equipment, net	2,328,048				2,342,906
Long-term investments	1,288				1,331
Other long-term assets	166,966				152,687
Total assets	$	5,309,351			$	4,869,119
Liabilities and Stockholders’ Equity
Current Liabilities
Accounts payable	$	1,021,735			$	945,559
Accrued expenses and other	398,126				376,522
Accrued payroll and benefits	316,492				280,766
Income taxes payable	16,153				—
Total current liabilities	1,752,506				1,602,847
Long-term debt	396,493				396,025
Other long-term liabilities	290,950				268,168
Deferred income taxes	121,385				130,088
Commitments and contingencies
Stockholders’ Equity
Common stock, par value $.01 per share	3,919				4,023
Authorized 1,000,000,000 shares
Issued and outstanding 391,893,000 and
402,339,000 shares, respectively
Additional paid-in capital	1,215,715				1,122,329
Treasury stock	(272,846		)		(229,525		)
Accumulated other comprehensive income	91				182
Retained earnings	1,801,138				1,574,982
Total stockholders’ equity	2,748,017				2,471,991
Total liabilities and stockholders’ equity	$	5,309,351			$	4,869,119
The accompanying notes are an integral part of these consolidated financial statements.

Consolidated Statements of Stockholders' Equity

									Additional paid-in capital								Accumulated other comprehensive income (loss)
		Common stock								Treasury stock					Retained earnings
(000)		Shares			Amount								Total
Balance at February 1, 2014		426,840			$	4,268			$	933,457			$	(121,559	)		$389			$	1,190,747			$	2,007,302
Net earnings		—			—				—				—				—			924,724				924,724
Unrealized investment loss, net		—			—				—				—				(59	)		—				(59		)
Common stock issued under stock
plans, net of shares
used for tax withholding		2,904			29				21,949				(39,041		)		—			—				(17,063		)
Tax benefit from equity issuance		—			—				29,759				—				—			—				29,759
Stock-based compensation		—			—				53,001				—				—			—				53,001
Common stock repurchased		(14,805	)		(148		)		(24,559		)		—				—			(525,293		)		(550,000		)
Dividends declared ($0.400 per share)		—			—				—				—				—			(168,454		)		(168,454		)
Balance at January 31, 2015		414,939			$	4,149			$	1,013,607			$	(160,600	)		$330			$	1,421,724			$	2,279,210
Net earnings		—			—				—				—				—			1,020,661				1,020,661
Unrealized investment loss, net		—			—				—				—				(148	)		—				(148		)
Common stock issued under stock
plans, net of shares
used for tax withholding		1,053			11				20,175				(68,925		)		—			—				(48,739		)
Tax benefit from equity issuance		—			—				42,382				—				—			—				42,382
Stock-based compensation		—			—				70,937				—				—			—				70,937
Common stock repurchased		(13,653	)		(137		)		(24,772		)		—				—			(675,091		)		(700,000		)
Dividends declared ($0.470 per share)		—			—				—				—				—			(192,312		)		(192,312		)
Balance at January 30, 2016		402,339			$	4,023			$	1,122,329			$	(229,525	)		$182			$	1,574,982			$	2,471,991
Net earnings		—			—				—				—				—			1,117,654				1,117,654
Unrealized investment loss, net		—			—				—				—				(91	)		—				(91		)
Common stock issued under stock
plans, net of shares
used for tax withholding		1,192			12				18,527				(43,321		)		—			—				(24,782		)
Tax benefit from equity issuance		—			—				23,331				—				—			—				23,331
Stock-based compensation		—			—				74,554				—				—			—				74,554
Common stock repurchased		(11,638	)		(116		)		(23,026		)		—				—			(676,858		)		(700,000		)
Dividends declared ($0.540 per share)		—			—				—				—				—			(214,640		)		(214,640		)
Balance at January 28, 2017		391,893			$	3,919			$	1,215,715			$	(272,846	)		$91			$	1,801,138			$	2,748,017
The accompanying notes are an integral part of these consolidated financial statements.

Consolidated Statements of Cash Flows

	Year Ended				Year Ended				Year Ended
($000)	January 28, 2017				January 30, 2016				January 31, 2015
Cash Flows From Operating Activities
Net earnings	$	1,117,654			$	1,020,661			$	924,724
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization	302,515				274,828				232,959
Stock-based compensation	74,554				70,937				53,001
Deferred income taxes	(8,703		)		56,358				25,086
Tax benefit from equity issuance	23,331				42,382				29,759
Excess tax benefit from stock-based compensation	(23,331		)		(42,302		)		(29,415		)
Change in assets and liabilities:
Merchandise inventory	(93,782		)		(46,429		)		(115,520		)
Other current assets	(928		)		(13,496		)		(16,410		)
Accounts payable	83,085				(41,464		)		204,158
Other current liabilities	76,676				7,796				69,568
Other long-term, net	7,780				(3,019		)		(5,045		)
Net cash provided by operating activities	1,558,851				1,326,252				1,372,865
Cash Flows From Investing Activities
Additions to property and equipment	(297,880		)		(366,960		)		(646,691		)
Decrease (increase) in restricted cash and investments	3,388				4,065				(4,329		)
Purchases of investments	—				(718		)		—
Proceeds from investments	1,729				1,104				12,021
Net cash used in investing activities	(292,763		)		(362,509		)		(638,999		)
Cash Flows From Financing Activities
Excess tax benefit from stock-based compensation	23,331				42,302				29,415
Net proceeds from issuance of long-term debt	—				—				245,676
Issuance of common stock related to stock plans	18,539				20,186				21,978
Treasury stock purchased	(43,321		)		(68,925		)		(39,041		)
Repurchase of common stock	(700,000		)		(700,000		)		(550,000		)
Dividends paid	(214,640		)		(192,312		)		(168,454		)
Net cash used in financing activities	(916,091		)		(898,749		)		(460,426		)
Net increase in cash and cash equivalents	349,997				64,994				273,440
Cash and cash equivalents:
Beginning of year	761,602				696,608				423,168
End of year	$	1,111,599			$	761,602			$	696,608
Supplemental Cash Flow Disclosures
Interest paid	$	18,105			$	18,035			$	9,668
Income taxes paid	$	628,441			$	523,597			$	510,145
The accompanying notes are an integral part of these consolidated financial statements.

Notes to Consolidated Financial Statements

Note A: Summary of Significant Accounting Policies

Business. Ross Stores, Inc. and its subsidiaries (the “Company”) is an off-price retailer of first-quality, in-season, name brand and designer apparel, accessories, footwear, and home fashions for the entire family. At the end of fiscal 2016, the Company operated 1,340 Ross Dress for Less® (“Ross”) locations in 36 states, the District of Columbia and Guam, and 193 dd’s DISCOUNTS® stores in 15 states. The Ross and dd's DISCOUNTS stores are supported by six distribution centers. The Company’s headquarters, one buying office, three operating distribution centers, two warehouses, and 24% of its stores are located in California.

Segment reporting. The Company has one reportable segment. The Company’s operations include only activities related to off-price retailing in stores throughout the United States.

Basis of presentation and fiscal year. The consolidated financial statements include the accounts of the Company and its subsidiaries, all of which are wholly-owned. Intercompany transactions and accounts have been eliminated. The Company follows the National Retail Federation fiscal calendar and utilizes a 52-53 week fiscal year whereby the fiscal year ends on the Saturday nearest to January 31. The fiscal years ended January 28, 2017, January 30, 2016 and January 31, 2015 are referred to as fiscal 2016, fiscal 2015, and fiscal 2014, respectively, and were 52-week years.

Stock dividend. In March 2015, the Company’s Board of Directors declared a two-for-one stock split of the Company’s common stock issued in the form of a stock dividend. Stockholders of record as of April 22, 2015 were issued one additional share of common stock on June 11, 2015 for each share held. All share and per share amounts have been adjusted to reflect the stock split.

Use of accounting estimates. The preparation of consolidated financial statements in conformity with Generally Accepted Accounting Principles in the United States of America (“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 consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. The Company’s significant accounting estimates include valuation reserves for inventory shortage, packaway inventory costs, useful lives of fixed assets, insurance reserves, and reserves for uncertain tax positions.

Purchase obligations. As of January 28, 2017, the Company had purchase obligations of approximately $2,146 million. These purchase obligations primarily consist of merchandise inventory purchase orders, commitments related to construction projects, store fixtures and supplies, and information technology service, transportation, and maintenance contracts.

Cash and cash equivalents. Cash equivalents consist of highly liquid, fixed income instruments purchased with an original maturity of three months or less.

Restricted cash, cash equivalents, and investments. The Company has restricted cash, cash equivalents, and investments that serve as collateral for certain insurance obligations of the Company. These restricted funds are invested in bank deposits, money market mutual funds, U.S. Government and agency securities, and corporate securities and cannot be withdrawn from the Company’s account without the prior written consent of the secured parties. The following table summarizes total restricted cash, cash equivalents, and investments which were included in Prepaid expenses and other and Other long-term assets in the Consolidated Balance Sheets as of January 28, 2017 and January 30, 2016:

Restricted Assets ($000)		2016				2015
Prepaid expenses and other		$	13,642			$	15,770
Other long-term assets		54,567				55,913
Total		$	68,209			$	71,683

The classification between current and long-term is based on the timing of expected payments of the insurance obligations.

Estimated fair value of financial instruments. The carrying value of cash and cash equivalents, short- and long-term investments, restricted cash and cash equivalents, restricted investments, accounts receivable, other long-term assets, accounts payable, and other long-term liabilities approximates their estimated fair value. See Note B and Note D for additional fair value information.

Cash and cash equivalents were $1,111.6 million and $761.6 million, at January 28, 2017 and January 30, 2016, respectively, and include bank deposits and money market funds for which the fair value was determined using quoted prices for identical assets in active markets, which are considered to be Level 1 inputs under the fair value measurements and disclosures guidance.

Investments. The Company’s investments are comprised of various debt securities. At January 28, 2017 and January 30, 2016, these investments were classified as available-for-sale and are stated at fair value. Investments are classified as either short- or long-term based on their maturity dates and the Company’s intent. Investments with a maturity of less than one year are classified as short-term. See Note B for additional information.

Merchandise inventory. Merchandise inventory is stated at the lower of cost (determined using a weighted average basis) or net realizable value. The Company purchases inventory that can either be shipped to stores or processed as packaway merchandise with the intent that it will be warehoused and released to stores at a later date. The timing of the release of packaway inventory to the stores is principally driven by the product mix and seasonality of the merchandise, and its relation to the Company’s store merchandise assortment plans. As such, the aging of packaway varies by merchandise category and seasonality of purchase, but typically packaway remains in storage less than six months. Merchandise inventory includes acquisition, processing, and storage costs related to packaway inventory. The cost of the Company’s merchandise inventory is reduced by valuation reserves for shortage based on historical shortage experience from the Company’s physical merchandise inventory counts and cycle counts.

Cost of goods sold. In addition to product costs, the Company includes in cost of goods sold its buying, distribution and freight expenses as well as occupancy costs, and depreciation and amortization related to the Company’s retail stores, buying, and distribution facilities. Buying expenses include costs to procure merchandise inventories. Distribution expenses include the cost of operating the Company’s distribution centers and warehouse facilities.

Property and equipment. Property and equipment are stated at cost, less accumulated depreciation and amortization. Depreciation is calculated using the straight-line method over the estimated useful life of the asset, typically ranging from three to 12 years for equipment and information systems and 20 to 40 years for land improvements and buildings. Depreciation and amortization expense on property and equipment was $302.5 million, $274.8 million, and $233.0 million for fiscal 2016, 2015, and 2014, respectively. The cost of leasehold improvements is amortized over the useful life of the asset or the applicable lease term, whichever is less. The Company capitalizes interest during the construction period. Interest capitalized was $0.0 million, $6.5 million and $10.8 million in fiscal 2016, 2015, and 2014, respectively. As of January 28, 2017, January 30, 2016, and January 31, 2015 the Company had $25.7 million, $35.8 million, and $58.6 million, respectively, of property and equipment purchased but not yet paid. These purchases are included in Property and Equipment and in Accounts payable and Accrued expenses and other in the accompanying Consolidated Balance Sheets.

Other long-term assets. Other long-term assets as of January 28, 2017 and January 30, 2016 consisted of the following:

($000)		2016				2015
Deferred compensation (Note B)		$	100,423			$	86,073
Restricted cash and investments		54,567				55,913
Other		11,976				10,701
Total		$	166,966			$	152,687

Property and other long-term assets that are subject to amortization are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Intangible assets that are not subject to amortization, including goodwill, are tested for impairment annually or more frequently if events or changes in circumstances indicate that the asset may be impaired. Based on the Company’s evaluation during fiscal 2016, 2015, and 2014, no impairment charges were recorded.

Store closures. The Company continually reviews the operating performance of individual stores. For stores that are closed, the Company records a liability for future minimum lease payments net of estimated sublease recoveries and

related ancillary costs at the time the liability is incurred. The lease loss liability was $1.2 million and $1.8 million, as of January 28, 2017 and January 30, 2016, respectively. Operating costs, including depreciation, of stores to be closed are expensed during the period they remain in use. The Company closed six stores in both 2016 and 2015.

Accounts payable. Accounts payable represents amounts owed to third parties at the end of the period. Accounts payable includes book cash overdrafts (checks issued under zero balance accounts not yet presented for payment) in excess of cash balances in such accounts of approximately $96.3 million and $100.3 million at January 28, 2017 and January 30, 2016, respectively. The Company includes the change in book cash overdrafts in operating cash flows.

Insurance obligations. The Company uses a combination of insurance and self-insurance for a number of risk management activities, including workers’ compensation, general liability, and employee-related health care benefits. The self-insurance and deductible liability is determined actuarially, based on claims filed and an estimate of claims incurred but not yet reported. Self-insurance and deductible reserves as of January 28, 2017 and January 30, 2016 consisted of the following:

($000)		2016				2015
Workers’ compensation		$	94,920			$	93,452
General liability		39,679				39,895
Medical plans		4,899				4,155
Total		$	139,498			$	137,502

Workers’ compensation and self-insured medical plan liabilities are included in Accrued payroll and benefits and accruals for general liability are included in Accrued expenses and other in the accompanying Consolidated Balance Sheets.

Other long-term liabilities. Other long-term liabilities as of January 28, 2017 and January 30, 2016 consisted of the following:

($000)		2016				2015
Income taxes		$	97,502			$	94,194
Deferred compensation (Note G)		100,423				86,073
Deferred rent		67,941				63,241
Tenant improvement allowances		20,554				20,300
Other		4,530				4,360
Total		$	290,950			$	268,168

Lease accounting. When a lease contains “rent holidays” or requires fixed escalations of the minimum lease payments, the Company records rental expense on a straight-line basis over the term of the lease and the difference between the average rental amount charged to expense and the amount payable under the lease is recorded as deferred rent. The Company begins recording rent expense on the lease possession date. Tenant improvement allowances are included in Other long-term liabilities and are amortized over the lease term. Changes in tenant improvement allowances are included as a component of operating activities in the Consolidated Statements of Cash Flows.

Revenue recognition. The Company recognizes revenue at the point of sale and maintains an allowance for estimated future returns. Sales of stored value cards are deferred until they are redeemed for the purchase of Company merchandise. The Company’s stored value cards do not have expiration dates. Based upon historical redemption rates, a small percentage of stored value cards will never be redeemed, which represents breakage. The Company recognizes income from stored value card breakage as a reduction of operating expenses when redemption by a customer is considered to be remote. Income recognized from breakage was not significant in fiscal 2016, 2015, and 2014.

Sales tax collected is not recognized as revenue and amounts outstanding are included in Accrued expenses and other in the Consolidated Balance Sheets.

Allowance for sales returns. An allowance for the gross margin loss on estimated sales returns is included in Accrued expenses and other in the Consolidated Balance Sheets. The allowance for sales returns consists of the following:

($000)		Beginning Balance				Additions				Returns				Ending Balance
Year ended:
January 28, 2017		$	7,955			$	761,350			$	(760,899	)		$	8,406
January 30, 2016		$	8,594			$	737,727			$	(738,366	)		$	7,955
January 31, 2015		$	7,431			$	717,040			$	(715,877	)		$	8,594

Store pre-opening. Store pre-opening costs are expensed in the period incurred.

Advertising. Advertising costs are expensed in the period incurred and are included in Selling, general and administrative expenses. Advertising costs for fiscal 2016, 2015, and 2014 were $73.0 million, $77.1 million, and $72.1 million, respectively.

Stock-based compensation. The Company recognizes compensation expense based upon the grant date fair value of all stock-based awards, typically over the vesting period. See Note C for more information on the Company’s stock-based compensation plans.

Taxes on earnings. The Company accounts for income taxes in accordance with Accounting Standards Codification (“ASC”) 740, “Accounting for Income Taxes,” which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in the Company's consolidated financial statements or tax returns. In estimating future tax consequences, the Company generally considers all expected future events other than changes in the tax law or tax rates. ASC 740 clarifies the criteria that an individual tax position must satisfy for some or all of the benefits of that position to be recognized in a company’s consolidated financial statements. ASC 740 prescribes a recognition threshold of more-likely-than-not, and a measurement standard for all tax positions taken or expected to be taken on a tax return, in order for those tax positions to be recognized in the consolidated financial statements. See Note F.

Treasury stock. The Company records treasury stock at cost. Treasury stock includes shares purchased from employees for tax withholding purposes related to vesting of restricted stock grants.

Earnings per share (“EPS”). The Company computes and reports both basic 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, including unexercised stock options and unvested shares of both performance and non-performance based awards of restricted stock.

In fiscal 2016, 2015, and 2014 there were 2,500, 25,000, and 5,100 weighted average shares, respectively, that were excluded from the calculation of diluted EPS because their effect would have been anti-dilutive for those years.

The following is a reconciliation of the number of shares (denominator) used in the basic and diluted EPS computations:

Shares in (000s)		Basic EPS				Effect of dilutive common stock equivalents				Diluted EPS
2016
Shares		392,124				2,834				394,958
Amount		$	2.85			$	(0.02	)		$	2.83
2015
Shares		403,034				3,371				406,405
Amount		$	2.53			$	(0.02	)		$	2.51
2014
Shares		413,553				4,524				418,077
Amount		$	2.24			$	(0.03	)		$	2.21

Comprehensive income. Comprehensive income includes net earnings and components of other comprehensive income (loss), net of tax, consisting of unrealized investment gains or losses.

Recently issued accounting standards. In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (ASU) 2014-09, Revenue from Contracts with Customers (Topic 606). The guidance provides a five-step analysis of transactions to determine when and how revenue is recognized. The core principle of the guidance is that a company should recognize revenue when the customer obtains control of promised goods or services in an amount that reflects the consideration which the company expects to receive in exchange for those goods or services. ASU 2014-09 is effective for the Company’s annual and interim reporting periods beginning in fiscal 2018. The Company does not expect the adoption of this new guidance to be material to its consolidated financial statements.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). The ASU requires balance sheet recognition for all leases with lease terms greater than one year including a lease liability, which is a lessee‘s obligation to make lease payments arising from a lease, measured on a discounted basis; and a right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term. ASU 2016-02 is effective for the Company's annual and interim reporting periods beginning in fiscal 2019. The Company is currently evaluating the effect adoption of this new guidance will have on its consolidated financial statements. Due to the substantial number of leases that it has, the Company believes this ASU will increase assets and liabilities by the same material amount on its consolidated balance sheet. See Note E for disclosure of the Company's current undiscounted minimum commitments under noncancelable operating leases. The Company does not believe adoption of this ASU will have a significant impact to its consolidated statements of earnings, stockholders’ equity, and cash flows.

In March 2016, the FASB issued ASU 2016-09, Compensation - Stock Compensation (Topic 718) - Improvements to Employee Share-Based Payment Accounting. ASU 2016-09 provides for changes to accounting for stock compensation including 1) excess tax benefits and tax deficiencies related to share based payment awards will be recognized as income tax benefit or expense in the reporting period in which they occur (previously such amounts were recognized in additional paid-in capital); 2) excess tax benefits will be classified as an operating activity in the statement of cash flows; and 3) the option to elect to estimate forfeitures or account for them when they occur. ASU 2016-09 is effective for the Company beginning in the first quarter of 2017. Upon adoption of ASU 2016-09, the Company plans to account for forfeitures as incurred and expects this adoption along with the retrospective impact on its classification of cash flows between operating and financing activities to be immaterial. The Company believes the impact of recording excess tax benefits in income taxes in its consolidated statement of earnings may be material. The magnitude of such impact is dependent upon the Company’s future stock price in relation to the fair value of awards on grant date and the Company’s future grants of stock-based compensation. See Note F for disclosure of the Company's historical accounting treatment of excess tax benefits.

In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash. ASU 2016-18 requires restricted cash and restricted cash equivalents be included with cash and cash equivalents when reconciling the total beginning and ending amounts on the statement of cash flows. The standard also requires companies who report cash and restricted cash separately on the balance sheet to reconcile those amounts to the

statement of cash flows. ASU 2016-18 is effective for the Company's annual and interim reporting periods beginning in fiscal 2018. The Company does not believe adoption of this ASU will have a significant impact to its consolidated financial statements.

Note B: Investments and Restricted Investments

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 and maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. Corporate, U.S. government and agency, and mortgage-backed securities are classified within Level 1 or Level 2 because these securities are valued using quoted market prices or alternative pricing sources and models utilizing market observable inputs.

The fair value of the Company’s financial instruments as of January 28, 2017 and January 30, 2016 are as follows:

($000)		2016				2015
Cash and cash equivalents (Level 1)		$	1,111,599			$	761,602
Investments (Level 2)		$	1,288			$	3,068
Restricted cash and cash equivalents (Level 1)		$	64,581			$	67,947
Restricted investments
Level 1		$	—			$	3,736
Level 2		$	3,628			$	—

Restricted investments in government bonds with a fair value of $3.6 million at January 28, 2017 were transferred from Level 1 into Level 2 due to the market for the identical bonds being inactive.

The underlying assets in the Company’s non-qualified deferred compensation program as of January 28, 2017 and January 30, 2016 (included in Other long-term assets and in Other long-term liabilities) primarily consist of participant-directed money market, stable value, stock, and bond funds. The fair value measurement for funds with quoted market prices in active markets (Level 1) and for funds without quoted market prices in active markets (Level 2) are as follows:

($000)	2016				2015
Level 1	$	84,933			$	73,633
Level 2	15,490				12,440
Total	$	100,423			$	86,073

Note C: Stock-Based Compensation

For fiscal 2016, 2015, and 2014, the Company recognized stock-based compensation expense as follows:

($000)	2016				2015				2014
Restricted stock	$	38,234			$	37,204			$	34,729
Performance awards	33,379				31,056				16,003
ESPP	2,941				2,677				2,269
Total	$	74,554			$	70,937			$	53,001

Capitalized stock-based compensation cost was not significant in any year.

No stock options were granted during fiscal 2016, 2015, and 2014. At January 28, 2017, the Company had one active stock-based compensation plan, which is further described in Note H. The Company recognizes expense for ESPP purchase rights equal to the value of the 15% discount given on the purchase date.

Total stock-based compensation recognized in the Company's Consolidated Statements of Earnings for fiscal 2016, 2015, and 2014 is as follows:

Statements of Earnings Classification ($000)	2016				2015				2014
Cost of goods sold	$	34,077			$	32,922			$	27,088
Selling, general and administrative	40,477				38,015				25,913
Total	$	74,554			$	70,937			$	53,001

Note D: Debt

Senior notes. Unsecured senior debt, net of unamortized discounts and debt issuance costs, as of January 28, 2017 and January 30, 2016 consisted of the following:

($000)		2016				2015
6.38% Series A Senior Notes due 2018		$	84,939			$	84,906
6.53% Series B Senior Notes due 2021		64,902				64,882
3.375% Senior Notes due 2024		246,652				246,237
Total		$	396,493			$	396,025

As of January 28, 2017, the Company had outstanding unsecured 3.375% Senior Notes due September 2024 (the “2024 Notes”) with an aggregate principal amount of $250 million. Interest on the 2024 Notes is payable semi-annually.

As of January 28, 2017, the Company also had outstanding two other series of unsecured senior notes in the aggregate principal amount of $150 million, held by various institutional investors. The Series A notes totaling $85 million are due in December 2018 and bear interest at a rate of 6.38%. The Series B notes totaling $65 million are due in December 2021 and bear interest at a rate of 6.53%. Borrowings under these senior notes are subject to certain financial covenants, including interest coverage and other financial ratios. As of January 28, 2017, the Company was in compliance with these covenants.

As of January 28, 2017 and January 30, 2016, total unamortized discount and debt issuance costs were $3.5 million and $4.0 million, respectively, and were classified as a reduction of Long-term debt.

The 2024 Notes, Series A, and Series B senior notes are all subject to prepayment penalties for early payment of principal.

The aggregate fair value of the three outstanding senior note issuances was approximately $419 million and $423 million as of January 28, 2017 and January 30, 2016, 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.

The following table shows scheduled annual principal payments on Long-term debt:

($000)
2017			$	—
2018			$	85,000
2019			$	—
2020			$	—
2021			$	65,000
Thereafter			$	250,000

The table below shows the components of interest expense and income for fiscal 2016, 2015, and 2014:

($000)		2016				2015				2014
Interest expense on long-term debt		$	18,573			$	18,568			$	12,990
Other interest expense		1,022				1,252				1,230
Capitalized interest		(26		)		(6,530		)		(10,825		)
Interest income		(3,081		)		(678		)		(411		)
Interest expense, net		$	16,488			$	12,612			$	2,984

Revolving credit facility. In April 2016, the Company entered into a new $600 million unsecured revolving credit facility. This credit facility, which replaced the Company's previous $600 million unsecured revolving credit facility, expires in April 2021 and contains a $300 million sublimit for issuance of standby letters of credit (subject to increase in proportion to any increase in the size of the credit facility). The facility also contains an option allowing the Company to increase the size of its credit facility by up to an additional $200 million, with the agreement of the lenders. Interest on any borrowings under this facility is based on LIBOR plus an applicable margin (currently 100 basis points) and is payable quarterly and upon maturity. The revolving credit facility may be extended, at the Company’s option, for up to two additional one year periods, subject to customary conditions. As of January 28, 2017 the Company had no borrowings or standby letters of credit outstanding under this facility and the $600 million credit facility remains in place and available.

The revolving credit facility is subject to a financial leverage ratio covenant. As of January 28, 2017, the Company was in compliance with this covenant.

Standby letters of credit and collateral trust. The Company uses standby letters of credit outside of its revolving credit facility in addition to a funded trust to collateralize its insurance obligations. As of January 28, 2017 and January 30, 2016, the Company had $11.6 million and $15.3 million, respectively, in standby letters of credit and $56.6 million and $56.4 million, respectively, in a collateral trust. The standby letters of credit are collateralized by restricted cash and the collateral trust consists of restricted cash, cash equivalents, and investments.

Trade letters of credit. The Company had $26.5 million and $32.0 million in trade letters of credit outstanding at January 28, 2017 and January 30, 2016, respectively.

Note E: Leases

The Company currently leases all but three of its store locations with original, non-cancelable terms that in general range from three to ten years. Store leases typically contain provisions for three to four renewal options of five years each. Most store leases also provide for minimum annual rentals and for payment of certain expenses. In addition, some store leases also have provisions for additional rent based on a percentage of sales.

The Company leases three warehouses. Two of the warehouses are in Carlisle, Pennsylvania with leases expiring in 2018 and 2019. The third warehouse is in Fort Mill, South Carolina, with a lease expiring in 2019. The leases for the two Carlisle, Pennsylvania warehouses contain renewal provisions.

The Company leases approximately 87,000 square feet of office space for its Los Angeles buying office. The lease term for this facility expires in 2017 and contains renewal provisions. In addition, the Company has a ground lease related to its New York buying office.

The aggregate future minimum annual lease payments under leases, including the ground lease related to the New York buying office, in effect at January 28, 2017 are as follows:

($000)		Total operating leases
2017		$	490,936
2018		507,976
2019		429,178
2020		349,362
2021		268,224
Thereafter		1,450,539
Total minimum lease payments		$	3,496,215

Rent expense, including contingent rent and net of sublease income, was $505.2 million, $473.2 million, and $451.9 million in fiscal 2016, 2015, and 2014, respectively. Contingent rent and sublease income was not significant in any year.

Note F: Taxes on Earnings

The provision for income taxes consisted of the following:

($000)		2016				2015				2014
Current
Federal		$	632,872			$	497,710			$	499,009
State		44,333				37,030				36,547
		677,205				534,740				535,556
Deferred
Federal		(8,350		)		55,404				23,452
State		(353		)		954				1,634
		(8,703		)		56,358				25,086
Total		$	668,502			$	591,098			$	560,642

In fiscal 2016, 2015, and 2014, the Company realized tax benefits of $23.3 million, $42.4 million and $29.8 million, respectively, related to employee equity programs that were recorded in additional paid-in capital.

The provision for taxes for financial reporting purposes is different from the tax provision computed by applying the statutory federal income tax rate. The differences are reconciled below:

		2016			2015			2014
Federal income taxes at the statutory rate		35	%		35	%		35	%
State income taxes (net of federal benefit) and other, net		2	%		2	%		3	%
Total		37	%		37	%		38	%

The components of deferred taxes at January 28, 2017 and January 30, 2016 are as follows:

($000)		2016				2015
Deferred Tax Assets
Accrued liabilities		$	71,796			$	69,144
Deferred compensation		36,101				29,932
Stock-based compensation		44,865				41,388
Deferred rent		25,221				23,903
State taxes and credits		28,484				21,973
Employee benefits		23,987				22,156
Other		8,223				6,835
Gross Deferred Tax Assets		238,677				215,331
Less: Valuation allowance		(3,730		)		—
Deferred Tax Assets		234,947				215,331
Deferred Tax Liabilities
Depreciation		(313,526		)		(304,191		)
Merchandise inventory		(28,853		)		(28,085		)
Supplies		(13,418		)		(12,559		)
Other		(535		)		(584		)
Deferred Tax Liabilities		(356,332		)		(345,419		)
Net Deferred Tax Liabilities		$	(121,385	)		$	(130,088	)

At the end of fiscal 2016 and 2015, the Company's state tax credit carryforwards for income tax purposes were approximately $22.8 million and $16.1 million, respectively. The state tax credit carryforwards will begin to expire in fiscal 2019. The Company has provided a valuation allowance of $3.7 million for deferred tax assets related to state tax credits that are not expected to be realized.

The changes in amounts of unrecognized tax benefits (gross of federal tax benefits and excluding interest and penalties) at fiscal 2016, 2015, and 2014 are as follows:

($000)		2016				2015				2014
Unrecognized tax benefits - beginning of year		$	75,372			$	78,116			$	80,323
Gross increases:
Tax positions in current period		12,394				14,990				15,441
Tax positions in prior period		2,897				—				—
Gross decreases:
Tax positions in prior periods		(3,231		)		(10,589		)		(9,432		)
Lapse of statute limitations		(6,310		)		(4,216		)		(5,732		)
Settlements		—				(2,929		)		(2,484		)
Unrecognized tax benefits - end of year		$	81,122			$	75,372			$	78,116

At the end of fiscal 2016, 2015, and 2014, the reserves for unrecognized tax benefits were $98.6 million, $94.2 million, and $101.7 million inclusive of $17.5 million, $18.8 million, and $23.6 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, $49.1 million would impact the Company’s effective tax rate. 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 tax assets and liabilities. These amounts are net of federal and state income taxes.

It is reasonably possible that certain federal and state tax matters may be concluded or statutes of limitations may lapse during the next twelve months. Accordingly, the total amount of unrecognized tax benefits may decrease, reducing the provision for taxes on earnings by up to $4.3 million.

The Company is open to audit by the Internal Revenue Service under the statute of limitations for fiscal years 2013 through 2016. The Company’s state income tax returns are generally open to audit under the various statutes of limitations for fiscal years 2012 through 2016. Certain federal and 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 consolidated financial statements.

Note G: Employee Benefit Plans

The Company has a defined contribution plan that is available to certain employees. Under the plan, employee and Company contributions and accumulated plan earnings qualify for favorable tax treatment under Section 401(k) of the Internal Revenue Code. This plan permits employees to make contributions up to the maximum limits allowable under the Internal Revenue Code. The Company matches up to 4% of the employee’s salary up to the plan limits. Company matching contributions to the 401(k) plan were $13.9 million, $12.7 million, and $11.4 million in fiscal 2016, 2015, and 2014, respectively.

The Company also has an Incentive Compensation Plan which provides cash awards to key management and employees based on Company and individual performance.

The Company also makes available to management a Non-qualified Deferred Compensation Plan which allows management to make payroll contributions on a pre-tax basis in addition to the 401(k) plan. Other long-term assets include $100.4 million and $86.1 million at January 28, 2017 and January 30, 2016, respectively, of long-term plan investments, at market value, set aside or designated for the Non-qualified Deferred Compensation Plan (See Note B). Plan investments are designated by the participants, and investment returns are not guaranteed by the Company. The Company has a corresponding liability to participants of $100.4 million and $86.1 million at January 28, 2017 and January 30, 2016, respectively, included in Other long-term liabilities in the Consolidated Balance Sheets.

In addition, the Company has certain individuals who receive or will receive post-employment medical benefits. The estimated liability for these benefits of $8.0 million and $13.2 million is included in Accrued expenses and other in the accompanying Consolidated Balance Sheets as of January 28, 2017 and January 30, 2016, respectively.

Note H: Stockholders' Equity

Common stock. In February 2017, the Company’s Board of Directors approved a new two-year $1.75 billion stock repurchase program through fiscal 2018.

The following table summarizes the Company’s stock repurchase activity in fiscal 2016, 2015, and 2014:

Fiscal Year		Shares repurchased (in millions)			Average repurchase price		Repurchased (in millions)
2016		11.6			$60.15		$700
2015		13.7			$51.27		$700
2014		14.8			$37.15		$550

Preferred stock. The Company has four million shares of preferred stock authorized, with a par value of $.01 per share. No preferred stock is issued or outstanding.

Dividends. On February 28, 2017, the Company’s Board of Directors declared a quarterly cash dividend of $0.1600 per common share, payable on March 31, 2017. The Company’s Board of Directors declared cash dividends of $0.1350 per common share in March, May, August, and November 2016, cash dividends of $0.1175 per common share in February, May, August, and November 2015, and cash dividends of $0.1000 per common share in February, May, August, and November 2014.

2008 Equity Incentive Plan. The Ross Stores, Inc. 2008 Equity Incentive Plan (the “2008 Plan”) has an initial share reserve of 33.0 million shares of the Company’s common stock, of which 24.0 million shares can be issued as full value awards. The 2008 Plan provides for various types of incentive awards, which may potentially include the grant of stock options, stock appreciation rights, restricted stock purchase rights, restricted stock bonuses, restricted stock

units, performance shares, performance units, and deferred compensation awards. As of January 28, 2017, there were 12.1 million shares that remained available for grant under the 2008 Plan.

A summary of the stock option activity for fiscal 2016 is presented below:

		Number of shares			Weighted average exercise price			Weighted average remaining contractual term		Aggregate intrinsic value ($000)
Outstanding at January 30, 2016		310,066			$7.34
Granted		—			—
Exercised		(261,502	)		7.18
Forfeited		—			—
Outstanding at January 28, 2017, all vested		48,564			$8.19			0.32		$2,775

As of January 28, 2017, the outstanding and exercisable options to purchase 48,564 shares of common stock had a weighted average exercise price of $8.19 and a weighted average remaining contractual life of 0.32 years.

A summary of restricted stock and performance share award activity for fiscal 2016 is presented below:

		Number of shares (000)			Weighted average grant date fair value
Unvested at January 30, 2016		6,104			$34.87
Awarded		1,537			57.08
Released		(1,916	)		27.82
Forfeited		(162	)		38.14
Unvested at January 28, 2017		5,563			$43.19

The market value of shares of restricted stock and of the stock underlying restricted stock units at the date of grant is amortized to expense over the vesting period of generally three to five years. The unamortized compensation expense at January 28, 2017 and January 30, 2016 was $101.6 million and $94.5 million, respectively, which is expected to be recognized over a weighted average remaining period of 1.8 years. Intrinsic value for restricted stock, defined as the closing market value on the last business day of fiscal year 2016 (or $65.33), was $363.4 million. A total of 12.1 million, 12.7 million, and 13.3 million shares were available for new restricted stock awards at the end of fiscal 2016, 2015, and 2014, respectively. During fiscal 2016, 2015, and 2014, shares purchased by the Company for tax withholding totaled 0.7 million, 1.3 million, and 1.1 million shares, respectively, and are considered treasury shares which are available for reissuance. As of January 28, 2017 and January 30, 2016, the Company held 11.8 million and 11.1 million shares of treasury stock, respectively.

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 or restricted stock units on a specified settlement date based on the Company’s attainment of a profitability-based performance goal during the performance period, which is the Company’s fiscal year. If attained, the restricted stock or units then vest over a service period, generally two to three years from the date the performance award was granted. The release of shares related to restricted stock units earned is deferred generally for one year from the date earned. The Company issued approximately 682,000, 601,000, and 607,000 shares in settlement of the fiscal 2016, 2015, and 2014 awards.

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 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.

During fiscal 2016, 2015, and 2014, employees purchased approximately 0.3 million, 0.4 million, and 0.4 million shares, respectively, of the Company’s common stock under the plan at weighted average per share prices of $51.86, $43.16,

and $32.18, respectively. Through January 28, 2017, approximately 39.4 million shares had been issued under this plan and 5.6 million shares remained available for future issuance.

Note I: Related Party Transactions

The Company has a consulting agreement with Norman Ferber, its Chairman Emeritus of the Board of Directors, under which the Company pays him an annual consulting fee of $1.5 million through May 2018. In addition, the agreement provides for administrative support and health and other benefits for him and his dependents, which totaled approximately $0.4 million, $0.3 million, and $0.3 million in fiscal 2016, 2015, and 2014, respectively, along with amounts to cover premiums through May 2018 on a life insurance policy with a death benefit of $2.0 million. On termination of Mr. Ferber’s consultancy with the Company, the Company will pay Mr. Ferber $75,000 per year for a period of 10 years.

Robert Ferber, the son of Norman Ferber, is a buyer with the Company. The Company paid Robert Ferber compensation including salary and bonus of approximately $148,000, $131,000, and $133,000 in fiscal 2016, 2015, and 2014, respectively.

Note J: Litigation, Claims, and Assessments

Like many retailers, the Company has been named in class action lawsuits, primarily in California, alleging violation of wage and hour laws and consumer protection laws. Class action litigation remains pending as of January 28, 2017.

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, 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 pending class 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.

Note K: Quarterly Financial Data (Unaudited)

Summarized quarterly financial information for fiscal 2016 and 2015 is presented in the tables below.

Year ended January 28, 2017:

		Quarter Ended
($000, except per share data)		April 30, 2016				July 30, 2016				October 29, 2016				January 28, 2017
Sales		$	3,088,995			$	3,180,917			$	3,086,687			$	3,510,158
Cost of goods sold		2,176,205				2,251,845				2,206,092				2,539,563
Selling, general and administrative		436,924				469,511				490,171				493,802
Interest expense, net		4,364				4,213				4,156				3,755
Total costs and expenses		2,617,493				2,725,569				2,700,419				3,037,120
Earnings before taxes		471,502				455,348				386,268				473,038
Provision for taxes on earnings		180,868				173,442				141,722				172,470
Net earnings		$	290,634			$	281,906			$	244,546			$	300,568
Earnings per share – basic1		$	0.73			$	0.72			$	0.63			$	0.77
Earnings per share – diluted1		$	0.73			$	0.71			$	0.62			$	0.77
Cash dividends declared per share
on common stock		$	0.1350			$	0.1350			$	0.1350			$	0.1350
Stock price
High		$	59.30			$	61.98			$	65.06			$	69.53
Low		$	52.56			$	52.34			$	60.68			$	61.28

1 EPS is computed independently for each of the quarters presented. The sum of the quarters may not equal the total year amount due to the impact of changes in average quarterly shares outstanding.

Year ended January 30, 2016:

		Quarter Ended
($000, except per share data)		May 2, 2015				August 1, 2015				October 31, 2015				January 30, 2016
Sales		$	2,938,148			$	2,968,270			$	2,782,855			$	3,250,726
Cost of goods sold		2,067,455				2,119,480				2,003,347				2,386,591
Selling, general and administrative		409,298				435,226				443,354				450,877
Interest expense, net		2,003				1,652				4,427				4,530
Total costs and expenses		2,478,756				2,556,358				2,451,128				2,841,998
Earnings before taxes		459,392				411,912				331,727				408,728
Provision for taxes on earnings		177,187				153,273				116,071				144,567
Net earnings		$	282,205			$	258,639			$	215,656			$	264,161
Earnings per share – basic1,2		$	0.69			$	0.64			$	0.54			$	0.66
Earnings per share – diluted1,2		$	0.69			$	0.63			$	0.53			$	0.66
Cash dividends declared per share
on common stock2		$	0.1175			$	0.1175			$	0.1175			$	0.1175
Stock price2
High		$	53.73			$	53.28			$	56.53			$	56.26
Low		$	45.93			$	47.79			$	47.22			$	44.81

1 EPS is computed independently for each of the quarters presented. The sum of the quarters may not equal the total year amount due to the impact of changes in average quarterly shares outstanding.

2 All per share amounts have been adjusted for the two-for-one stock split effective June 11, 2015.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of Ross Stores, Inc.:

We have audited the accompanying consolidated balance sheets of Ross Stores, Inc. and subsidiaries (the "Company") as of January 28, 2017 and January 30, 2016, and the related consolidated statements of earnings, comprehensive income, stockholders' equity, and cash flows for each of the three years in the period ended January 28, 2017. We also have audited the Company's internal control over financial reporting as of January 28, 2017, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. The Company's management is responsible for these financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying “Management’s Annual Report on Internal Control over Financial Reporting.” Our responsibility is to express an opinion on these consolidated financial statements and an opinion on the Company's internal control over financial reporting based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

A company's internal control over financial reporting is a process designed by, or under the supervision of, the company's principal executive and principal financial officers, or persons performing similar functions, and effected by the company's board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.

Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Ross Stores, Inc. and subsidiaries as of January 28, 2017 and January 30, 2016, and the results of their operations and their cash flows for each of the three years in the period ended January 28, 2017, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of January 28, 2017, based on the criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

/s/DELOITTE & TOUCHE LLP

San Francisco, California

March 28, 2017