Ross Stores (ROST) 10-K risk factor changes: FY2019 vs FY2018

Our Annual Report on Form 10-K for fiscal [removed: 2017,] [added: 2018,] and information we provide in our Annual Report to Stockholders, press releases, and other investor communications, including those on our corporate website, may contain forward-looking statements with respect to anticipated future events and our projected growth, financial performance, operations, and competitive position that are subject to risks and uncertainties that could cause our actual results to differ materially from those forward-looking statements and [added: from] our prior expectations and projections.

We compete [added: for customers, associates, store locations, and merchandise] with many other local, regional, and national retailers, traditional department stores, upscale mass merchandisers, other off-price retailers, specialty stores, internet and catalog businesses, and other forms of retail [removed: commerce, for customers, associates, store locations, and merchandise.][added: commerce.]

The substantial sales growth in [removed: the] e-commerce [removed: industry] within the last decade has also encouraged the entry of many new competitors, new business models, and an increase in competition from established companies looking for ways to create successful on-line off-price shopping alternatives.

Intense pressures from our competitors, our inability to adapt effectively and quickly to a changing competitive landscape, or a failure to effectively execute our off-price model, could reduce demand for our merchandise, decrease our inventory turnover, cause [added: us to take] greater markdowns, and negatively affect our sales and margins.

Although our off-price business model provides us certain advantages and [removed: could] [added: may] allow us greater flexibility than traditional retailers [added: have] in adjusting our merchandise mix to ever-changing consumer tastes, our merchandising decisions may still fail to correctly anticipate and match consumer trends and preferences, particularly in our newer geographic markets.

Unseasonable weather and prolonged, extreme temperatures, and events such as storms, affect consumers’ buying patterns and willingness to shop, and [removed: could] [added: may] adversely affect the demand for merchandise in our stores, particularly in apparel and seasonal merchandise.

As a result, adverse or unseasonable weather in any of our markets could lead to disappointing sales and [added: cause us to] increase our markdowns, which may negatively affect our sales and margins.

If we make packaway purchases that do not [removed: meet] [added: align with] consumer preferences at the later time of release to our stores, we could have significant inventory markdowns.

Our opportunistic buying places considerable discretion [removed: on] [added: with] our merchants, who are in the marketplace continually and who are generally purchasing merchandise for the current or upcoming season.

Despite security measures we have in [removed: place] [added: place,] and our efforts to prevent, monitor, and mitigate attacks and errors, our facilities and systems (or those of third-party service providers we utilize or connect to) may be vulnerable to security breaches, acts of vandalism, computer viruses, misplaced or lost data, programming and/or human errors, phishing and similar fraudulent attacks, or other similar events.

It is also possible that an associate within our [removed: Company] [added: Company,] or a third party we do business [removed: with] [added: with,] may purposefully or inadvertently cause a security breach involving such information.

We depend on the [removed: integrity] [added: integrity, continuous availability,] and consistent operations of these systems to process transactions in our stores, track inventory flow, manage merchandise allocation and distribution logistics, generate performance and financial reports, and support merchandising decisions.

We must monitor and choose [removed: the right] [added: sound] investments and implement them at the right pace.

[removed: Excessive] [added: An excessive rate of] technological change could [removed: impact] [added: detract from] the effectiveness of adoption, and could make it more difficult for us to realize benefits from new technology.

[removed: Targeting the wrong] [added: Poorly targeting] opportunities, failing to make [removed: the best] [added: good] investments, or making an investment commitment significantly above or below our needs could damage our competitive position and adversely impact our business and results of operations.

These initiatives might not provide [added: us with] the anticipated [removed: benefits] [added: benefits,] or may provide them on a delayed schedule or at a higher cost.

Such disruptions may result from: damage or destruction to our distribution centers; weather-related events; natural disasters; trade restrictions; tariffs; third-party strikes or ineffective cross dock [removed: operations,] [added: operations;] work stoppages or slowdowns; shipping capacity constraints; supply or shipping interruptions or costs; or other factors beyond our control.

We may not be able to open new stores or, if opened, operate those [added: new] stores profitably.

New markets may have competitive conditions, consumer [removed: tastes] [added: tastes,] and discretionary spending patterns that are more difficult to predict or satisfy than our existing markets.

These [removed: laws and] regulations [added: and related laws] frequently change, and the ultimate cost of compliance cannot be precisely estimated.

Although our vendor arrangements typically place contractual responsibility on the vendor for resulting liability and we generally rely on our vendors to provide authentic merchandise that matches the stated quality [removed: attributes] [added: attributes,] and complies with applicable product safety and other laws, vendor non-compliance with consumer product safety laws may subject us to product recalls, make certain products unsalable, or require us to incur significant compliance costs.

Regardless of fault, any real or perceived issues with the quality and safety of [removed: merchandise,] [added: merchandise we offer,] particularly products such as food and children’s items, issues with the authenticity of merchandise, or our inability, or that of our vendors, to comply on a timely basis with [removed: such] laws and regulatory requirements, could adversely affect our reputation, result in lost sales, inventory write-offs, uninsured product liability or other legal claims, penalties or losses, merchandise recalls, and increased costs.

In addition, an adverse outcome (or the adverse publicity from the claims) in any of these matters may [removed: harm and] damage our reputation or brand.

Significant judgment is required in evaluating and estimating our [removed: provision] [added: tax provisions] and accruals for [removed: both] legal [removed: claims and for taxes.][added: claims.]

Such an incident could also include alleged acts or omissions by or situations involving our suppliers (or their contractors or [removed: subcontractors).][added: subcontractors), the landlord for our stores, or our associates outside of work, and may pertain to social or political issues or protests largely unrelated to our business.]

Many social media platforms immediately publish the content their subscribers and participants post, often without filters or checks on accuracy of the [removed: content posted.][added: content.]

Information posted may be adverse to our interests or may be inaccurate, [removed: each of] which could negatively [removed: impact] [added: affect our] sales, diminish customer trust, reduce employee morale and productivity, and lead to difficulties in recruiting and retaining qualified associates.

Like other retailers, we face challenges in recruiting and retaining sufficient talent in our buying organization, management, [added: stores,] and other key areas.

If we cannot hire enough qualified associates, or if there is a disruption in the supply of personnel we hire from third-party providers, especially during our peak [removed: season,] [added: seasons,] our operations could be negatively impacted.

Because of the distinctive nature of our off-price model, we must also attract, train, and retain our key associates across the Company, [removed: including] [added: especially] within our buying organization.

The loss of one or more of our key [removed: personnel] [added: personnel,] or the inability to effectively identify a suitable successor for a key role could have a material adverse effect on our business.

Our advertising and other promotional programs may not be effective or may be perceived negatively, or could require increased expenditures, [added: any of] which could adversely affect sales or increase costs.

[removed: These risks] [added: Risks in importing] and [removed: uncertainties] [added: selling such merchandise] include import duties and quotas, compliance with anti-dumping regulations, [removed: work stoppages,] economic uncertainties and adverse economic conditions (including [removed: inflation] [added: inflation, recession,] and [removed: recession),] [added: exchange rate fluctuations),] foreign government regulations, employment and labor matters, concerns relating to human rights, working conditions, and other issues in factories or countries where merchandise is produced, transparency of sourcing and supply chains, exposure on product warranty and intellectual property issues, consumer perceptions of the safety of imported merchandise, wars and fears of war, political unrest, natural disasters, regulations to address climate change, and trade restrictions.

We also buy [removed: product] [added: products that originate] from foreign sources indirectly through domestic vendors and manufacturers’ representatives.

The flow of merchandise from our vendors could also be adversely affected by financial or political instability in any of the countries in which the goods we purchase are [removed: manufactured, if the instability affects the production or export of merchandise from those countries.][added: manufactured.]

We require our vendors (for both import and domestic purchasing) to [added: contractually confirm that they] adhere to various conduct, compliance, and other [removed: requirements] [added: requirements,] including those relating to environmental, employment and labor (including wages and working conditions), health, safety, and anti-bribery standards.

From time to time, our vendors, their contractors, or their subcontractors may be alleged to not be in compliance with these standards or [added: with] applicable local laws.

Although we have implemented policies and procedures to facilitate our compliance with laws and regulations relating to doing business in foreign markets and importing merchandise, [removed: there can be no assurance] [added: and to monitor our suppliers, this does not guarantee] that suppliers and other third parties with whom we do business will not violate such laws and regulations or our policies.

Changes in U.S. tax or [removed: tariff] [added: trade] policy regarding apparel and home-related merchandise produced in other countries could adversely affect our business.

The U.S. government has at times indicated a willingness to significantly change existing trade [removed: policies.][added: policies, including those with China.]

Ross is the largest off-price apparel and home fashion chain in the United States with [removed: 1,409] [added: 1,480] locations in [removed: 37] [added: 38] states, the District of Columbia, and Guam, as of February [removed: 3, 2018.][added: 2, 2019.]

We also operate [removed: 213] [added: 237] dd’s DISCOUNTS stores in [removed: 16] [added: 18] states as of February [removed: 3, 2018] [added: 2, 2019] that feature a more moderately-priced assortment of first-quality, in-season, name brand apparel, accessories, footwear, and home fashions for the entire family at savings of 20% to 70% off moderate department and discount store regular prices every day.

Our sales and earnings gains in [removed: 2017] [added: 2018] continued to benefit from efficient execution of our off-price model throughout all areas of our business.

We refer to our fiscal years ended February [added: 2, 2019, February] 3, 2018, [removed: January 28, 2017,] and January [removed: 30, 2016] [added: 28, 2017] as fiscal [removed: 2017,] [added: 2018,] fiscal [removed: 2016,] [added: 2017,] and fiscal [removed: 2015,] [added: 2016,] respectively.

Fiscal [removed: 2016] [added: 2018] and [removed: 2015] [added: 2016] were each 52-week years.

The following table summarizes the financial results for fiscal [added: 2018,] 2017, [removed: 2016,] and [removed: 2015:][added: 2016:]

| | | [removed: 2017] [added: 2018] | | | | [removed: 2016] [added: 2017] | | | | [removed: 2015] [added: 2016] | | |

| Sales (millions) | | $ | [removed: 14,135] [added: 14,984] | | | $ | [removed: 12,867] [added: 14,135] | | | $ | [removed: 11,940] [added: 12,867] | |

| Sales growth | | [removed: 9.9] [added: 6.0] | | % | | [removed: 7.8] [added: 9.9] | | % | | [removed: 8.1] [added: 7.8] | | % |

| Cost of goods sold | | [removed: 71.0] [added: 71.6] | | % | | [removed: 71.3] [added: 71.0] | | % | | [removed: 71.8] [added: 71.3] | | % |

| Selling, general and administrative | | [removed: 14.5] [added: 14.8] | | % | | [removed: 14.7] [added: 14.5] | | % | | [removed: 14.6] [added: 14.7] | | % |

| Interest [added: (income)] expense, net | | [removed: 0.1] [added: (0.1] | | [removed: %] [added: )%] | | 0.1 | | % | | 0.1 | | % |

| Earnings before taxes (as a percent of sales) | | [removed: 14.4] [added: 13.7] | | % | | [removed: 13.9] [added: 14.4] | | % | | [removed: 13.5] [added: 13.9] | | % |

| Net earnings (as a percent of sales) | | [removed: 9.6] [added: 10.6] | | % | | [removed: 8.7] [added: 9.6] | | % | | [removed: 8.5] [added: 8.7] | | % |

Total stores open at the end of fiscal [added: 2018,] 2017, [removed: 2016,] and [removed: 2015] [added: 2016] were [added: 1,717,] 1,622, [removed: 1,533,] and [removed: 1,446,] [added: 1,533,] respectively.

The number of stores at the end of fiscal [added: 2018,] 2017, [removed: 2016,] and [removed: 2015] [added: 2016] increased by 6%, 6%, and 6% from the respective prior years.

| Store Count | [removed: 2017] [added: 2018] | | | [removed: 2016] [added: 2017] | | | [removed: 2015] [added: 2016] | |

| Beginning of the period | [removed: 1,533] [added: 1,622] | | | [removed: 1,446] [added: 1,533] | | | [removed: 1,362] [added: 1,446] | |

| Opened in the period | [removed: 96] [added: 99] | | | [removed: 93] [added: 96] | | | [removed: 90] [added: 93] | |

| Closed in the period | [removed: (7] [added: (4] | ) | | [removed: (6] [added: (7] | ) | | (6 | ) |

| End of the period | [removed: 1,622] [added: 1,717] | | | [removed: 1,533] [added: 1,622] | | | [removed: 1,446] [added: 1,533] | |

| Selling square footage at the end of the period (000) | [removed: 34,700] [added: 36,300] | | | [removed: 33,300] [added: 34,700] | | | [removed: 31,900] [added: 33,300] | |

Sales for fiscal [removed: 2017] [added: 2018] increased [removed: $1.3] [added: $0.8] billion, or [removed: 9.9%,] [added: 6.0%,] compared to the prior year due to the opening of [removed: 89] [added: 95] net new stores during [removed: 2017,] [added: 2018 and] a 4% increase in comparable store sales (defined as stores that have been open for more than 14 complete [removed: months), and the impact of the 53rd week.][added: months).]

Sales for fiscal [removed: 2016] [added: 2017] increased [removed: $0.9] [added: $1.3] billion, or [removed: 7.8%,] [added: 9.9%,] compared to the prior year due to the opening of [removed: 87] [added: 89] net new stores during [removed: 2016] [added: 2017] and a 4% increase in sales from comparable [removed: stores.][added: stores, and the impact of the 53rd week.]

Our sales mix is shown below for fiscal [added: 2018,] 2017, [removed: 2016,] and [removed: 2015:][added: 2016:]

| | | [removed: 2017] [added: 2018] | | | [removed: 2016] [added: 2017] | | | [removed: 2015] [added: 2016] | |

| Ladies | | [removed: 27] [added: 26] | % | | [removed: 28] [added: 27] | % | | [removed: 29] [added: 28] | % |

| Home Accents and Bed and Bath | | 26 | % | | [removed: 25] [added: 26] | % | | 25 | % |

| Men’s | | [removed: 13] [added: 14] | % | | 13 | % | | 13 | % |

| Shoes | | 13 | % | | 13 | % | | [removed: 12] [added: 13] | % |

Although our strategies and store expansion program contributed to sales gains in fiscal [added: 2018,] 2017, [removed: 2016,] and [removed: 2015,] [added: 2016,] we cannot be sure that they will result in a continuation of sales growth or in an increase in net earnings.

Cost of goods sold in fiscal 2017 increased $868.9 million compared to the prior year mainly due to increased sales from the opening of 89 net new stores during the [removed: year,] [added: year and] a 4% increase in sales from comparable stores, and the impact of the 53rd week.

Cost of goods sold as a percentage of sales for fiscal 2017 decreased approximately 25 basis points from the prior year primarily due to a 25 basis point increase in merchandise gross margin, a 25 basis point decrease in occupancy costs, [removed: and a five basis point decrease in distribution expenses.]

[removed: These] [added: The] improvements were partially offset by a 25 basis point increase in freight costs and higher buying costs of five basis points.

Cost of goods sold in fiscal [removed: 2016] [added: 2018] increased [removed: $596.8] [added: $683.6] million compared to the prior year mainly due to increased sales from the opening of [removed: 87] [added: 95] net new stores during the year and a 4% increase in sales from comparable stores.

Cost of goods sold as a percentage of sales for fiscal [removed: 2016 decreased] [added: 2018 increased] approximately 55 basis points from the prior year primarily due to a [removed: 35] [added: 40] basis point increase in [removed: merchandise gross margin,] [added: freight costs,] a [removed: 10] [added: 15] basis point [removed: decrease] [added: increase] in [removed: buying expenses, and lower] distribution [added: expenses, higher buying costs of 10 basis points,] and [added: higher] occupancy costs [removed: by] [added: of] five basis [removed: points each.][added: points.]

We cannot be sure that the gross profit margins realized in fiscal [added: 2018,] 2017, [removed: 2016,] and [removed: 2015] [added: 2016] will continue in future years.

For fiscal 2017, [removed: selling, general and administrative expenses (“SG&A”)] [added: SG&A] increased $153.3 million compared to the prior year, mainly due to increased store operating costs reflecting the opening of 89 net new stores during the year, and the impact of the 53rd week.

For fiscal [removed: 2016, SG&A] [added: 2018, selling, general and administrative expenses (“SG&A”)] increased [removed: $151.7] [added: $172.9] million compared to the prior year, mainly due to increased store operating costs reflecting the opening of [removed: 87] [added: 95] net new stores during the year.

SG&A as a percentage of sales for fiscal [removed: 2016] [added: 2018] increased by approximately [removed: 15] [added: 30] basis points compared to the prior year primarily due to higher wages.

These increases were partially offset by an increase of 15 basis points in merchandise gross margin.

and a five basis point decrease in distribution expenses.

In fiscal 2018, net interest income improved by $17.8 million compared to 2017 primarily due to an increase in interest income, and higher capitalized interest on information systems projects.

In November 2018, we resolved uncertain federal tax positions related to fiscal 2015 with the Internal Revenue Service.

As a result, we recognized a tax benefit of approximately $26.0 million or approximately $0.07 of earnings per share in the Consolidated Statement of Earnings.

This rate reduction resulted in an increase to our earnings per share of approximately $0.70 for fiscal 2018.

For fiscal 2017, the rate reduction, along with the remeasurement of deferred taxes, resulted in an increase to our earnings per share of approximately $0.21.

Diluted earnings per share in fiscal 2018 was $4.26, which includes a per share benefit of approximately $0.70 from tax reform and $0.07 from the favorable resolution of a tax matter, compared to $3.55 in the prior year, which included a per share benefit of approximately $0.21 from tax reform and a $0.10 benefit from the 53rd week.

1 As the result of the adoption of ASU 2016-18, Statement of Cash Flow (Topic 230): Restricted Cash, the prior year amounts were retrospectively adjusted.

See Note A.

typically packaway remains in storage less than six months.

The increase in capital expenditures in fiscal 2018 compared to fiscal 2017 was primarily due to investments in our distribution centers, and information technology infrastructure investments for our stores, buying, corporate offices, and transportation.

In March 2019, our Board of Directors approved a new, two-year $2.55 billion stock repurchase program through fiscal 2020.

On December 13, 2018, we repaid at maturity the $85 million principal amount of the Series A 6.38% unsecured Senior Notes.

| Operating leases (rent obligations) | 549,929 | | | | 1,067,555 | | | | 750,137 | | | | 621,057 | | | | 2,988,678 | | |

| New York buying office ground lease² | 5,883 | | | | 12,835 | | | | 13,898 | | | | 954,616 | | | | 987,232 | | |

| Purchase obligations | 2,528,656 | | | | 33,405 | | | | 8,546 | | | | 806 | | | | 2,571,413 | | |

| Total contractual obligations | $ | 3,097,150 | | | $ | 1,204,159 | | | $ | 789,456 | | | $ | 1,834,917 | | | $ | 6,925,682 | |

Two of our leased warehouses are in Carlisle, Pennsylvania with leases expiring in 2019 and 2020, one is in Fort Mill, South Carolina, with the lease expiring in 2024, one is in Rock Hill, South Carolina, with the lease expiring in 2028, and one is in Shafter, California, with the lease expiring in 2029.

We consider the applicability and impact of all ASUs issued by the FASB.

ASUs not listed below were assessed and determined to be either not applicable or are expected to have minimal impact on our consolidated financial results.

We plan to adopt the new leases standard effective February 3, 2019 using the optional transition method on a modified retrospective basis by recognizing a cumulative-effect adjustment to the opening balance of retained earnings and do not plan to restate comparative periods.

In addition, we do not plan to elect the transitional package of practical expedients or the use of hindsight upon adoption.

Upon the adoption of the ASU, we do not expect to record a right-of-use asset and related lease liability for leases with an initial term of 12 months or less, and plan to account for lease and non-lease components as a single lease component.

Our current estimate of lease liabilities based on the present value of the remaining minimum rental payments, using discount rates as of the effective date, and the corresponding right-of-use assets, is approximately $2.9 billion.

The expected cumulative-effect adjustment to beginning retained earnings is a decrease of approximately $20 million primarily related to the write-off of previously capitalized initial direct costs that are no longer capitalized under the ASU, partially offset by the write-off of the deferred gain on a previous sale-leaseback transaction that meets the sale definition under the ASU.

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Accounting Standards Codification "ASC" 606) which, along with subsequent amendments, supersedes the revenue recognition requirements in “Revenue Recognition (ASC 605).” This guidance provides a five-step analysis of transactions to determine when and how revenue is recognized and requires entities to recognize revenue when the customer obtains control of promised goods or services in an amount that reflects the consideration the entity expects to receive in exchange for those goods or services.

We adopted ASC 606 as of February 4, 2018, using the modified retrospective method.

Results for reporting periods beginning on or after February 4, 2018 are presented under ASC 606, while prior period amounts were not adjusted and continue to be reported in accordance with ASC 605.

Upon adoption of ASC 606, we recorded a cumulative-effect adjustment to increase beginning retained earnings by $20 million as of February 4, 2018, primarily due to the change in the timing of the recognition of stored value card breakage.

The impact of applying ASC 606 was not material to our consolidated financial statements for the year ended February 2, 2019.

We adopted ASU 2016-18 as of February 4, 2018, using the retrospective method.

This reduced tax rate resulted in a tax benefit of $24.9 million.

We recorded an additional tax benefit of $55.2 million due to the remeasurement of our deferred tax assets and liabilities.

Both of these tax benefits were recorded in the fourth quarter of fiscal 2017.

Also on December 22, 2017, the SEC staff issued Staff Accounting Bulletin 118, Income Tax Accounting Implications of the Tax Cuts and Jobs Act (“SAB 118”), which provides guidance on accounting for the impact of the Tax Act.

As permitted by SAB 118, both of the tax benefits recorded by us in fiscal 2017, represent provisional amounts based on our current best estimates.

Any adjustments made to those provisional amounts will be included in income from operations and recorded as an adjustment to tax expense through the fiscal year ending February 2, 2019.

The recorded, provisional amounts reflect assumptions made based upon our current interpretation of the Tax Act, and may change as we receive additional clarification and guidance in the form of technical corrections to the Tax Act or regulations issued by the U.S. Treasury.

Diluted earnings per share in fiscal 2016 was $2.83 compared to $2.51 in fiscal 2015.

The decrease in capital expenditures in fiscal 2016 compared to fiscal 2015 was primarily due to the completion in 2015 of the rollout of new point of sale equipment in our stores and construction of a distribution center.

| Operating leases (rent obligations) | 509,954 | | | | 970,621 | | | | 649,773 | | | | 554,783 | | | | 2,685,131 | | |

| New York buying office ground lease² | 6,418 | | | | 12,835 | | | | 13,209 | | | | 939,359 | | | | 971,821 | | |

| Purchase obligations | 2,630,985 | | | | 32,976 | | | | 14,685 | | | | 2,705 | | | | 2,681,351 | | |

| Total contractual obligations | $ | 3,250,462 | | | $ | 1,041,796 | | | $ | 763,787 | | | $ | 1,763,722 | | | $ | 6,819,767 | |

The Series B notes totaling $65 million are due in December 2021 and bear interest at a rate of 6.53%.

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 2024.

Depreciation and amortization expense.

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.

The cost of leasehold improvements is amortized over the lesser of the useful life of the asset or the applicable lease term.

Stock-based compensation.

We recognize compensation expense based upon the grant date fair value of all stock-based awards and account for forfeitures as incurred.

All stock-based compensation awards are expensed over the service and performance periods of the awards.

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (ASU) 2014-09, Revenue from Contracts with Customers (ASC 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.

ASC 606 is effective for our annual and interim reporting periods beginning in fiscal 2018.

Adoption will result in a change in the timing of recognizing revenue from breakage for stored value cards.

Breakage will be estimated and recognized based upon the historical pattern of redemption, rather than when redemption is considered remote.

Additionally, we will recognize allowances for estimated sales returns on a gross rather than net basis in our Consolidated Financial Statements.

The impact of recognizing sales returns on a gross basis is not expected to be material.

We plan to adopt ASC 606 under the modified retrospective method and will recognize a cumulative-effect adjustment to increase retained earnings by approximately $20 million, net of income taxes, as of February 4, 2018.

ASU 2016-02 is effective for our annual and interim reporting periods beginning in fiscal 2019.

Due to the substantial number of leases that we have, we believe this ASU will increase assets and liabilities by the same material amount on our consolidated balance sheet.

Our current undiscounted minimum commitments under noncancelable operating leases is approximately $3.7 billion.

ASU 2016-18 is effective for our annual and interim reporting periods beginning in fiscal 2018.

We do not believe adoption of this ASU will have a significant impact to our consolidated financial statements.

We had no outstanding forward contracts as of February [removed: 3, 2018.][added: 2, 2019.]

As of February [removed: 3, 2018,] [added: 2, 2019,] we had no borrowings outstanding under our revolving credit facility.

A hypothetical 100 basis point increase or decrease in prevailing market interest rates would not have a material impact on our consolidated financial position, results of operations, cash flows, or the fair values of our short- and long-term investments as of and for the year ended February [removed: 3, 2018.][added: 2, 2019.]

As of February 2, 2019, we have one outstanding series of unsecured 6.53% Series B Senior Notes due December 2021 with an aggregate principal amount of $65 million.

We have two outstanding series of unsecured notes held by institutional investors: Series A Senior Notes due December 2018 for $85 million accrue interest at 6.38% and Series B Senior Notes due December 2021 for $65 million accrue interest at 6.53%.

The amount outstanding under these notes as of February 3, 2018 was $150 million.

Ross is the largest off-price apparel and home fashion chain in the United States, with [removed: 1,409] [added: 1,480] locations in [removed: 37] [added: 38] states, the District of Columbia, and Guam, as of February [removed: 3, 2018.][added: 2, 2019.]

We also operate [removed: 213] [added: 237] dd’s DISCOUNTS stores in [removed: 16] [added: 18] states as of February [removed: 3, 2018.][added: 2, 2019.]

We refer to our fiscal years ended February [added: 2, 2019, February] 3, 2018, [removed: January 28, 2017,] and January [removed: 30, 2016] [added: 28, 2017] as fiscal [removed: 2017,] [added: 2018,] fiscal [removed: 2016,] [added: 2017,] and fiscal [removed: 2015,] [added: 2016,] respectively.

Fiscal [removed: 2016] [added: 2018] and [removed: 2015] [added: 2016] were each 52-week years.

Our buyers use a number of methods that enable us to offer our customers brand name and designer merchandise at strong discounts every day relative to department and specialty stores for [removed: Ross] [added: Ross,] and moderate department and discount stores for dd’s DISCOUNTS.

In fiscal [removed: 2017,] [added: 2018,] we continued our emphasis on this important sourcing strategy in response to compelling opportunities available in the marketplace.

Packaway accounted for approximately [removed: 49%] [added: 46%] and 49% of total inventories as of February [removed: 3, 2018] [added: 2, 2019] and [removed: January 28, 2017,] [added: February 3, 2018,] respectively.

At the end of fiscal [removed: 2017,] [added: 2018,] we had approximately [removed: 800] [added: 850] merchants for Ross and dd’s DISCOUNTS combined.

Ross and dd’s DISCOUNTS buyers have on average [removed: eight] [added: seven] years of experience, including merchandising positions with other retailers such as Bloomingdale’s, Burlington Stores, Foot Locker, Kohl’s, Lord & Taylor, Macy’s, Nordstrom, Saks, and TJX.

We expect to continue to make additional targeted investments in our merchant organization to further develop our relationships with [removed: an expanding number of] [added: our] manufacturers and vendors.

At dd’s DISCOUNTS, we sell more moderate brand name [removed: product and fashions] [added: merchandise] that [removed: are] [added: is] priced 20% to 70% below most moderate department and discount store regular prices.

[removed: This strategy enables us to offer customers] consistently low prices and compelling value.

On a weekly basis our buyers review specified departments in our stores for possible markdowns based on the rate of [removed: sale] [added: sale,] as well as at the end of fashion [removed: seasons] [added: seasons,] to promote faster turnover of merchandise inventory and to accelerate the flow of fresh product.

As of February [removed: 3, 2018,] [added: 2, 2019,] we operated a total of [removed: 1,622] [added: 1,717] stores comprised of [removed: 1,409] [added: 1,480] Ross stores and [removed: 213] [added: 237] dd’s DISCOUNTS stores.

Recent initiatives include [added: continued] enhancements to our information and data security, merchandising, distribution, transportation, store, and financial systems.

We own four and lease [removed: three] [added: five] other warehouse facilities for packaway storage.

We also use other third-party facilities, including [removed: two] [added: three] warehouses, for storage of packaway inventory.

Advertising for dd’s DISCOUNTS is primarily focused on [added: radio and] new store grand [removed: openings and local media initiatives.][added: openings.]

As of February [removed: 3, 2018,] [added: 2, 2019,] we had approximately [removed: 82,700] [added: 88,100] total employees, which includes both full and part-time employees.

We also continue to make improvements to our [removed: core] merchandising [removed: system] [added: systems] to strengthen our ability to plan, buy, and allocate product based on more local versus regional trends.

The information found on our corporate website is not part of [removed: this,] [added: this report,] or any other report or regulatory filing we file with or furnish to the Securities and Exchange Commission.

This strategy enables us to offer customers

Class action litigation remains pending as of February [removed: 3, 2018.][added: 2, 2019.]

| | | For the fiscal year ended February [removed: 3, 2018] [added: 2, 2019] | |

The aggregate market value of the voting common stock held by non-affiliates of the Registrant as of [removed: July 29, 2017] [added: August 4, 2018] was [removed: $20,709,068,267,] [added: $32,578,316,211,] based on the closing price on that date as reported by the NASDAQ Global Select Market®.

The number of shares of Common Stock, with $.01 par value, outstanding on March [removed: 12, 2018] [added: 11, 2019] was [removed: 378,713,373.][added: 368,247,009.]

Portions of the Proxy Statement for the Registrant’s [removed: 2018] [added: 2019] Annual Meeting of Stockholders, which will be filed on or before June [removed: 4, 2018,] [added: 3, 2019,] are incorporated herein by reference into Part III.

10-K 1 rost-20190202x10k.htm 10-K

Ross Stores, Inc.

Form 10-K

Table of Contents

| | | | | |

| --- | --- | --- | --- | --- |

| | | | | |

| | | | | Page |

| [PART I](#s2BE2164D075DD29835869CD1FF64447C) | | | | |

| | | | | |

| [Item 1.](#s3ABF54382FB991E019DF9CD1FF66B5D9) | | [Business](#s3ABF54382FB991E019DF9CD1FF66B5D9) | | [3](#s3ABF54382FB991E019DF9CD1FF66B5D9) |

| | | | | |

| [Item 1A.](#sFBC0E6D02F1E6073590A9CD1FF93AAC9) | | [Risk Factors](#sFBC0E6D02F1E6073590A9CD1FF93AAC9) | | [7](#sFBC0E6D02F1E6073590A9CD1FF93AAC9) |

| | | | | |

| [Item 1B.](#s03C3E50F2623FB0C22349CD1FFB603AE) | | [Unresolved Staff Comments](#s03C3E50F2623FB0C22349CD1FFB603AE) | | [13](#s03C3E50F2623FB0C22349CD1FFB603AE) |

| | | | | |

| [Item 2.](#sBB3563EA51348B113F2B9CD1FCCEE926) | | [Properties](#sBB3563EA51348B113F2B9CD1FCCEE926) | | [13](#sBB3563EA51348B113F2B9CD1FCCEE926) |

| | | | | |

| [Item 3.](#sF4D0A30595502D2BF5539CD20039B33D) | | [Legal Proceedings](#sF4D0A30595502D2BF5539CD20039B33D) | | [16](#sF4D0A30595502D2BF5539CD20039B33D) |

| | | | | |

| [Item 4.](#s5899C7B574DF1869843C9CD2003CCCB7) | | [Mine Safety Disclosures](#s5899C7B574DF1869843C9CD2003CCCB7) | | [16](#s5899C7B574DF1869843C9CD2003CCCB7) |

| | | | | |

| [PART II](#s77F9857911B3A418D8369CD2005D20A4) | | | | |

| | | | | |

| [Item 5.](#sD885FC4AFDCE2BFF26A59CD1FBD18A2E) | | [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](#sD885FC4AFDCE2BFF26A59CD1FBD18A2E) | | [18](#sD885FC4AFDCE2BFF26A59CD1FBD18A2E) |

| | | | | |

| [Item 6.](#sB12CE79087E5CF608C869CD200D15584) | | [Selected Financial Data](#sB12CE79087E5CF608C869CD200D15584) | | [21](#sB12CE79087E5CF608C869CD200D15584) |

| | | | | |

| [Item 7.](#sD82977F9E7F5442D7B2B9CD20105ABFB) | | [Management's Discussion and Analysis of Financial Conditions and Results of Operations](#sD82977F9E7F5442D7B2B9CD20105ABFB) | | [23](#sD82977F9E7F5442D7B2B9CD20105ABFB) |

| | | | | |

| [Item 7A.](#sE3E67A63E427C2E864839CD20211C8D8) | | [Quantitative and Qualitative Disclosures about Market Risk](#sE3E67A63E427C2E864839CD20211C8D8) | | [32](#sE3E67A63E427C2E864839CD20211C8D8) |

| | | | | |

| [Item 8.](#s5AA8FA87FD692D3D0DD69CD2022F4F37) | | [Financial Statements and Supplementary Data](#s5AA8FA87FD692D3D0DD69CD2022F4F37) | | [33](#s5AA8FA87FD692D3D0DD69CD2022F4F37) |

| | | | | |

| [Item 9.](#s1352964688228C6DB5CB9CD2066A1533) | | [Changes in and Disagreements with Accountants on Accounting and Financial Disclosure](#s1352964688228C6DB5CB9CD2066A1533) | | [56](#s1352964688228C6DB5CB9CD2066A1533) |

| | | | | |

| [Item 9A.](#s7A4100366073408AF6229CD206A2FBCC) | | [Controls and Procedures](#s7A4100366073408AF6229CD206A2FBCC) | | [56](#s7A4100366073408AF6229CD206A2FBCC) |

| | | | | |

| [Item 9B.](#sFE3EB48996FB38FF63379CD206BF0B73) | | [Other Information](#sFE3EB48996FB38FF63379CD206BF0B73) | | [56](#sFE3EB48996FB38FF63379CD206BF0B73) |

| | | | | |

10-K 1 rost-20180203x10k.htm 10-K

At February [removed: 3, 2018,] [added: 2, 2019,] we operated a total of [removed: 1,622] [added: 1,717] stores, of which [removed: 1,409] [added: 1,480] were Ross stores in [removed: 37] [added: 38] states, the District of Columbia, and Guam, and [removed: 213] [added: 237] were dd’s DISCOUNTS stores in [removed: 16] [added: 18] states.

During fiscal [removed: 2017,] [added: 2018,] we opened [removed: 74] [added: 75] new Ross stores and closed [removed: five] [added: four] existing stores.

The average approximate Ross store size is [removed: 28,200] [added: 28,000] square feet.

During fiscal [removed: 2017,] [added: 2018,] we opened [removed: 22] [added: 24] new dd’s DISCOUNTS stores and closed [removed: two] [added: no] existing stores.

The average approximate dd’s DISCOUNTS store size is [removed: 23,100] [added: 23,000] square feet.

During fiscal [removed: 2017,] [added: 2018,] no one store accounted for more than 1% of our sales.

We carry [added: fire, flood, wind, and] earthquake insurance to help mitigate the risk of financial loss [removed: due to an earthquake.][added: that may result from such events.]

Our real estate strategy in [removed: 2018] [added: 2019] is to primarily open stores in states where we currently operate, to increase our market penetration and leverage overhead and advertising expenses as a percentage of sales in each market.

We also expect to continue our store expansion in newer markets in [removed: 2018.][added: 2019.]

The following table summarizes the locations of our stores by state/territory as of February [removed: 3, 2018] [added: 2, 2019] and [removed: January 28, 2017.][added: February 3, 2018.]

| State/Territory | | February [removed: 3, 2018] [added: 2, 2019] | | [removed: January 28, 2017] [added: February 3, 2018] |

| Alabama | | [removed: 23] [added: 24] | | 23 |

| Arizona | | [removed: 78] [added: 80] | | [removed: 74] [added: 78] |

| California | | [removed: 379] [added: 400] | | [removed: 364] [added: 379] |

| Colorado | | [removed: 34] [added: 37] | | [removed: 33] [added: 34] |

| Delaware | | [removed: 2] [added: 3] | | 2 |

| District of Columbia | | [removed: 1] [added: 2] | | 1 |

| Florida | | [removed: 195] [added: 205] | | [removed: 185] [added: 195] |

| Georgia | | [removed: 59] [added: 61] | | [removed: 56] [added: 59] |

| Guam | | 2 | | [removed: 1] [added: 2] |

| Hawaii | | [removed: 20] [added: 22] | | [removed: 17] [added: 20] |

| Idaho | | [removed: 11] [added: 12] | | 11 |

| Illinois | | [removed: 67] [added: 79] | | [removed: 62] [added: 67] |

| Indiana | | [removed: 14] [added: 15] | | [removed: 9] [added: 14] |

| Iowa | | [removed: 4] [added: 6] | | [removed: 0] [added: 4] |

| Kansas | | [removed: 11] [added: 12] | | [removed: 10] [added: 11] |

| Kentucky | | 11 | | [removed: 9] [added: 11] |

| Maryland | | [removed: 24] [added: 25] | | 24 |

| Mississippi | | 9 | | [removed: 8] [added: 9] |

| Missouri | | [removed: 23] [added: 26] | | [removed: 21] [added: 23] |

| Nevada | | [removed: 37] [added: 39] | | [removed: 33] [added: 37] |

| New Jersey | | 14 | | [removed: 13] [added: 14] |

| New Mexico | | [removed: 14] [added: 15] | | [removed: 12] [added: 14] |

| North Carolina | | [removed: 46] [added: 47] | | [removed: 45] [added: 46] |

| North Dakota | | [removed: 1] [added: 2] | | 1 |

| Oklahoma | | 26 | | [removed: 23] [added: 26] |

| Oregon | | [removed: 30] [added: 31] | | 30 |

| Pennsylvania | | 48 | | [removed: 44] [added: 48] |

| South Carolina | | [removed: 24] [added: 27] | | [removed: 23] [added: 24] |

| South Dakota | | 2 | | [removed: 1] [added: 2] |

| Nebraska | | 1 | | 0 |

| Rock Hill, South Carolina | | 431,000 | | | Lease |

| Shafter, California | | 1,003,000 | | | Lease |

| | | | | | |

| Warehouses | | | | | |

| Michael Balmuth | | [removed: 67] [added: 68] | | | Executive Chairman of the Board |

| Barbara Rentler | | [removed: 60] [added: 61] | | | Chief Executive Officer |

| Bernie Brautigan | | [removed: 53] [added: 54] | | | President, Merchandising, Ross Dress for Less |

| James S. Fassio | | [removed: 63] [added: 64] | | | President and Chief Development Officer |

| Brian Morrow | | [removed: 58] [added: 59] | | | President and Chief Merchandising Officer, dd’s DISCOUNTS |

| Michael O’Sullivan | | [removed: 54] [added: 55] | | | President and Chief Operating Officer |

| Michael J. Hartshorn | | [removed: 50] [added: 51] | | | [added: Group] Executive Vice President, [added: Finance and Legal,] Chief Financial Officer and Principal Accounting Officer |

Mr. Brautigan has served as President, Merchandising, Ross Dress for Less since March 2016 with responsibility for the Ladies and Children’s apparel businesses, Shoes, Lingerie, [added: Cosmetics,] and Accessories.

Mr. [removed: Call] [added: Hartshorn] has served as [added: Group] Executive Vice President, Finance and Legal, [removed: and Corporate Secretary] [added: Chief Financial Officer] since [removed: 2014.][added: March 2019.]

[removed: From 2012 to 2014, Mr. Call] [added: Previously, he] was [added: Executive Vice President, Chief Financial Officer from 2018 to 2019,] Group Senior Vice [added: President, Chief Financial Officer from 2015 to 2018, Senior Vice] President and Chief Financial [removed: Officer, with additional oversight for Legal] [added: Officer from 2014 to 2015,] and [removed: the Corporate Secretary function.][added: Senior Vice President and Deputy Chief Financial Officer from 2012 to 2014.]

[removed: He was also Group] Vice President, Finance and Treasurer from 2011 to 2012, and Vice President, Finance and Treasurer from 2006 to 2011.

He was also Group

| Lisa Panattoni | | 55 | | | President, Merchandising, Ross Dress for Less |

| John G. Call | | 59 | | | Executive Vice President, Finance and Legal, and Corporate Secretary |

Ms. Panattoni has served as President, Merchandising, Ross Dress for Less since 2014 with responsibility for all of the Home businesses, Men’s, and Cosmetics.

Previously, she was Group Executive Vice President, Merchandising at Ross from 2009 to 2014.

She joined the Company in 2005 as Senior Vice President and General Merchandise Manager of Home and was promoted to Executive Vice President later that same year.

Prior to joining Ross, Ms. Panattoni was with The TJX Companies, where she served as Senior Vice President of Merchandising and Marketing for HomeGoods from 1998 to 2004 and as Divisional Merchandise Manager of the Marmaxx Home Store from 1994 to 1998.

From 1997 to 2012, he was Senior Vice President and Chief Financial Officer and also served as Corporate Secretary from 1997 to 2009.

Mr. Call was Senior Vice President, Chief Financial Officer, Secretary and Treasurer of Friedman’s from 1993 until 1997.

For ten years prior to joining Friedman’s, Mr. Call held various positions with Ernst & Young LLP.

Mr. Hartshorn has served as Executive Vice President, Chief Financial Officer since March 2018.

Previously, he was Group Senior Vice President, Chief Financial Officer from 2015 to 2018, Senior Vice President and Chief Financial Officer from 2014 to 2015, and Senior Vice President and Deputy Chief Financial Officer from 2012 to 2014.

There were [removed: 886] [added: 904] stockholders of record as of March [removed: 12, 2018] [added: 11, 2019] and the closing stock price on that date was [removed: $76.43] [added: $90.74] per share.

On March [removed: 6, 2018,] [added: 5, 2019,] our Board of Directors declared a quarterly cash dividend of [removed: $0.2250] [added: $0.255] per common share, payable on March [removed: 30, 2018.][added: 29, 2019.]

Our Board of Directors declared cash dividends of [removed: $0.1600] [added: $0.225] per common share in [removed: February,] [added: March,] May, August, and November [removed: 2017,] [added: 2018,] cash dividends of [removed: $0.1350] [added: $0.160] per common share in [removed: March,] [added: February,] May, August, and November [removed: 2016,] [added: 2017,] and cash dividends of [removed: $0.1175] [added: $0.135] per common share in [removed: February,] [added: March,] May, August, and November [removed: 2015.][added: 2016.]

Information regarding shares of common stock we repurchased during the fourth quarter of fiscal [removed: 2017] [added: 2018] is as follows:

| ¹ [removed: All shares were repurchased under our publicly announced stock repurchase program.] We [removed: did not acquire any] [added: acquired 8,500] shares of treasury stock during the quarter ended February [removed: 3, 2018.] [added: 2, 2019.] Treasury stock includes shares acquired from employees for tax withholding purposes related to vesting of restricted stock grants. [added: All remaining shares were repurchased under our publicly announced stock repurchase program.] |

In [removed: February 2017,] [added: March 2019,] our Board of Directors approved a [added: new,] two-year [removed: $1.75] [added: $2.55] billion stock repurchase program through fiscal [removed: 2018.][added: 2020.]

The graph below compares total stockholder returns over the last five years for our common stock with the Standard & Poor’s (“S&P”) 500 Index, [added: and] the Dow Jones Apparel Retailers [removed: Index, and the S&P Retailing Group.][added: Index.]

We [removed: are using] [added: use] the Dow Jones Apparel Retailers Index [removed: for the first time] in our performance graph [removed: this year] because we believe the retail companies comprising that index are [removed: more closely] aligned with the segment of the retail industry in which we operate, and it provides a [removed: more] relevant comparison against which to measure our stock performance.

Data with respect to returns for the S&P [removed: indexes] [added: index] and the Dow Jones Apparel Retailers Index is not readily available for periods shorter than one month.

Among Ross Stores, Inc., the S&P 500 Index, [removed: S&P Retailing Group,] and Dow Jones Apparel Retailers

[removed: ][added: ]

| Company / Index | | [removed: 2013 | | |] 2014 | | | 2015 | | | 2016 | | | 2017 | | | 2018 | | [added: | 2019 | |]

| Dow Jones Apparel Retailers | | 100 | | | [removed: 114] [added: 121] | | | [removed: 138] [added: 120] | | | [removed: 136] [added: 118] | | | 134 | | | [removed: 153] [added: 146] | |

| (11/04/2018 - 12/01/2018) | | 749,726 | | | $94.24 | | 749,726 | | | $197,842 | |

| (12/02/2018 - 01/05/2019) | | 1,352,850 | | | $80.60 | | 1,344,392 | | | $89,500 | |

| (01/06/2019 - 02/02/2019) | | 982,600 | | | $91.09 | | 982,558 | | | $0 | |

| Total | | 3,085,176 | | | $87.26 | | 3,076,676 | | | $0 | |

| Ross Stores, Inc. | | 100 | | | 136 | | | 169 | | | 198 | | | 242 | | | 284 | |

| S&P 500 Index | | 100 | | | 114 | | | 113 | | | 136 | | | 172 | | | 168 | |

| (10/29/2017 - 11/25/2017) | | 782,134 | | | $66.37 | | 782,134 | | | $1,049,300 | |

| (11/26/2017 - 12/30/2017) | | 1,151,156 | | | $77.30 | | 1,151,156 | | | $960,300 | |

| (12/31/2017 - 02/03/2018) | | 1,034,865 | | | $82.40 | | 1,034,865 | | | $875,000 | 2 |

| Total | | 2,968,155 | | | $76.20 | | 2,968,155 | | | $1,075,000 | 2 |

| | | | | |

| --- | --- | --- | --- | --- |

| ² In March 2018, our Board of Directors approved an increase in the stock repurchase authorization for fiscal 2018 by $200 million to $1.075 billion, up from the previously available $875 million as of February 3, 2018. | | | | |

In March 2018, our Board of Directors approved an increase in the stock repurchase authorization for fiscal 2018 by $200 million to $1.075 billion, up from the previously available $875 million.

For comparison purposes, we have also included the S&P Retailing Group in our fiscal 2017 performance graph.

We do not plan to include the S&P Retailing Group Index in next year’s performance graph.

| Ross Stores, Inc. | | 100 | | | 115 | | | 158 | | | 195 | | | 229 | | | 279 | |

| S&P 500 Index | | 100 | | | 122 | | | 139 | | | 138 | | | 166 | | | 209 | |

| S&P Retailing Group | | 100 | | | 128 | | | 154 | | | 184 | | | 219 | | | 321 | |

| ($000, except per share data) | [removed: 2017] [added: 2018] | | | [removed: ¹] | [removed: 2016] [added: 2017 1] | | | | [removed: 2015] [added: 2016] | | | | [removed: 2014] [added: 2015] | | | | [removed: 2013] [added: 2014] | | | |

| Sales | $ | [removed: 14,134,732] [added: 14,983,541] | | | $ | [removed: 12,866,757] [added: 14,134,732] | | | $ | [removed: 11,939,999] [added: 12,866,757] | | | $ | [removed: 11,041,677] [added: 11,939,999] | | | $ | [removed: 10,230,353] [added: 11,041,677] | | |

| Cost of goods sold | [removed: 10,042,638] [added: 10,726,277] | | | | [removed: 9,173,705] [added: 10,042,638] | | | | [removed: 8,576,873] [added: 9,173,705] | | | | [removed: 7,937,956] [added: 8,576,873] | | | | [removed: 7,360,924] [added: 7,937,956] | | | |

| Percent of sales | [removed: 71.0] [added: 71.6] | | % | | [removed: 71.3] [added: 71.0] | | % | | [removed: 71.8] [added: 71.3] | | % | | [removed: 71.9] [added: 71.8] | | % | | [removed: 72.0] [added: 71.9] | | % | |

| Selling, general and administrative | [removed: 2,043,698] [added: 2,216,550] | | | | [removed: 1,890,408] [added: 2,043,698] | | | | [removed: 1,738,755] [added: 1,890,408] | | | | [removed: 1,615,371] [added: 1,738,755] | | | | [removed: 1,526,366] [added: 1,615,371] | | | |

| Percent of sales | [removed: 14.5] [added: 14.8] | | % | | [removed: 14.7] [added: 14.5] | | % | | [removed: 14.6] [added: 14.7] | | % | | 14.6 | | % | | [removed: 14.9] [added: 14.6] | | % | |

| Interest [removed: expense (income),] [added: (income) expense,] net | [removed: 7,676] [added: (10,162] | | [added: )] | | [removed: 16,488] [added: 7,676] | | | | [removed: 12,612] [added: 16,488] | | | | [removed: 2,984] [added: 12,612] | | | | [removed: (247] [added: 2,984] | | [removed: )] | |

| Earnings before taxes | [removed: 2,040,720] [added: 2,050,876] | | | | [removed: 1,786,156] [added: 2,040,720] | | | | [removed: 1,611,759] [added: 1,786,156] | | | | [removed: 1,485,366] [added: 1,611,759] | | | | [removed: 1,343,310] [added: 1,485,366] | | | |

| Percent of sales | [removed: 14.4] [added: 13.7] | | % | | [removed: 13.9] [added: 14.4] | | % | | [removed: 13.5] [added: 13.9] | | % | | 13.5 | | % | | [removed: 13.1] [added: 13.5] | | % | |

| Provision for taxes on earnings | [removed: 677,967] [added: 463,419] | | | | [removed: 668,502] [added: 677,967] | | | | [removed: 591,098] [added: 668,502] | | | | [removed: 560,642] [added: 591,098] | | | | [removed: 506,006] [added: 560,642] | | | |

| Net earnings | $ | [removed: 1,362,753] [added: 1,587,457] | | | $ | [removed: 1,117,654] [added: 1,362,753] | | | $ | [removed: 1,020,661] [added: 1,117,654] | | | $ | [removed: 924,724] [added: 1,020,661] | | | $ | [removed: 837,304] [added: 924,724] | | |

| Percent of sales | [removed: 9.6] [added: 10.6] | | % | | [removed: 8.7] [added: 9.6] | | % | | [removed: 8.5] [added: 8.7] | | % | | [removed: 8.4] [added: 8.5] | | % | | [removed: 8.2] [added: 8.4] | | % | |

| Basic earnings per share² | $ | [removed: 3.58] [added: 4.30] | | 4 | $ | [removed: 2.85] [added: 3.58] | | [added: 3] | $ | [removed: 2.53] [added: 2.85] | | | $ | [removed: 2.24] [added: 2.53] | | | $ | [removed: 1.97] [added: 2.24] | | |

| Diluted earnings per share² | $ | [removed: 3.55] [added: 4.26] | | 4 | $ | [removed: 2.83] [added: 3.55] | | [added: 3] | $ | [removed: 2.51] [added: 2.83] | | | $ | [removed: 2.21] [added: 2.51] | | | $ | [removed: 1.94] [added: 2.21] | | |

| per common share² | $ | [removed: 0.640] [added: 0.900] | | | $ | [removed: 0.540] [added: 0.640] | | | $ | [removed: 0.470] [added: 0.540] | | | $ | [removed: 0.400] [added: 0.470] | | | $ | [removed: 0.255] [added: 0.400] | | [removed: ³] |

| [removed: 4] [added: 3] Includes a per share benefit of approximately $0.21 from tax reform legislation enacted in December 2017 and $0.10 from the 53rd week. | | | | | | | | | | | | | | | | | | | | |

| ($000, except per share data) | | [removed: 2017] [added: 2018] | | | [removed: 1] | [removed: 2016] [added: 2017 1] | | | | [removed: 2015] [added: 2016] | | | | [removed: 2014] [added: 2015] | | | | [removed: 2013] [added: 2014] | | | |

| Cash and cash equivalents | | $ | [removed: 1,290,294] [added: 1,412,912] | | | $ | [removed: 1,111,599] [added: 1,290,294] | | | $ | [removed: 761,602] [added: 1,111,599] | | | $ | [removed: 696,608] [added: 761,602] | | | $ | [removed: 423,168] [added: 696,608] | | |

| Merchandise inventory | | [removed: 1,641,735] [added: 1,750,442] | | | | [removed: 1,512,886] [added: 1,641,735] | | | | [removed: 1,419,104] [added: 1,512,886] | | | | [removed: 1,372,675] [added: 1,419,104] | | | | [removed: 1,257,155] [added: 1,372,675] | | | |

| Property and equipment, net | | [removed: 2,382,464] [added: 2,475,201] | | | | [removed: 2,328,048] [added: 2,382,464] | | | | [removed: 2,342,906] [added: 2,328,048] | | | | [removed: 2,273,752] [added: 2,342,906] | | | | [removed: 1,875,299] [added: 2,273,752] | | | |

| Total assets | | [removed: 5,722,051] [added: 6,073,691] | | | | [removed: 5,309,351] [added: 5,722,051] | | | | [removed: 4,869,119] [added: 5,309,351] | | | | [removed: 4,687,370] [added: 4,869,119] | | | | [removed: 3,886,251] [added: 4,687,370] | | | |

| Return on average assets | | [removed: 25] [added: 27] | | % | | [removed: 22] [added: 25] | | % | | [removed: 21] [added: 22] | | % | | [removed: 22] [added: 21] | | % | | 22 | | % | |

| Working capital | | [removed: 1,224,755] [added: 1,394,535] | | | | [removed: 1,060,543] [added: 1,224,755] | | | | [removed: 769,348] [added: 1,060,543] | | | | [removed: 590,471] [added: 769,348] | | | | [removed: 463,875] [added: 590,471] | | | |

| Current ratio | | [removed: 1.6:1] [added: 1.7:1] | | | | 1.6:1 | | | | [removed: 1.5:1] [added: 1.6:1] | | | | [removed: 1.4:1] [added: 1.5:1] | | | | [removed: 1.3:1] [added: 1.4:1] | | | |

| Long-term debt | | [removed: 396,967] [added: 312,440] | | | | [removed: 396,493] [added: 396,967] | | | | [removed: 396,025] [added: 396,493] | | | | [removed: 395,562] [added: 396,025] | | | | [removed: 149,681] [added: 395,562] | | | |

| of total capitalization | | [removed: 12] [added: 9] | | % | | [removed: 13] [added: 12] | | % | | [removed: 14] [added: 13] | | % | | [removed: 15] [added: 14] | | % | | [removed: 7] [added: 15] | | % | |

| Stockholders’ equity | | [removed: 3,049,308] [added: 3,305,746] | | | | [removed: 2,748,017] [added: 3,049,308] | | | | [removed: 2,471,991] [added: 2,748,017] | | | | [removed: 2,279,210] [added: 2,471,991] | | | | [removed: 2,007,302] [added: 2,279,210] | | | |

| stockholders’ equity | | [removed: 47] [added: 50] | | % | | [removed: 43] [added: 47] | | % | | 43 | | % | | 43 | | % | | [removed: 44] [added: 43] | | % | |

| outstanding at year-end2 | | $ | [removed: 8.03] [added: 8.98] | | | $ | [removed: 7.01] [added: 8.03] | | | $ | [removed: 6.14] [added: 7.01] | | | $ | [removed: 5.49] [added: 6.14] | | | $ | [removed: 4.70] [added: 5.49] | | |

| Number of stores opened | | [removed: 96] [added: 99] | | | | [removed: 93] [added: 96] | | | | [removed: 90] [added: 93] | | | | [removed: 95] [added: 90] | | | | [removed: 88] [added: 95] | | | |

| Number of stores closed | | [removed: 7] [added: 4] | | | | [removed: 6] [added: 7] | | | | 6 | | | | [removed: 9] [added: 6] | | | | [removed: 11] [added: 9] | | | |

| Number of stores at year-end | | [removed: 1,622] [added: 1,717] | | | | [removed: 1,533] [added: 1,622] | | | | [removed: 1,446] [added: 1,533] | | | | [removed: 1,362] [added: 1,446] | | | | [removed: 1,276] [added: 1,362] | | | |

| (52-week basis) | | 4 | | % | | 4 | | % | | 4 | | % | | [removed: 3] [added: 4] | | % | | 3 | | % | |

| selling space (52-week basis) | | $ | [removed: 409] [added: 422] | | | $ | [removed: 395] [added: 409] | | | $ | [removed: 383] [added: 395] | | | $ | [removed: 372] [added: 383] | | | $ | [removed: 362] [added: 372] | | |

| at year-end (000) | | [removed: 34,700] [added: 36,300] | | | | [removed: 33,300] [added: 34,700] | | | | [removed: 31,900] [added: 33,300] | | | | [removed: 30,400] [added: 31,900] | | | | [removed: 28,900] [added: 30,400] | | | |

| Number of employees at year-end | | [removed: 82,700] [added: 88,100] | | | | [removed: 78,600] [added: 82,700] | | | | [removed: 77,800] [added: 78,600] | | | | [removed: 71,400] [added: 77,800] | | | | [removed: 66,300] [added: 71,400] | | | |

| of record at year-end | | [removed: 880] [added: 902] | | | | [removed: 848] [added: 880] | | | | [removed: 842] [added: 848] | | | | [removed: 817] [added: 842] | | | | [removed: 823] [added: 817] | | | |

| 4 Includes a per share benefit of approximately $0.70 from tax reform legislation enacted in December 2017 and $0.07 from the favorable resolution of a tax matter. | | | | | | | | | | | | | | | | | | | | |

| ³ Dividend declaration of $0.10 per share for the fourth quarter, which historically had been declared in January, was declared in February 2014. | | | | | | | | | | | | | | | | | | | | |

| ($000, except per share data) | | February [removed: 3, 2018] [added: 2, 2019] | | | | [removed: January 28, 2017] [added: February 3, 2018] | | | | January [removed: 30, 2016] [added: 28, 2017] | | |

| Sales | | $ | [removed: 14,134,732] [added: 14,983,541] | | | $ | [removed: 12,866,757] [added: 14,134,732] | | | $ | [removed: 11,939,999] [added: 12,866,757] | |

| Cost of goods sold | | [removed: 10,042,638] [added: 10,726,277] | | | | [removed: 9,173,705] [added: 10,042,638] | | | | [removed: 8,576,873] [added: 9,173,705] | | |

| Selling, general and administrative | | [removed: 2,043,698] [added: 2,216,550] | | | | [removed: 1,890,408] [added: 2,043,698] | | | | [removed: 1,738,755] [added: 1,890,408] | | |

| Interest [added: (income)] expense, net | | [removed: 7,676] [added: (10,162] | | [added: )] | | [removed: 16,488] [added: 7,676] | | | | [removed: 12,612] [added: 16,488] | | |

| Total costs and expenses | | [removed: 12,094,012] [added: 12,932,665] | | | | [removed: 11,080,601] [added: 12,094,012] | | | | [removed: 10,328,240] [added: 11,080,601] | | |

| Earnings before taxes | | [removed: 2,040,720] [added: 2,050,876] | | | | [removed: 1,786,156] [added: 2,040,720] | | | | [removed: 1,611,759] [added: 1,786,156] | | |

| Provision for taxes on earnings | | [removed: 677,967] [added: 463,419] | | | | [removed: 668,502] [added: 677,967] | | | | [removed: 591,098] [added: 668,502] | | |

| Net earnings | | $ | [removed: 1,362,753] [added: 1,587,457] | | | $ | [removed: 1,117,654] [added: 1,362,753] | | | $ | [removed: 1,020,661] [added: 1,117,654] | |

| Basic | | $ | [removed: 3.58] [added: 4.30] | | | $ | [removed: 2.85] [added: 3.58] | | | $ | [removed: 2.53] [added: 2.85] | |

| Diluted | | $ | [removed: 3.55] [added: 4.26] | | | $ | [removed: 2.83] [added: 3.55] | | | $ | [removed: 2.51] [added: 2.83] | |

| Basic | | [removed: 381,174] [added: 369,533] | | | | [removed: 392,124] [added: 381,174] | | | | [removed: 403,034] [added: 392,124] | | |

| Diluted | | [removed: 384,329] [added: 372,678] | | | | [removed: 394,958] [added: 384,329] | | | | [removed: 406,405] [added: 394,958] | | |

| ($000) | | February [removed: 3, 2018] [added: 2, 2019] | | | | [removed: January 28, 2017] [added: February 3, 2018] | | | | January [removed: 30, 2016] [added: 28, 2017] | | |

| Change in unrealized loss on investments, net of tax | | [removed: (64] [added: (27] | | ) | | [removed: (91] [added: (64] | | ) | | [removed: (148] [added: (91] | | ) |

| Comprehensive income | | $ | [removed: 1,362,689] [added: 1,587,430] | | | $ | [removed: 1,117,563] [added: 1,362,689] | | | $ | [removed: 1,020,513] [added: 1,117,563] | |

| ($000, except share data) | February [removed: 3, 2018] [added: 2, 2019] | | | | [removed: January 28, 2017] [added: February 3, 2018] | | |

| Cash and cash equivalents | [added: |] $ | [added: 1,412,912 | | | $ |] 1,290,294 | | | $ | 1,111,599 | |

| Short-term investments | [removed: 512] [added: —] | | | | [removed: —] [added: 512] | | |

| Accounts receivable | [removed: 87,868] [added: 96,711] | | | | [removed: 75,154] [added: 87,868] | | |

| Merchandise inventory | [removed: 1,641,735] [added: 1,750,442] | | | | [removed: 1,512,886] [added: 1,641,735] | | |

| Prepaid expenses and other | [removed: 130,748] [added: 143,954] | | | | [removed: 113,410] [added: 130,748] | | |

| Total current assets | [removed: 3,151,157] [added: 3,404,019] | | | | [removed: 2,813,049] [added: 3,151,157] | | |

| Land and buildings | [removed: 1,109,173] [added: 1,126,051] | | | | [removed: 1,101,334] [added: 1,109,173] | | |

| Fixtures and equipment | [removed: 2,603,318] [added: 2,783,198] | | | | [removed: 2,421,645] [added: 2,603,318] | | |

| Leasehold improvements | [removed: 1,093,634] [added: 1,175,921] | | | | [removed: 998,508] [added: 1,093,634] | | |

| Construction-in-progress | [removed: 102,054] [added: 171,538] | | | | [removed: 69,767] [added: 102,054] | | |

| Less accumulated depreciation and amortization | [removed: 2,525,715] [added: 2,781,507] | | | | [removed: 2,263,206] [added: 2,525,715] | | |

| Property and equipment, net | [removed: 2,382,464] [added: 2,475,201] | | | | [removed: 2,328,048] [added: 2,382,464] | | |

| Long-term investments | [removed: 712] [added: 125] | | | | [removed: 1,288] [added: 712] | | |

| Other long-term assets | [removed: 187,718] [added: 194,346] | | | | [removed: 166,966] [added: 187,718] | | |

| Total assets | $ | [removed: 5,722,051] [added: 6,073,691] | | | $ | [removed: 5,309,351] [added: 5,722,051] | |

| Accounts payable | $ | [removed: 1,059,844] [added: 1,177,104] | | | $ | [removed: 1,021,735] [added: 1,059,844] | |

| Accrued expenses and other | [removed: 431,706] [added: 431,596] | | | | [removed: 398,126] [added: 431,706] | | |

| Accrued payroll and benefits | [removed: 349,879] [added: 363,035] | | | | [removed: 316,492] [added: 349,879] | | |

| Income taxes payable | [removed: —] [added: 37,749] | | | | [removed: 16,153] [added: —] | | |

| Current portion of long-term debt | [removed: 84,973] [added: —] | | | | [removed: —] [added: 84,973] | | |

| Total current liabilities | [removed: 1,926,402] [added: 2,009,484] | | | | [removed: 1,752,506] [added: 1,926,402] | | |

| Long-term debt | [removed: 311,994] [added: 312,440] | | | | [removed: 396,493] [added: 311,994] | | |

| Other long-term liabilities | [removed: 348,541] [added: 321,713] | | | | [removed: 290,950] [added: 348,541] | | |

| Net earnings | | $ | 1,587,457 | | | $ | 1,362,753 | | | $ | 1,117,654 | |

| Cash and cash equivalents | $ | 1,412,912 | | | $ | 1,290,294 | |

| | 5,256,708 | | | | 4,908,179 | | |

| | | | | | | | | | | | | | | | | | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| | | | | | | | | | | | | | | | | | | | | | | | | | | | |

| (stock-compensation), net | | — | | | — | | | | 1,789 | | | | — | | | | — | | | | (1,113 | | ) | | 676 | | |

| Common stock issued under stock | | | | | | | | | | | | | | | | | | | | | | | | | | | |

| plans, net of shares | | | | | | | | | | | | | | | | | | | | | | | | | | | |

| Net earnings | | — | | | — | | | | — | | | | — | | | | — | | | | 1,587,457 | | | | 1,587,457 | | |

| Cumulative effect of adoption of | | | | | | | | | | | | | | | | | | | | | | | | | | | |

| accounting standard | | | | | | | | | | | | | | | | | | | | | | | | | | | |

| (revenue recognition), net | | — | | | — | | | | — | | | | — | | | | — | | | | 19,884 | | | | 19,884 | | |

| Common stock issued under stock | | | | | | | | | | | | | | | | | | | | | | | | | | | |

| plans, net of shares | | | | | | | | | | | | | | | | | | | | | | | | | | | |

| used for tax withholding | | 1,097 | | | 11 | | | | 20,101 | | | | (54,384 | | ) | | — | | | | — | | | | (34,272 | | ) |

| Common stock repurchased | | (12,473 | ) | | (125 | | ) | | (32,085 | | ) | | — | | | | — | | | | (1,042,790 | | ) | | (1,075,000 | | ) |

| Balance at February 2, 2019 | | 368,242 | | | $ | 3,682 | | | $ | 1,375,965 | | | $ | (372,663 | ) | | $ | — | | | $ | 2,298,762 | | | $ | 3,305,746 | |

| ($000) | | February 2, 2019 | | | | February 3, 2018 1 | | | | January 28, 2017 1 | | |

| Net earnings | | $ | 1,587,457 | | | $ | 1,362,753 | | | $ | 1,117,654 | |

| Proceeds from investments | | 3,489 | | | | 687 | | | | 1,700 | | |

| Net cash used in investing activities | | (410,409 | | ) | | (354,755 | | ) | | (296,180 | | ) |

| Payment of long-term debt | | (85,000 | | ) | | — | | | | — | | |

| Net increase in cash, cash equivalents, and restricted cash and cash equivalents | | 124,807 | | | | 177,092 | | | | 346,630 | | |

| Beginning of year 1 | | 1,353,272 | | | | 1,176,180 | | | | 829,550 | | |

| End of year | | $ | 1,478,079 | | | $ | 1,353,272 | | | $ | 1,176,180 | |

| 1 As the result of the adoption of ASU 2016-18, Statement of Cash Flow (Topic 230): Restricted Cash, the prior year amounts were retrospectively adjusted to include restricted cash and cash equivalents. See Note A. | | | | | | | | | | | | |

The following table provides a reconciliation of cash, cash equivalents, restricted cash and cash equivalents in the Consolidated Balance Sheets that reconcile to the amounts shown on the Consolidated Statements of Cash Flows:

| Restricted cash and cash equivalents included in: | | | | | | | | | | | | |

| Prepaid expenses and other | | 11,402 | | | | 9,412 | | | | 12,936 | | |

| Other long-term assets | | 53,765 | | | | 53,566 | | | | 51,645 | | |

| Total restricted cash and cash equivalents | | 65,167 | | | | 62,978 | | | | 64,581 | | |

| Total cash, cash equivalents and restricted cash and equivalents | | $ | 1,478,079 | | | $ | 1,353,272 | | | $ | 1,176,180 | |

In addition to the restricted cash and equivalents in the table above, the Company has restricted investments included in the Consolidated Balance Sheets as shown below:

| Total restricted investments | | $ | 400 | | | $ | 2,838 | |

| ($000) | | 2018 | | | | 2017 | | |

| ($000) | | 2018 | | | | 2017 | | |

| ($000) | | 2018 | | | | 2017 | | |

As a result of adopting ASU No. 2014-09, Revenue from Contracts with Customers (Accounting Standards Codification "ASC" 606), the Company recognizes allowances for estimated sales returns on a gross basis as a reduction to sales.

This resulted in an asset recorded for the expected recovery of merchandise inventory of $10.2 million and a liability recorded for the refund due to the customer of $19.8 million as of February 2, 2019.

| | 4,908,179 | | | | 4,591,254 | | |

| | | | | | | | | | | | | | | | | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| 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 | | |

| used for tax withholding | | 1,053 | | | 11 | | | | 20,175 | | | | (68,925 | | ) | | — | | | — | | | | (48,739 | | ) |

| Common stock repurchased | | (13,653 | ) | | (137 | | ) | | (24,772 | | ) | | — | | | | — | | | (675,091 | | ) | | (700,000 | | ) |

| Purchases of investments | | — | | | | — | | | | (718 | | ) |

| Proceeds from investments | | 40 | | | | 1,729 | | | | 1,104 | | |

| Net cash used in investing activities | | (353,092 | | ) | | (292,763 | | ) | | (362,509 | | ) |

| Excess tax benefit from stock-based compensation | | — | | | | 23,331 | | | | 42,302 | | |

| Net increase in cash and cash equivalents | | 178,695 | | | | 349,997 | | | | 64,994 | | |

| Beginning of year | | 1,111,599 | | | | 761,602 | | | | 696,608 | | |

| End of year | | $ | 1,290,294 | | | $ | 1,111,599 | | | $ | 761,602 | |

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 February 3, 2018 and January 28, 2017:

| Total | | $ | 65,816 | | | $ | 68,209 | |

| Restricted cash and investments | | 53,969 | | | | 54,567 | | |

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 2017, 2016, and 2015.

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 | | |

| February 3, 2018 | | $ | 8,406 | | | $ | 784,076 | | | $ | (782,580 | ) | | $ | 9,902 | |

| January 28, 2017 | | $ | 7,955 | | | $ | 761,350 | | | $ | (760,899 | ) | | $ | 8,406 | |

| January 30, 2016 | | $ | 8,594 | | | $ | 737,727 | | | $ | (738,366 | ) | | $ | 7,955 | |

| 2015 | | | | | | | | | | | | |

| Shares | | 403,034 | | | | 3,371 | | | | 406,405 | | |

| Amount | | $ | 2.53 | | | $ | (0.02 | ) | | $ | 2.51 | |

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (ASU) 2014-09, Revenue from Contracts with Customers (ASC 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.

ASC 606 is effective for the Company’s annual and interim reporting periods beginning in fiscal 2018.

Adoption will result in a change in the timing of recognizing revenue from breakage for stored value cards.

Breakage will be estimated and recognized based upon the historical pattern of redemption, rather than when redemption is considered remote.

Additionally, the Company will recognize allowances for estimated sales returns on a gross rather than net basis in its Consolidated Financial Statements.

The impact of estimating sales returns on a gross basis is not expected to be material.

The Company plans to adopt ASC 606 under the modified retrospective method and will recognize a cumulative-effect adjustment to increase retained earnings by approximately $20 million, net of income taxes as of February 4, 2018.

Based on our evaluation under the framework in Internal Control — Integrated Framework (2013), our management concluded that our internal control over financial reporting was effective as of February [removed: 3, 2018.][added: 2, 2019.]

Our internal control over financial reporting as of February [removed: 3, 2018] [added: 2, 2019] has also been audited by Deloitte & Touche LLP, an independent registered public accounting firm, and their opinion as to the effectiveness of our internal control over financial reporting is stated in their report, dated April [removed: 3, 2018,] [added: 2, 2019,] which is included in Item 8 in this Annual Report on Form 10-K.

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, also conducted an evaluation of our internal control over financial reporting to determine whether any change occurred during the fourth fiscal quarter of [removed: 2017] [added: 2018] that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Information required by Item 401 of Regulation S-K is incorporated herein by reference to the sections entitled “Executive Officers of the Registrant” at the end of Part I of this report; and to the sections of the Ross Stores, Inc. Proxy Statement for the Annual Meeting of Stockholders to be held on Wednesday, May [removed: 23, 2018] [added: 22, 2019] (the “Proxy Statement”) entitled “Information Regarding Nominees and Incumbent Directors.” Information required by Item 405 of Regulation S-K is incorporated by reference to the Proxy Statement under the section titled “Section 16(a) Beneficial Ownership Reporting Compliance.” Since our last Annual Report on Form 10-K, we have not made any material changes to the procedures by which our stockholders may recommend nominees to the Board of Directors.

Our Board of Directors has adopted a Code of Ethics for Senior Financial Officers that applies to the Company’s Executive Chairman; Chief Executive Officer; Chief Operating Officer; Chief Merchandising Officer; President, Merchandising; Chief Development Officer; [added: Group] Executive Vice President, Finance and [removed: Legal;] [added: Legal,] Chief Financial Officer; [added: Deputy Chief Financial Officer;] Senior Vice President, Controller; Senior Vice President, Finance; Group Vice President, Accounting and Assistant Controller; [added: Group] Vice President, Finance [added: and Treasury; Vice President, Finance] (FP&A); Group Vice President, Tax; Assistant Treasurer; Investor and Media Relations personnel; and successor and other positions that may be designated by the Company.

The following table summarizes the equity compensation plans under which the Company’s common stock may be issued as of February [removed: 3, 2018:][added: 2, 2019:]

| approved by security holders | | [removed: 655] [added: 556 2] | | [removed: 2] | — | | | [removed: 17,203] [added: 16,206 3] | | [removed: 3] |

2 Securities include shares underlying outstanding performance share awards where the performance measurement has occurred but that remain unsettled and unissued as of February [removed: 3, 2018.][added: 2, 2019.]

3 Includes [removed: 5.3] [added: 5.0] million shares reserved for issuance under the Employee Stock Purchase Plan and [removed: 11.9] [added: 11.2] million shares reserved for issuance under the 2017 Equity Incentive Plan.

| Total | | 556 | | | — | | | 16,206 | | |

| Total | | 655 | | | — | | | 17,203 | | |

Consolidated Statements of Earnings for the years ended February [added: 2, 2019, February] 3, 2018, [removed: January 28, 2017,] and January [removed: 30, 2016.][added: 28, 2017.]

Consolidated Statements of Comprehensive Income for the years ended February [added: 2, 2019, February] 3, 2018, [removed: January 28, 2017,] and January [removed: 30, 2016.][added: 28, 2017.]

Consolidated Balance Sheets at February [removed: 3, 2018] [added: 2, 2019] and [removed: January 28, 2017.][added: February 3, 2018.]

Consolidated Statements of Stockholders’ Equity for the years ended February [added: 2, 2019, February] 3, 2018, [removed: January 28, 2017,] and January [removed: 30, 2016.][added: 28, 2017.]

Consolidated Statements of Cash Flows for the years ended February [added: 2, 2019, February] 3, 2018, [removed: January 28, 2017,] and January [removed: 30, 2016.][added: 28, 2017.]

| Date: | April [removed: 3, 2018] [added: 2, 2019] | | Barbara Rentler |

| /s/Barbara Rentler | | Chief Executive Officer, Director | | April [removed: 3, 2018] [added: 2, 2019] |

| /s/Michael J. Hartshorn | | [added: Group] Executive Vice President, [removed: Chief Financial Officer,] [added: Finance and Legal,] | | April [removed: 3, 2018] [added: 2, 2019] |

| Michael J. Hartshorn | | [added: Chief Financial Officer,] and Principal Accounting Officer | | |

| /s/Michael Balmuth | | Executive Chairman of the Board, Director | | April [removed: 3, 2018] [added: 2, 2019] |

| /s/K. Gunnar Bjorklund | | Director | | April [removed: 3, 2018] [added: 2, 2019] |

| /s/Michael J. Bush | | Director | | April [removed: 3, 2018] [added: 2, 2019] |

| /s/Norman A. Ferber | | Chairman Emeritus of the Board, Director | | April [removed: 3, 2018] [added: 2, 2019] |

| /s/Sharon D. Garrett | | Director | | April [removed: 3, 2018] [added: 2, 2019] |

| /s/Stephen D. Milligan | | Director | | April [removed: 3, 2018] [added: 2, 2019] |

| /s/G. Orban | | Director | | April [removed: 3, 2018] [added: 2, 2019] |

| /s/Michael O’Sullivan | | President and Chief Operating Officer, Director | | April [removed: 3, 2018] [added: 2, 2019] |

| /s/G. L. Quesnel | | Director | | April [removed: 3, 2018] [added: 2, 2019] |

| MANAGEMENT CONTRACTS AND COMPENSATORY PLANS (EXHIBITS 10.2 - [removed: 10.33)] [added: 10.39)] | | |

| 10.3 | | [Third Amended and Restated Ross Stores, Inc. Non-Qualified Deferred Compensation Plan effective December 31, [removed: 2008, as] [added: 2008 (as] amended effective January 1, 2015 and October 1, [removed: 2017.](https://www.sec.gov/Archives/edgar/data/745732/000074573218000004/exhibit103nonqualifieddefe.htm)] [added: 2017), incorporated by reference to Exhibit 10.3 filed by Ross Stores, Inc. for its fiscal year ended February 3, 2018. ](http://www.sec.gov/Archives/edgar/data/745732/000074573218000004/exhibit103nonqualifieddefe.htm)] |

| 10.4 | | [Second Amended and Restated Ross Stores, Inc. Incentive Compensation Plan (as amended effective May 18, 2016), incorporated by reference [added: to] Exhibit 10.1 to the Form 10-Q filed by Ross Stores, Inc. on July 30, [removed: 2016.](http://www.sec.gov/Archives/edgar/data/745732/000074573216000059/exhibit101rossstores2ndame.htm)] [added: 2016. ](http://www.sec.gov/Archives/edgar/data/745732/000074573216000059/exhibit101rossstores2ndame.htm)] |

| [removed: 10.10] [added: 10.12] | | [Form of Restricted Stock Agreement for Nonemployee [removed: Director.](https://www.sec.gov/Archives/edgar/data/745732/000074573218000004/exhibit1010restrictedstock.htm)] [added: Director, incorporated by reference to Exhibit 10.10 to the Form 10-K filed by Ross Stores, Inc. for its fiscal year ended February 3, 2018.](http://www.sec.gov/Archives/edgar/data/745732/000074573218000004/exhibit1010restrictedstock.htm)] |

| [removed: 10.12] [added: 10.13] | | [Form of Performance Shares Grant Agreement, incorporated by reference to Exhibit 10.1 to the Form 10-Q filed by Ross Stores, Inc. for its quarter ended May 3, 2014. ](http://www.sec.gov/Archives/edgar/data/745732/000074573214000011/exhibit101forofperformance.htm) |

| [removed: 10.13] [added: 10.14] | | [Form of Performance Share Agreement, incorporated by reference to Exhibit 10.6 to the Form 10-Q filed by Ross Stores, Inc. for its quarter ended July 29, 2017. ](http://www.sec.gov/Archives/edgar/data/745732/000074573217000030/exhibit106formofperformanc.htm) |

| [removed: 10.14] [added: 10.16] | | [Form of Indemnity Agreement between Ross Stores, Inc. for Directors and Executive Officers, incorporated by reference to Exhibit 10.26 to the Form 10-K filed by Ross Stores, Inc. for its fiscal year ended February 2, 2013. ](http://www.sec.gov/Archives/edgar/data/745732/000074573213000006/exhibit1026rosstemplateind.htm) |

| [removed: 10.15] [added: 10.17] | | [Forms of Executive Employment Agreement for Executive Officers, incorporated by reference to Exhibit 10.3 to the Form 10-Q filed by Ross Stores, Inc. for its quarter ended April 30, 2016.](http://www.sec.gov/Archives/edgar/data/745732/000074573216000053/exhibit103formsofexecutive.htm) |

| [removed: 10.16] [added: 10.18] | | [Forms of Executive Employment Agreement for Executive Officers, incorporated by reference to Exhibit 10.1 to the Form 10-Q filed by Ross Stores, Inc. for its quarter ended April 29, 2017. ](http://www.sec.gov/Archives/edgar/data/745732/000074573217000026/exhibit101formsofexecutive.htm) |

| [removed: 10.17] [added: 10.20] | | [Amended and Restated Independent Contractor Consultancy Agreement effective January 6, 2010 between Norman A. Ferber and Ross Stores, Inc., incorporated by reference to Exhibit 10.47 to the Form 10-K filed by Ross Stores, Inc. for its fiscal year ended January 30, 2010. ](http://www.sec.gov/Archives/edgar/data/745732/000120677410000742/exhibit10-47.htm) |

| [removed: 10.18] [added: 10.21] | | [Amended Independent Contractor Consultancy Agreement effective January 30, 2012 between Norman A. Ferber and Ross Stores, Inc., incorporated by reference to Exhibit 10.52 to the Form 10-K filed by Ross Stores, Inc. for its fiscal year ended January 28, 2012. ](http://www.sec.gov/Archives/edgar/data/745732/000120677412001210/exhibit10-52.htm) |

| [removed: 10.19] [added: 10.22] | | [Amendment to Independent Contractor Consultancy Agreement effective February 17, 2015 between Norman A. Ferber and Ross Stores, Inc., incorporated by reference to Exhibit 10.3 to the Form 10-Q filed by Ross Stores, Inc. for its quarter ended May 2, 2015. ](http://www.sec.gov/Archives/edgar/data/745732/000074573215000017/exhibit103amendmenttoindep.htm) |

| [removed: 10.20] [added: 10.23] | | [Amended and Restated Retirement Benefit Package Agreement effective January 6, 2010 between Norman A. Ferber and Ross Stores, Inc., incorporated by reference to Exhibit 10.48 to the Form 10-Q filed by Ross Stores, Inc. for its quarter ended May 1, 2010. ](http://www.sec.gov/Archives/edgar/data/745732/000120677410001420/exhibit10-48.htm) |

| [removed: 10.21] [added: 10.24] | | [Amended Retirement Benefits Package Agreement effective January 30, 2012 between Norman A. Ferber and Ross Stores, Inc., incorporated by reference to Exhibit 10.53 to the Form 10-K filed by Ross Stores, Inc. for its fiscal year ended January 28, 2012. ](http://www.sec.gov/Archives/edgar/data/745732/000120677412001210/exhibit10-53.htm) |