Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Consolidated Statements of Earnings

						Fiscal Year Ended
($000, except per share data)						February 3, 2024						January 28, 2023						January 29, 2022
Sales						$	20,376,941					$	18,695,829					$	18,916,244
Costs and Expenses
Cost of goods sold						14,801,601						13,946,230						13,708,907
Selling, general and administrative						3,267,677						2,759,268						2,874,469
Interest (income) expense, net						(164,118)						2,842						74,328
Total costs and expenses						17,905,160						16,708,340						16,657,704
Earnings before taxes						2,471,781						1,987,489						2,258,540
Provision for taxes on earnings						597,261						475,448						535,951
Net earnings						$	1,874,520					$	1,512,041					$	1,722,589
Earnings per share
Basic						$	5.59					$	4.40					$	4.90
Diluted						$	5.56					$	4.38					$	4.87
Weighted-average shares outstanding (000)
Basic						335,187						343,452						351,496
Diluted						337,433						345,222						353,734
The accompanying notes are an integral part of these consolidated financial statements.

Consolidated Statements of Comprehensive Income

						Fiscal Year Ended
($000)						February 3, 2024						January 28, 2023						January 29, 2022
Net earnings						$	1,874,520					$	1,512,041					$	1,722,589
Other comprehensive income						—						—						—
Comprehensive income						$	1,874,520					$	1,512,041					$	1,722,589

The accompanying notes are an integral part of these consolidated financial statements.

Consolidated Balance Sheets

($000, except share data)			February 3, 2024						January 28, 2023
Assets
Current Assets
Cash and cash equivalents			$	4,872,446					$	4,551,876
Accounts receivable			130,766						145,694
Merchandise inventory			2,192,220						2,023,495
Prepaid expenses and other			202,706						183,654
Total current assets			7,398,138						6,904,719
Property and Equipment
Land and buildings			1,486,557						1,495,006
Fixtures and equipment			4,220,221						3,961,733
Leasehold improvements			1,577,102						1,433,647
Construction-in-progress			628,730						319,319
			7,912,610						7,209,705
Less accumulated depreciation and amortization			4,380,709						4,028,178
Property and equipment, net			3,531,901						3,181,527
Operating lease assets			3,126,841						3,098,134
Other long-term assets			243,229						232,083
Total assets			$	14,300,109					$	13,416,463
Liabilities and Stockholders’ Equity
Current Liabilities
Accounts payable			$	1,955,850					$	2,009,924
Accrued expenses and other			671,867						638,561
Current operating lease liabilities			683,625						655,976
Accrued payroll and benefits			548,371						279,710
Income taxes payable			76,370						52,075
Current portion of long-term debt			249,713						—
Total current liabilities			4,185,796						3,636,246
Long-term debt			2,211,017						2,456,510
Non-current operating lease liabilities			2,603,349						2,593,961
Other long-term liabilities			232,383						224,104
Deferred income taxes			196,238						217,059
Commitments and contingencies
Stockholders’ Equity
Common stock, par value $0.01 per share			3,352						3,428
Authorized 1,000,000,000 shares
Issued and outstanding 335,172,000 and
342,753,000 shares, respectively
Additional paid-in capital			1,952,625						1,820,249
Treasury stock			(633,318)						(584,750)
Retained earnings			3,548,667						3,049,656
Total stockholders’ equity			4,871,326						4,288,583
Total liabilities and stockholders’ equity			$	14,300,109					$	13,416,463
The accompanying notes are an integral part of these consolidated financial statements.

Consolidated Statements of Stockholders’ Equity

																		Additional paid-in capital
						Common stock															Treasury stock									Retained earnings
(000)						Shares						Amount																		Total
Balance at January 30, 2021						356,503						$	3,565					$	1,579,824					$	(478,550)											$	2,185,801					$	3,290,640
Net earnings						—						—						—						—												1,722,589						1,722,589
Common stock issued under stock plans,
net of shares used for tax withholding						905						9						25,060						(57,345)												—						(32,276)
Stock-based compensation						—						—						134,217						—												—						134,217
Common stock repurchased						(5,688)						(57)						(21,571)						—												(628,369)						(649,997)
Dividends declared ($1.140 per share)						—						—						—						—												(405,123)						(405,123)
Balance at January 29, 2022						351,720						$	3,517					$	1,717,530					$	(535,895)											$	2,874,898					$	4,060,050
Net earnings						—						—						—						—												1,512,041						1,512,041
Common stock issued under stock plans,
net of shares used for tax withholding						1,343						14						24,688						(48,855)												—						(24,153)
Stock-based compensation						—						—						121,936						—												—						121,936
Common stock repurchased						(10,310)						(103)						(43,905)						—												(905,988)						(949,996)
Dividends declared ($1.240 per share)						—						—						—						—												(431,295)						(431,295)
Balance at January 28, 2023						342,753						$	3,428					$	1,820,249					$	(584,750)											$	3,049,656					$	4,288,583
Net earnings						—						—						—						—												1,874,520						1,874,520
Common stock issued under stock plans,
net of shares used for tax withholding						662						7						24,893						(48,568)												—						(23,668)
Stock-based compensation						—						—						145,490						—												—						145,490
Common stock repurchased, inclusive of excise tax						(8,243)						(83)						(38,007)						—												(920,695)						(958,785)
Dividends declared ($1.340 per share)						—						—						—						—												(454,814)						(454,814)
Balance at February 3, 2024						335,172						$	3,352					$	1,952,625					$	(633,318)											$	3,548,667					$	4,871,326
The accompanying notes are an integral part of these consolidated financial statements.

Consolidated Statements of Cash Flows

						Fiscal Year Ended
($000)						February 3, 2024						January 28, 2023						January 29, 2022
Cash Flows From Operating Activities
Net earnings						$	1,874,520					$	1,512,041					$	1,722,589
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization						419,432						394,655						360,664
Stock-based compensation						145,490						121,936						134,217
Deferred income taxes						(20,821)						79,417						15,775
Change in assets and liabilities:
Merchandise inventory						(168,725)						238,778						(753,291)
Other current assets						(2,261)						(39,487)						1,420
Accounts payable						(65,327)						(365,262)						135,311
Other current liabilities						296,980						(304,454)						198,595
Income taxes						22,931						33,876						(44,579)
Operating lease assets and liabilities, net						8,330						9,261						7,647
Other long-term, net						3,941						8,612						(39,499)
Net cash provided by operating activities						2,514,490						1,689,373						1,738,849
Cash Flows From Investing Activities
Additions to property and equipment						(762,812)						(654,070)						(557,840)
Net cash used in investing activities						(762,812)						(654,070)						(557,840)
Cash Flows From Financing Activities
Issuance of common stock related to stock plans						24,900						24,702						25,069
Treasury stock purchased						(48,568)						(48,855)						(57,345)
Repurchase of common stock						(949,996)						(949,996)						(649,997)
Dividends paid						(454,814)						(431,295)						(405,123)
Payments of long-term debt						—						—						(65,000)
Net cash used in financing activities						(1,428,478)						(1,405,444)						(1,152,396)
Net increase (decrease) in cash, cash equivalents, and restricted cash and cash equivalents						323,200						(370,141)						28,613
Cash and cash equivalents, and restricted cash and cash equivalents:
Beginning of year						4,612,241						4,982,382						4,953,769
End of year						$	4,935,441					$	4,612,241					$	4,982,382
Supplemental Cash Flow Disclosures
Interest paid						$	80,316					$	80,316					$	84,331
Income taxes paid						$	595,152					$	362,156					$	564,755
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 2023, the Company operated 1,764 Ross Dress for Less® (“Ross”) locations in 43 states, the District of Columbia, and Guam, and 345 dd’s DISCOUNTS® stores in 22 states. The Ross and dd’s DISCOUNTS stores are supported by the Company’s headquarters, buying offices, and its network of distribution centers and warehouses.

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 year ended February 3, 2024, is referred to as fiscal 2023 which was a 53-week year. The fiscal years ended January 28, 2023 and January 29, 2022, are referred to as fiscal 2022 and fiscal 2021, respectively, each of which were 52-week years.

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 materially from the Company’s estimates. The Company’s significant accounting estimates include valuation reserves for inventory, packaway and other inventory carrying costs, useful lives of fixed assets, insurance reserves, reserves for uncertain tax positions, and legal claims.

Segment reporting. The Company has one reportable segment. The Company identifies its operating segments according to how the business activities are managed and evaluated. As of February 3, 2024, the Company identified two operating segments; Ross and dd’s DISCOUNTS. Each operating segment’s operations include only activities related to off-price retailing in stores throughout the United States. The Company determined that the two operating segments share similar economic and other qualitative characteristics and are therefore aggregated into one reportable segment.

Cash and cash equivalents. Cash equivalents consist of highly liquid, fixed income instruments purchased with an original maturity of three months or less. The institutions where these instruments are held could potentially subject the Company to concentrations of credit risk. The Company manages its risk associated with these instruments by primarily holding its cash and cash equivalents across a highly diversified set of banks and other financial institutions.

Restricted cash and cash equivalents. Restricted cash and cash equivalents serve as collateral for certain insurance obligations. These restricted funds are invested in bank deposits, money market mutual funds, and U.S. Government and agency securities, and cannot be withdrawn from the Company’s account without the prior written consent of the secured parties. The classification between current and long-term is based on the timing of expected payments of the obligations.

The Company uses standby letters of credit in addition to a funded trust to collateralize these insurance obligations. The standby letters of credit are collateralized by restricted cash. As of February 3, 2024, January 28, 2023, and January 29, 2022 we had $2.2 million, $2.6 million, and $3.3 million, respectively, in standby letters of credit outstanding and $60.8 million, $57.8 million, and $56.7 million, respectively, in a collateral trust.

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

($000)						2023						2022						2021
Cash and cash equivalents						$	4,872,446					$	4,551,876					$	4,922,365
Restricted cash and cash equivalents included in:
Prepaid expenses and other						14,489						12,677						11,403
Other long-term assets						48,506						47,688						48,614
Total restricted cash and cash equivalents						62,995						60,365						60,017
Total cash and cash equivalents, and restricted cash and cash equivalents						$	4,935,441					$	4,612,241					$	4,982,382

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

Cash and cash equivalents were $4.9 billion and $4.6 billion at February 3, 2024 and January 28, 2023, 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.

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, 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, transportation, 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, warehouses, and cross-dock 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 years to 12 years for equipment, 20 years to 40 years for land improvements and buildings, and three years to seven years for computer software costs incurred in developing or obtaining software for internal use. The cost of leasehold improvements is amortized over the useful life of the asset or the applicable lease term, whichever is less. Depreciation and amortization expense on property and equipment was $419.4 million, $394.7 million, and $360.7 million for fiscal 2023, 2022, and 2021, respectively. The Company capitalizes interest during the construction period of facilities and during the development and implementation phase of software projects. Interest capitalized was $12.1 million, $5.7 million, and $14.5 million in fiscal 2023, 2022, and 2021, respectively. As of February 3, 2024, January 28, 2023, and January 29, 2022, the Company had $78.2 million, $71.0 million, and $47.3 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 February 3, 2024 and January 28, 2023 consisted of the following:

($000)						2023						2022
Deferred compensation (Note G)						$	165,582					$	155,496
Restricted cash and cash equivalents						48,506						47,688
Other						29,141						28,899
Total						$	243,229					$	232,083

Impairment of long-lived assets. Property and other long-term assets that are subject to depreciation and amortization are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable based on estimated undiscounted future cash flows. For stores that are closed, the Company records an impairment charge, if appropriate, or accelerates depreciation over the revised useful life of the asset. 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. No material impairment charges were recorded during fiscal 2023, 2022, and 2021.

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 $61.4 million and $110.6 million at February 3, 2024 and January 28, 2023, respectively. The Company includes the change in book cash overdrafts in operating cash flows.

Supply chain finance program. The Company facilitates a voluntary supply chain finance program (the “program”) to provide certain suppliers with the opportunity to sell their receivables due from the Company to participating financial institutions at the sole discretion of both the suppliers and the financial institutions. A third-party bank administers the program. The Company’s responsibility is limited to making payment on the terms originally negotiated with each supplier, regardless of whether a supplier sells its receivable to a financial institution. The Company is not a party to the agreements between the participating financial institutions and the suppliers in connection with the program and receives no financial incentives from the suppliers or the financial institutions. No guarantees are provided by the Company under the program and the Company’s rights and obligations to its suppliers are not affected by the program. The range of payment terms negotiated with a supplier is consistent, irrespective of whether a supplier participates in the program.

All outstanding payments owed under the program are recorded within Accounts payable in the Consolidated Balance Sheets. The Company accounts for all payments made under the program as a reduction to operating cash flows in Accounts payable within the Consolidated Statements of Cash Flows. The amounts owed to participating financial institutions under the program and included in Accounts payable were $146.9 million and $119.2 million as of February 3, 2024 and January 28, 2023, respectively.

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 February 3, 2024 and January 28, 2023 consisted of the following:

($000)						2023						2022
Workers’ compensation						$	80,791					$	80,275
General liability						47,663						48,754
Medical plans						8,145						9,650
Total						$	136,599					$	138,679

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 February 3, 2024 and January 28, 2023 consisted of the following:

($000)						2023						2022
Income taxes (Note F)						$	56,045					$	57,409
Deferred compensation (Note G)						165,582						155,496
Other						10,756						11,199
Total						$	232,383					$	224,104

Lease accounting. As the Company’s leases generally do not provide an implicit discount rate, the Company uses the estimated collateralized incremental borrowing rate based on information available at the lease commencement date in determining the present value of lease payments for use in the calculation of the operating lease liabilities and right-of-use assets. This rate is determined using a portfolio approach based on the risk-adjusted rate of interest and requires estimates and assumptions including credit rating, credit spread, and adjustments for the impact of collateral. The Company believes that this is the rate it would have to pay to borrow an amount equal to the lease payments on a collateralized basis over a similar lease term. Operating lease liabilities and corresponding right-of-use assets include options to extend lease terms that are reasonably certain of being exercised. The Company does not record a lease liability and corresponding right-of-use asset for leases with terms of 12 months or less and accounts for lease and non-lease components as a single lease component. The Company’s lease portfolio is comprised of operating leases with the lease cost recorded on a straight-line basis over the lease term. Refer to Note E: Leases for additional information.

Revenue recognition. The Company recognizes revenue at the point of sale, net of sales taxes collected and an allowance for estimated future returns. The Company recognizes allowances for estimated sales returns on a gross basis as a reduction to sales. The asset recorded for the expected recovery of merchandise inventory was $12.1 million, $11.8 million, and $10.5 million and the liability recorded for the refund due to the customer was $23.7 million, $23.1 million, and $20.3 million as of February 3, 2024, January 28, 2023, and January 29, 2022, respectively. Sales taxes collected that are outstanding and the allowance for estimated future returns are included in Accrued expenses and other and the asset for expected recovery of merchandise is included in Prepaid expenses and other in the Consolidated Balance Sheets.

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. Breakage is estimated and recognized as revenue based upon the historical pattern of customer redemptions. Breakage was not material to the consolidated financial statements in fiscal 2023, 2022, and 2021.

The following sales mix table disaggregates revenue by merchandise category for fiscal 2023, 2022, and 2021:

						2023			1			2022						2021
Home Accents and Bed and Bath						26		%				26		%				26		%
Ladies						23		%				24		%				25		%
Men’s						15		%				15		%				14		%
Accessories, Lingerie, Fine Jewelry, and Cosmetics						15		%				14		%				14		%
Shoes						13		%				12		%				12		%
Children’s						8		%				9		%				9		%
Total						100		%				100		%				100		%

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 2023, 2022, and 2021 were $67.7 million, $66.5 million, and $65.1 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. Refer to Note C: Stock-Based Compensation, for more information on the Company’s stock-based compensation plans.

Taxes on earnings. The Company accounts for income taxes in accordance with the Financial Accounting Standards Board (“FASB”) 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. Refer to Note F: Taxes on Earnings for additional information.

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

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 and unvested shares of both performance and non-performance based awards of restricted stock and restricted stock units.

In fiscal 2023, 2022, and 2021 there were 200, 11,100, and 3,500 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
2023
Shares						335,187						2,246						337,433
Amount						$	5.59					$	(0.03)					$	5.56
2022
Shares						343,452						1,770						345,222
Amount						$	4.40					$	(0.02)					$	4.38
2021
Shares						351,496						2,238						353,734
Amount						$	4.90					$	(0.03)					$	4.87

Recently adopted accounting standards. In September 2022, the FASB issued Accounting Standards Update (“ASU”) 2022-04, Liabilities — Supplier Finance Programs (Subtopic 405-50): Disclosure of Supplier Finance Program Obligations, to enhance transparency about an entity’s use of supplier finance programs. The ASU requires enhanced and additional disclosures about the key terms of supplier finance programs including a description of where in the financial statements any related amounts are presented. The Company adopted ASU 2022-04 in the first quarter of fiscal 2023 on a retrospective basis, excluding the rollforward requirements which will be adopted in fiscal 2024 on a prospective basis. The adoption of this standard did not have a material impact on the Company’s consolidated financial statements.

Recently issued accounting standards. In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. The ASU is intended to enhance the transparency and decision usefulness of income tax disclosures. It requires the Company to disclose disaggregated jurisdictional and categorical information for the tax rate reconciliation and the amount of income taxes paid as well as additional income tax related amounts. The new guidance is effective for annual reporting periods beginning after December 15, 2024, with retrospective application permitted. The Company is currently evaluating the impact of this guidance on its disclosures in the consolidated financial statements.

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. The ASU is intended to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. The standard is effective for annual reporting periods beginning after December 15, 2023, and interim periods beginning after December 15, 2024. The Company is currently evaluating the impact of this guidance on its disclosures in the consolidated financial statements.

Note B: Fair Value Measurements

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 February 3, 2024 and January 28, 2023 are as follows:

($000)												2023						2022
Cash and cash equivalents (Level 1)												$	4,872,446					$	4,551,876
Restricted cash and cash equivalents (Level 1)												$	62,995					$	60,365

The underlying assets in the Company’s nonqualified deferred compensation program as of February 3, 2024 and January 28, 2023 (included in Other long-term assets and Other long-term liabilities) primarily consist of participant-directed money market, stock, and bond funds. The fair value measurement for funds with quoted market prices in active markets (Level 1) are as follows:

($000)			2023						2022
Nonqualified deferred compensation program (Level 1)			$	165,582					$	155,496

Note C: Stock-Based Compensation

For fiscal 2023, 2022, and 2021, the Company recognized stock-based compensation expense as follows:

($000)			2023						2022						2021
Restricted stock			$	92,511					$	85,092					$	72,210
Performance awards			48,584						32,484						57,582
Employee stock purchase plan (“ESPP”)			4,395						4,360						4,425
Total			$	145,490					$	121,936					$	134,217

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

At February 3, 2024, the Company had one active stock-based compensation plan (further described in Note H: Stockholders’ Equity). 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 2023, 2022, and 2021 is as follows:

Statements of Earnings Classification ($000)			2023						2022						2021
Cost of goods sold			$	76,301					$	67,141					$	66,500
Selling, general and administrative			69,189						54,795						67,717
Total			$	145,490					$	121,936					$	134,217

The tax benefits related to stock-based compensation expense for fiscal 2023, 2022, and 2021 were $29.6 million, $24.8 million, and $25.6 million, respectively.

Note D: Debt

Long-term debt. Unsecured senior debt (the “Senior Notes”), net of unamortized discounts and debt issuance costs, as of February 3, 2024 and January 28, 2023 consisted of the following:

($000)						2023						2022
3.375% Senior Notes due 2024						$	249,713					$	249,257
4.600% Senior Notes due 2025						698,441						697,161
0.875% Senior Notes due 2026						497,268						496,038
4.700% Senior Notes due 2027						240,335						239,899
4.800% Senior Notes due 2030						132,776						132,602
1.875% Senior Notes due 2031						495,820						495,254
5.450% Senior Notes due 2050						146,377						146,299
Total long-term debt1						$	2,460,730					$	2,456,510
Less: current portion						$	249,713					$	—
Total due beyond one year						$	2,211,017					$	2,456,510

1Net of unamortized discount and debt issuance costs of $14.3 million and $18.5 million as of February 3, 2024 and January 28, 2023, respectively.

Interest on all Senior Notes is payable semi-annually and the Senior Notes are subject to prepayment penalties for early payment of principal.

As of February 3, 2024 and January 28, 2023, the aggregate fair value of the seven outstanding series of Senior Notes was approximately $2.3 billion. 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)
2024									$	250,000
2025									$	700,000
2026									$	500,000
2027									$	241,786
Thereafter									$	783,205

Revolving credit facilities. The Company’s $1.3 billion senior unsecured revolving credit facility (“Credit Facility”) expires in February 2027 and may be extended at the Company’s request for up to two additional one-year periods subject to customary conditions. The Credit Facility contains a $300 million sublimit for issuance of standby letters of credit. It also contains an option allowing the Company to increase the size of its Credit Facility by up to an additional $700 million, with the agreement of the committing lenders. Interest on borrowings under this Credit Facility is a term rate based on the Secured Overnight Financing Rate (“Term SOFR”) (or an alternate benchmark rate, if Term SOFR is no longer available) plus an applicable margin and is payable quarterly and upon maturity.

The Credit Facility is subject to a quarterly Consolidated Adjusted Debt to Consolidated EBITDAR financial leverage ratio covenant. As of February 3, 2024, the Company was in compliance with the financial covenant, had no borrowings or standby letters of credit outstanding under the Credit Facility, and the $1.3 billion Credit Facility remained in place and available.

The table below shows the components of interest expense and income for fiscal 2023, 2022, and 2021:

($000)						2023						2022						2021
Interest expense on long-term debt						$	84,596					$	84,558					$	88,286
Other interest expense						1,599						1,668						1,351
Capitalized interest						(12,106)						(5,678)						(14,476)
Interest income						(238,207)						(77,706)						(833)
Interest (income) expense, net						$	(164,118)					$	2,842					$	74,328

Note E: Leases

The Company currently leases its store locations with original, non-cancelable terms that in general range from three years to ten years. Store leases typically contain provisions for three to four renewal options of five years each. The exercise of lease renewal options is at the sole discretion of the Company. Most store leases also provide for minimum annual rentals and for payment of variable lease costs. In addition, some store leases also have provisions for additional rent based on a percentage of sales (“percentage rent”) and others include rental payments adjusted periodically for inflation. The Company’s lease agreements do not contain any material residual guarantees or material restrictive covenants. The Company does not have any financing leases.

The Company leases certain distribution/warehouse facilities with expiration dates ranging from 2025 to 2031 and the majority contain renewal provisions. The Company also leases office space for its Los Angeles and Boston buying offices. The lease terms for these facilities expire in 2027 and 2026, respectively. The Los Angeles and Boston buying office facilities contain renewal provisions. In addition, the Company has a ground lease related to its New York buying office.

The following table presents net operating lease cost included in the Consolidated Statement of Earnings for fiscal 2023, 2022, and 2021:

($000)			2023			2022			2021
Operating lease cost1			$	760,268		$	721,340		$	687,187
Variable lease costs2			219,526			206,262			194,112
Net lease cost3			$	979,794		$	927,602		$	881,299
1 Net of sublease income which was immaterial.
2 Includes property and rent taxes, insurance, common area maintenance, percentage rent, and negotiated rent abatements.
3 Excludes short-term lease costs which were immaterial.

The maturity of operating lease liabilities, including the ground lease related to the New York buying office as of February 3, 2024, are as follows:

($000)			Operating Leases****1
2024			$	730,583
2025			722,550
2026			608,814
2027			497,641
2028			371,173
Thereafter			1,557,432
Total lease payments			$	4,488,193
Less: interest			1,201,219
Present value of lease liabilities			$	3,286,974
Less: current operating lease liabilities			683,625
Non-current operating lease liabilities			$	2,603,349
1 Operating leases exclude $233.0 million of minimum lease payments for leases signed that have not yet commenced.

The weighted-average remaining lease term and the weighted-average discount rate for operating leases as of February 3, 2024 and January 28, 2023 are as follows:

						2023						2022
Weighted-average remaining lease term (years):
Including the long-term ground lease related to the New York buying office						9.8						10.0
Excluding the long-term ground lease related to the New York buying office						5.4						5.5
Weighted-average discount rate:
Including the long-term ground lease related to the New York buying office						3.9		%				3.5		%
Excluding the long-term ground lease related to the New York buying office						3.6		%				3.1		%

The following table presents cash paid for amounts included in the measurement of operating lease liabilities and operating lease assets obtained in exchange for operating lease liabilities (includes new leases and remeasurements or modifications of existing leases) for fiscal 2023, 2022, and 2021:

($000)			2023			2022			2021
Cash paid for amounts included in the measurement of operating lease liabilities			$	746,254		$	701,478		$	745,110
Operating lease assets obtained in exchange for operating lease liabilities			$	682,580		$	705,220		$	545,401

Note F: Taxes on Earnings

The provision for income taxes consisted of the following:

($000)						2023						2022						2021
Current
Federal						$	532,913					$	338,479					$	442,152
State						85,169						57,552						78,024
						618,082						396,031						520,176
Deferred
Federal						(16,265)						74,062						21,103
State						(4,556)						5,355						(5,328)
						(20,821)						79,417						15,775
Total						$	597,261					$	475,448					$	535,951

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:

						2023						2022						2021
Federal income taxes at the statutory rate						21.0		%				21.0		%				21.0		%
State income taxes (net of federal benefit) and other, net1						3.2		%				2.9		%				2.7		%
Total						24.2		%				23.9		%				23.7		%
1Certain items in the prior years have been reclassified to conform to the current year’s presentation.

The components of deferred taxes at February 3, 2024 and January 28, 2023 are as follows:

($000)						2023						2022
Deferred Tax Assets
Accrued liabilities						$	35,010					$	31,303
Deferred compensation						39,366						40,201
Stock-based compensation						52,431						46,139
State taxes and credits						18,494						15,755
Employee benefits						33,764						24,715
Operating lease liabilities						826,566						820,219
Other						9,053						7,976
Deferred Tax Assets						1,014,684						986,308
Deferred Tax Liabilities
Depreciation and amortization						(369,529)						(372,497)
Merchandise inventory						(25,410)						(24,493)
Supplies						(14,137)						(13,239)
Operating lease assets						(785,608)						(781,277)
Other						(16,238)						(11,861)
Deferred Tax Liabilities						(1,210,922)						(1,203,367)
Net Deferred Tax Liabilities						$	(196,238)					$	(217,059)

At the end of fiscal 2023 and 2022, the Company’s state tax credit carryforwards for income tax purposes were approximately $10.1 million and $10.0 million, respectively. The state tax credit carryforwards will begin to expire in fiscal 2032.

The changes in amounts of unrecognized tax benefits (gross of federal tax benefits and excluding interest and penalties) at fiscal 2023, 2022, and 2021 are as follows:

($000)						2023						2022						2021
Unrecognized tax benefits - beginning of year						$	53,544					$	60,547					$	60,240
Gross increases:
Tax positions in current period						13,206						10,132						10,381
Tax positions in prior period						2,295						672						1,494
Gross decreases:
Tax positions in prior periods						(4,366)						(6,808)						(1,795)
Lapse of statutes of limitations						(11,148)						(9,989)						(9,757)
Settlements						(1,152)						(1,010)						(16)
Unrecognized tax benefits - end of year						$	52,379					$	53,544					$	60,547

At the end of fiscal 2023, 2022, and 2021, the reserves for unrecognized tax benefits were $58.6 million, $60.6 million, and $68.1 million inclusive of $6.2 million, $7.1 million, and $7.6 million of related reserves for 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, $46.6 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 by up to $10.8 million.

The Company is open to audit by the Internal Revenue Service under the statute of limitations for fiscal years 2020 through 2023. The Company’s state income tax returns are generally open to audit under the various statutes of limitations for fiscal years 2019 through 2023. Certain 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 $26.9 million, $24.8 million, and $23.6 million in fiscal 2023, 2022, and 2021, respectively.

The Company also makes available to management a Nonqualified 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 $165.6 million and $155.5 million at February 3, 2024 and January 28, 2023, respectively, of long-term plan investments, at market value, set aside or designated for the Nonqualified Deferred Compensation Plan. Refer to Note B: Fair Value Measurements for additional information. 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 $165.6 million and $155.5 million at February 3, 2024 and January 28, 2023, 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 $13.1 million and $13.3 million is included in Accrued expenses and other in the accompanying Consolidated Balance Sheets as of February 3, 2024 and January 28, 2023, respectively.

Note H: Stockholders’ Equity

Common stock. In May 2021, the Company’s Board of Directors authorized a program to repurchase up to $1.5 billion of the Company’s common stock through fiscal 2022.

In March 2022, the Company’s Board of Directors approved a two-year program to repurchase up to $1.9 billion of the Company’s common stock through fiscal 2023. This program replaced the previous $1.5 billion stock repurchase program, effective at the end of fiscal 2021 (at which time the Company had repurchased $650 million under the previous $1.5 billion program).

In March 2024, the Company’s Board of Directors approved a new two-year program to repurchase up to $2.1 billion of the Company’s common stock through fiscal 2025.

The following table summarizes the Company’s stock repurchase activity in fiscal 2023, 2022, and 2021:

Fiscal Year						Shares repurchased (in millions)						Average repurchase price						Amount repurchased (in millions)
2023						8.2						$	115.24					$	950		1
2022						10.3						$	92.15					$	950
2021						5.7						$	114.29					$	650
1 Amount excludes excise tax due under the Inflation Reduction Act of 2022.

Preferred stock. The Company has 4.0 million shares of preferred stock authorized, with a par value of $.01 per share. No preferred stock is issued or outstanding.

Dividends. On March 5, 2024, the Company’s Board of Directors declared a quarterly cash dividend of $0.3675 per common share, payable on March 29, 2024. The Company’s Board of Directors declared a cash dividend of $0.3350 per common share in February, May, August, and November 2023. The Company’s Board of Directors declared a cash dividend of $0.3100 per common share in March, May, August, and November 2022. The Company’s Board of Directors declared a cash dividend of $0.2850 per common share in March, May, August, and November 2021. During fiscal 2023, 2022, and 2021, the Company paid dividends of $454.8 million, $431.3 million, and $405.1 million, respectively.

2017 Equity Incentive Plan. On May 17, 2017, the Company’s stockholders approved the Ross Stores, Inc. 2017 Equity Incentive Plan (the “2017 Plan”) which replaced the Company’s 2008 Equity Incentive Plan (“Predecessor Plan”). The 2017 Plan, which was authorized to issue a maximum of 12.0 million shares, was immediately effective upon approval and no further awards were granted under the Predecessor Plan, which was terminated.

The 2017 Plan has an initial share reserve of 12.0 million shares of the Company’s common stock which can be increased by a maximum of 5.5 million shares from certain expired, withheld, or forfeited shares from the 2017 Plan or the Predecessor Plan. The 2017 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 February 3, 2024, there were 7.8 million shares available for grant under the 2017 Plan.

A summary of restricted stock and performance share award activity for fiscal 2023 is presented below:

						Number of shares (000)						Weighted-average grant date fair value
Unvested at January 28, 2023						3,943						$	99.69
Awarded						1,690						109.59
Released						(1,139)						95.98
Forfeited						(99)						102.40
Unvested at February 3, 2024						4,395						$	104.52

All unvested shares at February 3, 2024 are only subject to service vesting conditions. The market value of shares of restricted stock and performance shares at the date of grant is amortized to expense over the vesting period of generally three to five years. The unamortized compensation expense at February 3, 2024 and January 28, 2023 was $217.1 million and $183.2 million, respectively, which is expected to be recognized over a weighted-average remaining period of 1.7 years and 1.8 years, respectively. Intrinsic value for unvested restricted stock, defined as the closing market value per share on the last business day of fiscal year 2023 (or $143.68), applied to the unvested shares was $631.5 million. A total of 7.8 million, 8.9 million, and 9.3 million shares were available for new restricted stock awards at the end of fiscal 2023, 2022, and 2021, respectively. During fiscal 2023, 2022, and 2021, shares purchased by the Company for tax withholding totaled 0.5 million shares in each year and are considered treasury shares which are available for reissuance. As of February 3, 2024 and January 28, 2023, the Company held 15.8 million and 15.3 million shares of treasury stock, respectively.

The Company has a performance share award program for senior executives. A performance share award represents a right to receive shares of restricted stock on a specified settlement date based on the Company’s attainment of a performance goal during the performance period, which is the Company’s fiscal year. If attained, the restricted stock then vests over a service period, generally three years from the date the performance award was granted.

Employee Stock Purchase Plan. Under the Employee Stock Purchase Plan, 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 2023, 2022, and 2021, employees purchased approximately 0.3 million shares in each year of the Company’s common stock under the plan at weighted-average per share prices of $98.86, $74.54, and $99.07, respectively. Through February 3, 2024, approximately 41.3 million shares had been issued under this plan and 3.6 million shares remained available for future issuance.

Note I: Litigation, Claims, and Assessments

Like many retailers, the Company has been named in class/representative action lawsuits, primarily in California, alleging violations by the Company of wage and hour laws. Class/representative action litigation remains pending as of February 3, 2024.

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, environmental, 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 currently pending class/representative 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.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

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

Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated balance sheets of Ross Stores, Inc. and subsidiaries (the “Company”) as of February 3, 2024 and January 28, 2023, the related consolidated statements of earnings, comprehensive income, stockholders’ equity, and cash flows for each of the fiscal years ended February 3, 2024, January 28, 2023, and January 29, 2022 and the related notes (collectively referred to as the “financial statements”). We also have audited the Company’s internal control over financial reporting as of February 3, 2024, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of February 3, 2024 and January 28, 2023, and the results of its operations and its cash flows for each of the fiscal years ended February 3, 2024, January 28, 2023, and January 29, 2022, 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 February 3, 2024, based on criteria established in Internal Control - Integrated Framework (2013) issued by COSO.

Basis for Opinions

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 financial statements and an opinion on the Company’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audits of the financial statements included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures to respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. 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.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed 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 its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Critical Audit Matters

Critical audit matters are matters arising from the current-period audit of the financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. We determined that there are no critical audit matters.

*/s/*DELOITTE & TOUCHE LLP

San Francisco, California

April 1, 2024

We have served as the Company’s auditor since 1982.