Ross Stores 10-Q 2024-08-03

Filed 2024-09-11. 7 sections, 111K characters. Original on sec.gov · Markdown · JSON

Cover and table of contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark one)

☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended August 03, 2024

☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________ to __________

Commission file number:0-14678

Ross Stores, Inc.

(Exact name of registrant as specified in its charter)

Delaware94-1390387
(State or other jurisdiction of incorporation or(I.R.S. Employer Identification No.)
organization)
5130 Hacienda Drive,Dublin,California94568-7579
(Address of principal executive offices)(Zip Code)
Registrant’s telephone number, including area code(925)965-4400

Securities registered pursuant to Section 12(b) of the Act:

Title of each classTrading symbolName of each exchange on which registered
Common Stock,par value $.01ROSTNasdaq Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ý No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes ý No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ý Accelerated filer o Non-accelerated filer o Smaller reporting company ☐

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐ No ☒

The number of shares of Common Stock, with $.01 par value, outstanding on August 16, 2024 was 331,762,504.

Ross Stores, Inc.

Form 10-Q

Table of Contents

Page
PART I. FINANCIAL INFORMATION
Item 1.Financial Statements (unaudited)
Condensed Consolidated Statements of Earnings3
Condensed Consolidated Statements of Comprehensive Income4
Condensed Consolidated Balance Sheets5
Condensed Consolidated Statements of Stockholders’ Equity6
Condensed Consolidated Statements of Cash Flows7
Notes to Condensed Consolidated Financial Statements8
Report of Independent Registered Public Accounting Firm15
Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations16
Item 3.Quantitative and Qualitative Disclosures About Market Risk22
Item 4.Controls and Procedures23
PART II. OTHER INFORMATION
Item 1.Legal Proceedings24
Item 1A.Risk Factors24
Item 2.Unregistered Sales of Equity Securities and Use of Proceeds24
Item 6.Exhibits25
Signatures26

PART I. FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS

Condensed Consolidated Statements of Earnings

Three Months EndedSix Months Ended
($000, except stores and per share data, unaudited)August 3, 2024July 29, 2023August 3, 2024July 29, 2023
Sales$5,287,519$4,934,905$10,145,586$9,429,591
Costs and Expenses
Cost of goods sold3,791,9293,569,3677,282,6016,861,973
Selling, general and administrative836,357807,8981,612,6391,554,120
Interest income, net(43,350)(37,214)(89,300)(68,611)
Total costs and expenses4,584,9364,340,0518,805,9408,347,482
Earnings before taxes702,583594,8541,339,6461,082,109
Provision for taxes on earnings175,435148,535324,508264,599
Net earnings$527,148$446,319$1,015,138$817,510
Earnings per share
Basic$1.60$1.33$3.07$2.42
Diluted$1.59$1.32$3.05$2.41
Weighted-average shares outstanding (000)
Basic329,392336,231330,325337,140
Diluted331,511337,932332,620339,003

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

Condensed Consolidated Statements of Comprehensive Income

Three Months EndedSix Months Ended
($000, unaudited)August 3, 2024July 29, 2023August 3, 2024July 29, 2023
Net earnings$527,148$446,319$1,015,138$817,510
Other comprehensive income————
Comprehensive income$527,148$446,319$1,015,138$817,510

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

Condensed Consolidated Balance Sheets

($000, except share data, unaudited)August 3, 2024February 3, 2024July 29, 2023
Assets
Current Assets
Cash and cash equivalents$4,668,137$4,872,446$4,583,606
Accounts receivable181,918130,766175,410
Merchandise inventory2,490,5582,192,2202,300,063
Prepaid expenses and other254,370202,706214,673
Total current assets7,594,9837,398,1387,273,752
Property and Equipment
Land and buildings1,486,2141,486,5571,490,681
Fixtures and equipment4,341,7644,220,2214,027,874
Leasehold improvements1,607,2261,577,1021,463,585
Construction-in-progress694,574628,730518,405
8,129,7787,912,6107,500,545
Less accumulated depreciation and amortization4,546,2434,380,7094,189,940
Property and equipment, net3,583,5353,531,9013,310,605
Operating lease assets3,234,1803,126,8413,164,685
Other long-term assets265,323243,229238,260
Total assets$14,678,021$14,300,109$13,987,302
Liabilities and Stockholders’ Equity
Current Liabilities
Accounts payable$2,217,227$1,955,850$2,150,999
Accrued expenses and other639,703671,867689,866
Current operating lease liabilities691,036683,625668,028
Accrued payroll and benefits353,980548,371435,300
Income taxes payable23,26676,37025,449

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Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF

OPERATIONS

This section and other parts of this Form 10-Q contain forward-looking statements that involve risks and uncertainties. Our actual results may differ materially from the results discussed in the forward-looking statements. Factors that might cause such differences include, but are not limited to, those discussed below under the caption “Forward-Looking Statements” and also those in Part I, Item 1A (Risk Factors) of our Annual Report on Form 10-K for fiscal 2023. The following discussion should be read in conjunction with the condensed consolidated financial statements and notes thereto included elsewhere in this Quarterly Report on Form 10-Q and in conjunction with the consolidated financial statements and notes thereto in our Annual Report on Form 10-K for fiscal 2023. All information is based on our fiscal calendar.

Overview

Ross Stores, Inc. operates two brands of off-price retail apparel and home fashion stores—Ross Dress for Less® (“Ross”) and dd’s DISCOUNTS®. Ross is the largest off-price apparel and home fashion chain in the United States, with 1,795 locations in 43 states, the District of Columbia, and Guam, as of August 3, 2024. Ross offers first-quality, in-season, name brand and designer apparel, accessories, footwear, and home fashions for the entire family at savings of 20% to 60% off department and specialty store regular prices every day. We also operate 353 dd’s DISCOUNTS stores in 22 states as of August 3, 2024 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 low-to-moderate income customers continue to face persistently high costs for necessities, pressuring their discretionary spending amidst a volatile external environment. Through these ongoing pressures and uncertainty, we remain focused on offering our customers the best branded values possible throughout our stores. In addition, we plan to carefully manage our expenses and inventory, while closely monitoring market share trends for the off-price industry. We believe our market share can continue to grow through continued focus on bringing value and convenience to our consumers.

Results of Operations

The following table summarizes our financial results for the three and six month periods ended August 3, 2024 and July 29, 2023:

Three Months EndedSix Months Ended
August 3, 2024July 29, 2023August 3, 2024July 29, 2023
Sales
Sales (millions)$5,288$4,935$10,146$9,430
Sales growth7.1%7.7%7.6%5.8%
Comparable store sales growth14%5%3%3%
Costs and expenses (as a percent of sales)
Cost of goods sold71.7%72.3%71.8%72.8%
Selling, general and administrative15.8%16.4%15.9%16.5%
Interest income, net(0.8%)(0.8%)(0.9%)(0.7%)
Earnings before taxes (as a percent of sales)13.3%12.1%13.2%11.4%
Net earnings (as a percent of sales)10.0%9.0%10.0%8.7%
1 Comparable stores are stores open for more than 14 complete months.

Stores. Our long-term strategy is to open additional stores based on market penetration, local demographic characteristics, competition, expected store profitability, and the ability to leverage overhead expenses. We continually evaluate opportunistic real estate acquisitions and opportunities for potential new store locations. We also evaluate our current store locations and determine store closures based on similar criteria.

We opened 24 new stores in the second quarter of fiscal 2024 and remain on track to open a total of approximately 90 new stores this year.

The following table summarizes the stores opened and closed during the three and six month periods ended August 3, 2024 and July 29, 2023:

Three Months EndedSix Months Ended
Store CountAugust 3, 2024July 29, 2023August 3, 2024July 29, 2023
Ross Dress for Less
Beginning of the period1,7751,7041,7641,693
Opened in the period211832291
Closed in the period(1)—(1)—
Total Ross Dress for Less stores end of period1,7951,7221,7951,722
dd’s DISCOUNTS
Beginning of the period352330345322
Opened in the period391017
Closed in the period(2)—(2)—
Total dd’s DISCOUNTS stores end of period353339353339
Total stores end of period2,1482,0612,1482,061
1 Includes the reopening of a store previously temporarily closed due to a weather event.

Sales. Sales for the three month period ended August 3, 2024 increased $352.6 million, or 7.1%, compared to the three month period ended July 29, 2023, primarily due to a 4% comparable store sales increase and the opening of 87 net new stores between July 29, 2023 and August 3, 2024.

Sales for the six month period ended August 3, 2024 increased $716.0 million, or 7.6%, compared to the six month period ended July 29, 2023, primarily due to the opening of 87 net new stores between July 29, 2023 and August 3, 2024 and a 3% comparable store sales increase.

Our sales mix for the three and six month periods ended August 3, 2024 and July 29, 2023 is shown below:

Three Months EndedSix Months Ended
August 3, 2024July 29, 2023August 3, 2024July 29, 2023
Home Accents and Bed and Bath24%24%25%25%
Ladies23%24%23%24%
Men’s17%16%16%15%
Accessories, Lingerie, Fine Jewelry, and Cosmetics14%15%14%15%
Shoes13%13%13%13%
Children’s9%8%9%8%
Total100%100%100%100%

Cost of goods sold. Cost of goods sold for the three month period ended August 3, 2024 increased $222.6 million compared to the three month period ended July 29, 2023, primarily due to the 4% comparable store sales increase and higher sales from the opening of 87 net new stores between July 29, 2023 and August 3, 2024, partially offset by lower distribution costs and lower buying costs primarily due to lower incentive compensation expense.

Cost of goods sold for the six month period ended August 3, 2024 increased $420.6 million compared to the six month period ended July 29, 2023, primarily due to higher sales from the opening of 87 net new stores between July 29, 2023 and August 3, 2024 and the 3% comparable store sales increase, partially offset by lower distribution costs and lower buying costs primarily due to lower incentive compensation expense.

Cost of goods sold as a percentage of sales for the three month period ended August 3, 2024 decreased approximately 60 basis points compared to the three month period ended July 29, 2023, primarily due to a 70 basis point decrease in distribution costs, a 55 basis point decrease in buying costs primarily due to lower incentive compensation expense, and a 15 basis point decrease in domestic freight costs. Partially offsetting these items was an 80 basis point decrease in merchandise margin, primarily due to our continued efforts to offer more sharply priced branded bargains.

Cost of goods sold as a percentage of sales for the six month period ended August 3, 2024 decreased approximately 100 basis points compared to the six month period ended July 29, 2023, primarily due to a 75 basis point decrease in distribution costs, a 55 basis point decrease in buying costs primarily due to lower incentive compensation expense, and a 20 basis point decrease in domestic freight costs. Partially offsetting these items was a 50 basis point decrease in merchandise margin primarily due to our continued efforts to offer more sharply priced branded bargains.

We expect lower incentive compensation expense, domestic freight costs, and distribution costs as a percentage of sales to continue through the remainder of fiscal 2024, offset by lower merchandise margins as we build on our efforts to offer more sharply priced branded bargains throughout our stores.

Selling, general and administrative expenses. For the three and six month periods ended August 3, 2024, selling, general and administrative expenses (“SG&A”) increased $28.5 million and $58.5 million, respectively, compared to the three and six month periods ended July 29, 2023, primarily due to the opening of 87 net new stores between July 29, 2023 and August 3, 2024.

SG&A as a percentage of sales for the three and six month periods ended August 3, 2024 decreased 55 and 60 basis points, respectively, compared to the three and six month periods ended July 29, 2023, primarily due to higher sales and lower incentive compensation expense.

We expect lower incentive compensation expense as a percentage of sales to continue through the remainder of fiscal 2024.

Interest income, net. For the three and six month periods ended August 3, 2024, interest income, net increased $6.1 million and $20.7 million, respectively, compared to the three and six month periods ended July 29, 2023, primarily due to increased interest income from higher interest rates and higher cash balances.

The table below shows the components of interest income, net for the three and six month periods ended August 3, 2024 and July 29, 2023:

Three Months EndedSix Months Ended
($000)August 3, 2024July 29, 2023August 3, 2024July 29, 2023
Interest expense on long-term debt$21,142$21,133$42,317$42,299
Other interest expense367372725745
Capitalized interest(4,577)(2,818)(8,842)(4,926)
Interest income(60,282)(55,901)(123,500)(106,729)
Interest income, net$(43,350)$(37,214)$(89,300)$(68,611)

Taxes on earnings. Our effective tax rate for the three month periods ended August 3, 2024 and July 29, 2023 was approximately 25%. Our effective tax rate for the six month periods ended August 3, 2024 and July 29, 2023 was

approximately 24%. Our effective tax rate is impacted by changes in tax laws and accounting guidance, location of new stores, level of earnings, tax effects associated with stock-based compensation, and the resolution of tax positions with various tax authorities.

Net earnings. Net earnings as a percentage of sales for the three month periods ended August 3, 2024 and July 29, 2023 were 10.0% and 9.0%, respectively. Net earnings as a percentage of sales for the three month period ended August 3, 2024 were higher primarily due to lower cost of goods sold and lower SG&A expenses.

Net earnings as a percentage of sales for the six month periods ended August 3, 2024 and July 29, 2023 were 10.0% and 8.7%, respectively. Net earnings as a percentage of sales for the six month period ended August 3, 2024 were higher primarily due to lower cost of goods sold, lower SG&A expenses, and higher interest income.

Earnings per share. Diluted earnings per share for the three month period ended August 3, 2024 was $1.59, compared to $1.32 for the three month period ended July 29, 2023. Diluted earnings per share for the six month period ended August 3, 2024 was $3.05, compared to $2.41 for the six month period ended July 29, 2023.

The $0.27 increase in the diluted earnings per share for the three month period ended August 3, 2024 was primarily attributable to an 18% increase in net earnings and a 2% reduction in weighted-average diluted shares outstanding largely due to stock repurchases under our stock repurchase program. The $0.64 increase in the diluted earnings per share for the six month period ended August 3, 2024 was primarily attributable to a 24% increase in net earnings and a 3% reduction in weighted-average diluted shares outstanding largely due to stock repurchases under our stock repurchase program.

Financial Condition

Liquidity and Capital Resources

The primary sources of funds for our business activities are cash flows from operations and short-term trade credit. Our primary ongoing cash requirements are for merchandise inventory purchases, payroll, operating and variable lease costs, taxes, capital expenditures related to new and existing stores, and investments in distribution centers, information systems, and buying and corporate offices. We also use cash to repurchase stock under active stock repurchase programs, pay dividends, and repay debt as it becomes due.

Six Months Ended
($000)August 3, 2024July 29, 2023
Cash provided by operating activities$961,042$1,116,281
Cash used in investing activities(333,735)(363,459)
Cash used in financing activities(830,040)(719,766)
Net (decrease) increase in cash, cash equivalents, and restricted cash and cash equivalents$(202,733)$33,056

Operating Activities

Net cash provided by operating activities was $961.0 million for the six month period ended August 3, 2024. This was primarily driven by net earnings excluding non-cash expenses for depreciation, amortization, and stock-based compensation, partially offset by the payment of fiscal 2023 incentive bonuses. Net cash provided by operating activities was $1.1 billion for the six month period ended July 29, 2023. This was primarily driven by net earnings excluding non-cash expenses for depreciation, amortization, and stock-based compensation.

The decrease in cash flow provided by operating activities for the six month period ended August 3, 2024 compared to the same period in the prior fiscal year was primarily driven by higher incentive compensation payments and lower accounts payable leverage (defined as accounts payable divided by merchandise inventory), partially offset by higher net earnings.

Accounts payable leverage was 89% and 94% as of August 3, 2024 and July 29, 2023, respectively. The decrease in accounts payable leverage was primarily due to the timing of inventory receipts and related payments versus last year.

As a regular part of our business, packaway inventory levels will vary over time based on availability of compelling merchandise purchase opportunities in the marketplace and our decisions on the timing for release of that inventory to our

stores. Packaway merchandise is purchased with the intent that it will be stored in our warehouses until a later date. The timing of the release of packaway inventory to our stores is principally driven by the product mix and seasonality of the merchandise, and its relation to our store merchandise assortment plans. As such, the aging of packaway varies by merchandise category and seasonality of purchase, but typically packaway remains in storage for less than six months. We expect to continue to take advantage of packaway inventory opportunities to maximize our ability to deliver bargains to our customers.

Changes in packaway inventory levels impact our operating cash flow. As of August 3, 2024, packaway inventory was 39% of total inventory, compared to 40% at the end of fiscal 2023.

Investing Activities

Net cash used in investing activities was $333.7 million and $363.5 million for the six month periods ended August 3, 2024 and July 29, 2023, respectively, and was related to our capital expenditures. Our capital expenditures include costs to build, expand, and improve distribution centers, to open new stores and improve existing stores, and for various other expenditures related to our information technology systems and buying and corporate offices.

The decrease in cash used in investing activities for the six month period ended August 3, 2024, compared to the same period in the prior fiscal year, was primarily due to lower capital expenditures in the current year related to our new Buckeye, Arizona distribution center, partially offset by the purchase of land for our next distribution center.

Capital expenditures for fiscal 2024 are currently projected to be approximately $780 million. Our planned capital expenditures for fiscal 2024 are for investments in our supply chain to support long-term growth, including construction of our next distribution centers, investments in our information technology systems, costs for fixtures and leasehold improvements to open new Ross and dd’s DISCOUNTS stores, and for various other expenditures related to our stores, distribution centers, and buying and corporate offices. We expect to fund capital expenditures with available cash.

Financing Activities

Net cash used in financing activities was $830.0 million and $719.8 million for the six month periods ended August 3, 2024 and July 29, 2023, respectively, primarily resulting from stock repurchases under our stock repurchase program and from dividend payments.

Revolving credit facilities. We have a $1.3 billion senior unsecured revolving credit facility. As of August 3, 2024, we had no borrowings or standby letters of credit outstanding under the Credit Facility, our Credit Facility remained in place and available, and we were in compliance with its financial covenant. Refer to Note E: Debt in the Notes to Condensed Consolidated Financial Statements for additional information.

Senior notes. As of August 3, 2024, we had approximately $2.5 billion of outstanding unsecured Senior Notes, of which $949 million is classified within Current Liabilities on our Condensed Consolidated Balance Sheet for the period ended August 3, 2024. Refer to Note E: Debt in the Notes to Condensed Consolidated Financial Statements for additional information.

Other financing activities. In March 2024, our Board of Directors approved a new two-year program to repurchase up to $2.1 billion of our common stock through January 31, 2026. During the six month period ended August 3, 2024, we repurchased 3.7 million shares of common stock for $525.0 million (excluding excise tax) under this program. For the six month period ended July 29, 2023, we repurchased 4.3 million shares of common stock for $464.9 million (excluding excise tax) under our previous, publicly announced repurchase program. During the six month periods ended August 3, 2024 and July 29, 2023, we also acquired 0.5 million and 0.4 million shares of treasury stock, respectively, to cover employee tax withholding obligations under our employee equity compensation programs, for aggregate purchase prices of approximately $71.7 million and $38.4 million, respectively.

On August 21, 2024, our Board of Directors declared a quarterly cash dividend of $0.3675 per common share, payable on September 30, 2024. The Board of Directors declared a cash dividend of $0.3675 per common share in March and May 2024, and $0.3350 per common share in February, May, August, and November 2023.

For the six month periods ended August 3, 2024 and July 29, 2023, we paid cash dividends of $245.8 million and $228.8 million, respectively.

Short-term trade credit represents a significant source of financing for merchandise inventory. Trade credit arises from customary payment terms and trade practices with our vendors. We regularly review the adequacy of credit available to us from all sources, and expect to be able to maintain adequate trade credit, bank credit, and other credit sources to meet our capital and liquidity requirements.

We ended the second quarter of fiscal 2024 with $4.7 billion of unrestricted cash balances, which were held primarily in overnight money market funds invested in U.S. treasury and government instruments across a highly diversified set of banks and other financial institutions. We also have $1.3 billion available under our Credit Facility. We estimate that existing cash and cash equivalent balances, cash flows from operations, our bank credit facility, and trade credit are adequate to meet our operating cash needs and to fund our planned capital investments, debt repayments, interest payments, common stock repurchases, and quarterly dividend payments for at least the next 12 months.

Contractual Obligations and Off-Balance Sheet Arrangements

As of August 3, 2024, there have been no material changes to our contractual obligations as disclosed in our Annual Report on Form 10-K as of February 3, 2024, other than those which occur in the ordinary course of business.

Standby letters of credit and collateral trust. We use standby letters of credit outside of our revolving credit facility and a funded trust to collateralize some of our insurance obligations. As of August 3, 2024, February 3, 2024, and July 29, 2023, we had $2.2 million, $2.2 million, and $2.6 million, respectively, in standby letters of credit outstanding. As of August 3, 2024, February 3, 2024, and July 29, 2023, we had $62.4 million, $60.8 million, and $59.1 million, respectively, held in a collateral trust. The standby letters of credit are collateralized by restricted cash and the collateral trust consists of restricted cash and cash equivalents.

Critical Accounting Estimates

During the second quarter of fiscal 2024, there were no significant changes to the critical accounting estimates discussed in our Annual Report on Form 10-K for the year ended February 3, 2024.

Forward-Looking Statements

This report contains a number of forward-looking statements regarding, without limitation, projected sales, costs and earnings, planned new store growth, capital expenditures, liquidity, and other matters. These forward-looking statements reflect our then-current beliefs, plans, and estimates with respect to future events and our projected financial performance, operations, and competitive position. The words “plan,” “expect,” “target,” “anticipate,” “estimate,” “believe,” “forecast,” “projected,” “guidance,” “outlook,” “looking ahead,” and similar expressions identify forward-looking statements.

Future impact from inflation, interest rate changes, ongoing military conflicts and economic sanctions, climate change, pandemics, natural disasters, and other economic, regulatory, consumer spending, and industry trends that could potentially adversely affect our revenue, profitability, operating conditions, and growth are difficult to predict. Our forward-looking statements are subject to risks and uncertainties which could cause our actual results to differ materially from those forward-looking statements and our previous expectations, plans, and projections. Such risks and uncertainties are not limited to but may include:

  • Uncertainties arising from the macroeconomic environment, including inflation, high interest rates, housing costs, energy and fuel costs, financial and credit market conditions, recession concerns, geopolitical conditions, and public health and public safety issues that affect consumer confidence, and consumer disposable income, and shopping behavior, as well as our costs.

  • Unexpected changes in the level of consumer spending on, or preferences for, apparel and home-related merchandise, which could adversely affect us.

  • Competitive pressures in the apparel and home-related merchandise retailing industry.

  • Our need to effectively manage our inventories, markdowns, and inventory shortage in order to achieve our planned gross margins.

  • Risks associated with importing and selling merchandise produced in other countries, including risks from supply chain disruption, shipping delays, and higher than expected ocean freight costs.

  • Unseasonable weather or extreme temperatures that may affect shopping patterns and consumer demand for seasonal apparel and other merchandise.

  • Our dependence on the market availability, quantity, and quality of attractive brand name merchandise at desirable discounts, and on the ability of our buyers to anticipate consumer preferences and to purchase merchandise to enable us to offer customers a wide assortment of merchandise at competitive prices.

  • Information or data security breaches, including cyber-attacks on our transaction processing and computer information systems, which could disrupt our operations, and result in theft or unauthorized disclosure of confidential and valuable business information, such as customer, credit card, employee, or other private and valuable information that we handle in the ordinary course of our business.

  • Disruptions in our supply chain or in our information systems, including from ransomware or other cyber-attacks, that could impact our ability to process sales and to deliver product to our stores in a timely and cost-effective manner.

  • Our need to obtain acceptable new store sites with favorable consumer demographics to achieve our planned store openings.

  • Our need to expand in existing markets and enter new geographic markets in order to achieve planned growth and market penetration.

  • Consumer problems or legal issues involving the quality, safety, or authenticity of products we sell, which could harm our reputation, result in lost sales, and/or increase our costs.

  • An adverse outcome in various legal, regulatory, or tax matters, or the adoption of new federal or state tax legislation that increases tax rates or adds new taxes, that could increase our costs.

  • Damage to our corporate reputation or brands that could adversely affect our sales and operating results.

  • Our need to continually attract, train, and retain associates with the retail talent necessary to execute our off-price retail strategies.

  • Our need to effectively advertise and market our business.

  • Changes in U.S. tax, tariff, or trade policy regarding apparel and home-related merchandise produced in other countries, which could adversely affect our business.

  • Possible volatility in our revenues and earnings.

  • A public health or public safety crisis, or a natural or man-made disaster in California or another region where we have a concentration of stores, offices, or a distribution center, that could harm our business.

  • Our need to maintain sufficient liquidity to support our continuing operations and our new store openings.

The factors underlying our forecasts are dynamic and subject to change. As a result, any forecasts or forward-looking statements speak only as of the date they are given and do not necessarily reflect our outlook at any other point in time. We disclaim any obligation to update or revise these forward-looking statements.

Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are exposed to market risks, which primarily include changes in interest rates. We do not engage in financial transactions for trading or speculative purposes.

We may occasionally use forward contracts to hedge against fluctuations in foreign currency prices. We had no outstanding forward contracts as of August 3, 2024.

Interest that is payable on our Credit Facility is based on variable interest rates and is therefore affected by changes in market interest rates. As of August 3, 2024, we had no borrowings outstanding under the Credit Facility.

As of August 3, 2024, we had outstanding seven series of unsecured Senior Notes. Interest that is payable on all series of our Senior Notes is based on fixed interest rates, and is therefore unaffected by changes in market interest rates.

We receive interest payments on our cash and cash equivalents and restricted cash and cash equivalents. Changes in interest rates may impact the interest income we recognize in the future.

A hypothetical 100 basis point increase or decrease in prevailing market interest rates would not have had a material negative impact on our financial position, results of operations, cash flows, or the fair values of our cash and cash equivalents and restricted cash and cash equivalents as of and for the three month or six month periods ended August 3, 2024. We do not consider the potential losses in future earnings and cash flows from reasonably possible, near-term changes in interest rates to be material.

Item 4. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, conducted an evaluation of the effectiveness of our “disclosure controls and procedures” (as defined in Exchange Act Rule 13a-15(e)) as of the end of the period covered by this report. Our disclosure controls and procedures are designed to provide reasonable assurance of achieving their objectives. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective at that reasonable assurance level as of the end of the period covered by this report.

It should be noted that any system of controls, however well designed and operated, can provide only reasonable, and not absolute, assurance that the objectives of the system will be met. In addition, the design of any control system is based in part upon certain assumptions about the likelihood of future events.

Quarterly Evaluation of Changes in Internal Control Over Financial Reporting

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 second fiscal quarter of 2024 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. Based on that evaluation, our management concluded that there was no such change during the second fiscal quarter of 2024.

PART II – OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

The matters under the caption “Litigation, claims, and assessments” in Note A of Notes to Condensed Consolidated Financial Statements are incorporated herein by reference.

Item 1A. RISK FACTORS

See Part I, Item 1A of our Annual Report on Form 10-K for the fiscal year ended February 3, 2024 for a description of risks and uncertainties associated with our business.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Information regarding shares of common stock we repurchased during the second quarter of fiscal 2024 is as follows:

Total number of shares (or units) purchased****1Average price paid per share (or unit)Total number of shares (or units) purchased as part of publicly announced plans or programsMaximum number (or approximate dollar value) of shares (or units) that may yet be purchased under the plans or programs ($000)
Period
May
(5/5/2024 - 6/1/2024)481,660$135.01477,456$1,773,050
June
(6/2/2024-7/6/2024)732,033$145.64727,295$1,667,130
July
(7/7/2024- 8/3/2024)634,821$145.09634,821$1,575,020
Total1,848,514$142.681,839,572$1,575,020

1 We acquired 8,942 shares of treasury stock during the quarter ended August 3, 2024. Treasury stock includes shares acquired from employees for tax withholding purposes related to vesting of restricted stock grants.

In March 2024, our Board of Directors approved a new two-year program to repurchase up to $2.1 billion of our common stock through January 31, 2026.

Item 6. EXHIBITS

Exhibit
NumberExhibit
3.1Certificate of Incorporation of Ross Stores, Inc. as amended (Corrected First Restated Certificate of Incorporation, dated March 17, 1999, together with amendments thereto through Amendment of Certificate of Incorporation dated May 29, 2015) incorporated by reference to Exhibit 3.1 to the Form 10-Q filed by Ross Stores, Inc. for its quarter ended August 1, 2015.
3.2Amended and Restated Bylaws of Ross Stores, Inc. (as amended March 8, 2023), incorporated by reference to Exhibit 3.2 to the Form 8-K filed by Ross Stores, Inc. on March 14, 2023.
10.1Form of Notice of Grant of Restricted Stock Units and Form of Restricted Stock Units Agreement (For Non-employee Directors) pursuant to the Ross Stores, Inc. 2017 Equity Incentive Plan.
15Letter re: Unaudited Interim Financial Information from Deloitte & Touche LLP dated September 10, 2024.
31.1Certification of Chief Executive Officer Pursuant to Sarbanes-Oxley Act Section 302(a).
31.2Certification of Chief Financial Officer Pursuant to Sarbanes-Oxley Act Section 302(a).
32.1Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350.
32.2Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350.
101.INSXBRL Instance Document. (The instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.)
101.SCHInline XBRL Taxonomy Extension Schema
101.CALInline XBRL Taxonomy Extension Calculation Linkbase
101.DEFInline XBRL Taxonomy Extension Definition Linkbase
101.LABInline XBRL Taxonomy Extension Label Linkbase
101.PREInline XBRL Taxonomy Extension Presentation Linkbase
104Cover Page Interactive Data File. (The cover page interactive data file does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.)

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned thereunto duly authorized.

ROSS STORES, INC.
(Registrant)
Date:September 10, 2024By:/s/Jeffrey P. Burrill
Jeffrey P. Burrill
Senior Vice President, Chief Accounting Officer and Corporate Controller (Principal Accounting Officer)