Ross Stores 10-Q 2024-11-02

Filed 2024-12-11. 8 sections, 115K 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 November 02, 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 November 15, 2024 was 329,929,197.

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 Flows8
Notes to Condensed Consolidated Financial Statements9
Report of Independent Registered Public Accounting Firm16
Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations17
Item 3.Quantitative and Qualitative Disclosures About Market Risk24
Item 4.Controls and Procedures24
PART II. OTHER INFORMATION
Item 1.Legal Proceedings25
Item 1A.Risk Factors25
Item 2.Unregistered Sales of Equity Securities and Use of Proceeds25
Item 5.Other Information25
Item 6.Exhibits26
Signatures27

PART I. FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS

Condensed Consolidated Statements of Earnings

Three Months EndedNine Months Ended
($000, except stores and per share data, unaudited)November 2, 2024October 28, 2023November 2, 2024October 28, 2023
Sales$5,071,354$4,924,849$15,216,940$14,354,440
Costs and Expenses
Cost of goods sold3,634,2833,564,26810,916,88410,426,241
Selling, general and administrative832,855810,4702,445,4942,364,590
Interest income, net(42,527)(43,319)(131,827)(111,930)
Total costs and expenses4,424,6114,331,41913,230,55112,678,901
Earnings before taxes646,743593,4301,986,3891,675,539
Provision for taxes on earnings157,935146,103482,443410,702
Net earnings$488,808$447,327$1,503,946$1,264,837
Earnings per share
Basic$1.49$1.34$4.56$3.76
Diluted$1.48$1.33$4.53$3.74
Weighted-average shares outstanding (000)
Basic327,710334,282329,453336,187
Diluted329,937336,261331,728338,107

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

Condensed Consolidated Statements of Comprehensive Income

Three Months EndedNine Months Ended
($000, unaudited)November 2, 2024October 28, 2023November 2, 2024October 28, 2023
Net earnings$488,808$447,327$1,503,946$1,264,837
Other comprehensive income————
Comprehensive income$488,808$447,327$1,503,946$1,264,837

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

Condensed Consolidated Balance Sheets

($000, except share data, unaudited)November 2, 2024February 3, 2024October 28, 2023
Assets
Current Assets
Cash and cash equivalents$4,349,262$4,872,446$4,499,497
Accounts receivable176,218130,766171,915
Merchandise inventory2,859,1062,192,2202,613,808
Prepaid expenses and other241,703202,706206,725
Total current assets7,626,2897,398,1387,491,945
Property and Equipment
Land and buildings1,487,5791,486,5571,491,023
Fixtures and equipment4,428,4364,220,2214,109,947
Leasehold improvements1,637,7711,577,1021,503,769
Construction-in-progress749,911628,730569,995
8,303,6977,912,6107,674,734
Less accumulated depreciation and amortization4,646,0184,380,7094,277,215
Property and equipment, net3,657,6793,531,9013,397,519
Operating lease assets3,349,4273,126,8413,160,017
Other long-term assets271,791243,229221,139
Total assets$14,905,186$14,300,109$14,270,620
Liabilities and Stockholders’ Equity
Current Liabilities
Accounts payable$2,346,479$1,955,850$2,280,278
Accrued expenses and other637,332671,867665,279
Current operating lease liabilities699,200683,625680,088
Accrued payroll and benefits459,094548,371509,484
Income taxes payable2,18676,37020,96

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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 1,836 locations in 43 states, the District of Columbia, and Guam, as of November 2, 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 356 dd’s DISCOUNTS stores in 22 states as of November 2, 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 on necessities, pressuring their discretionary spending. However, we believe there are opportunities to grow our market share through the execution of our merchandising initiatives and remain confident that our ongoing focus and commitment to deliver the most compelling values possible will best position our Company for profitable growth.

On October 28, 2024, we announced the appointment of James G. Conroy as our next Chief Executive Officer (“CEO”). Following a two-month transition period, Mr. Conroy will assume the CEO role at the beginning of the next fiscal year on February 2, 2025, at which time our current CEO, Barbara Rentler, will transition into an advisory role through March 2027.

Results of Operations

The following table summarizes our financial results for the three and nine month periods ended November 2, 2024 and October 28, 2023:

Three Months EndedNine Months Ended
November 2, 2024October 28, 2023November 2, 2024October 28, 2023
Sales
Sales (millions)$5,071$4,925$15,217$14,354
Sales growth3.0%7.9%6.0%6.5%
Comparable store sales growth11%5%3%4%
Costs and expenses (as a percent of sales)
Cost of goods sold71.7%72.4%71.7%72.6%
Selling, general and administrative16.4%16.5%16.1%16.5%
Interest income, net(0.8%)(0.9%)(0.9%)(0.8%)
Earnings before taxes (as a percent of sales)12.7%12.0%13.1%11.7%
Net earnings (as a percent of sales)9.6%9.1%9.9%8.8%
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 47 new stores in the third quarter of fiscal 2024. For the nine month period ended November 2, 2024, we opened 89 new locations.

The following table summarizes the stores opened and closed during the three and nine month periods ended November 2, 2024 and October 28, 2023:

Three Months EndedNine Months Ended
Store CountNovember 2, 2024October 28, 2023November 2, 2024October 28, 2023
Ross Dress for Less
Beginning of the period1,7951,7221,7641,693
Opened in the period434375721
Closed in the period(2)—(3)—
Total Ross Dress for Less stores end of period1,8361,7651,8361,765
dd’s DISCOUNTS
Beginning of the period353339345322
Opened in the period481425
Closed in the period(1)—(3)—
Total dd’s DISCOUNTS stores end of period356347356347
Total stores end of period2,1922,1122,1922,112
1 Includes the reopening of a store previously temporarily closed due to a weather event.

Sales. Sales for the three month period ended November 2, 2024 increased $146.5 million, or 3.0%, compared to the three month period ended October 28, 2023, primarily due to the opening of 80 net new stores between October 28, 2023 and November 2, 2024 and a 1% comparable store sales increase.

Sales for the nine month period ended November 2, 2024 increased $862.5 million, or 6.0%, compared to the nine month period ended October 28, 2023, primarily due to the opening of 80 net new stores between October 28, 2023 and November 2, 2024 and a 3% comparable store sales increase.

Our sales mix for the three and nine month periods ended November 2, 2024 and October 28, 2023 is shown below:

Three Months EndedNine Months Ended
November 2, 2024October 28, 2023November 2, 2024October 28, 2023
Home Accents and Bed and Bath25%25%25%25%
Ladies23%23%23%24%
Men’s16%16%16%15%
Accessories, Lingerie, Fine Jewelry, and Cosmetics14%14%14%14%
Shoes13%13%13%13%
Children’s9%9%9%9%
Total100%100%100%100%

Cost of goods sold. Cost of goods sold for the three and nine month periods ended November 2, 2024 increased $70.0 million and $490.6 million, respectively, compared to the three and nine month periods ended October 28, 2023, primarily due to higher sales from the opening of 80 net new stores between October 28, 2023 and November 2, 2024, and the respective 1% and 3% comparable store sales increases, partially offset by lower buying costs primarily due to lower incentive compensation expense, lower distribution costs, and lower domestic freight costs.

Cost of goods sold as a percentage of sales for the three month period ended November 2, 2024 decreased approximately 70 basis points compared to the three month period ended October 28, 2023, primarily due to a 65 basis point decrease in buying costs mainly due to lower incentive compensation expense, a 50 basis point decrease in distribution costs, and a 40 basis point decrease in domestic freight costs. Partially offsetting these items was a 60 basis point decrease in merchandise margin primarily due to our continued efforts to offer more sharply priced branded bargains and a 25 basis point increase in occupancy costs.

Cost of goods sold as a percentage of sales for the nine month period ended November 2, 2024 decreased approximately 90 basis points compared to the nine month period ended October 28, 2023, primarily due to a 65 basis point decrease in distribution costs, a 60 basis point decrease in buying costs mainly due to lower incentive compensation expense, and a 30 basis point decrease in domestic freight costs. Partially offsetting these items was a 55 basis point decrease in merchandise margin primarily due to our continued efforts to offer more sharply priced branded bargains and a 10 basis point increase in occupancy costs.

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

Selling, general and administrative expenses. For the three and nine month periods ended November 2, 2024, selling, general and administrative expenses (“SG&A”) increased $22.4 million and $80.9 million, respectively, compared to the three and nine month periods ended October 28, 2023, primarily due to the opening of 80 net new stores between October 28, 2023 and November 2, 2024, partially offset by lower incentive compensation expense.

SG&A as a percentage of sales for the three month period ended November 2, 2024 decreased 5 basis points compared to the three month period ended October 28, 2023, primarily due to lower incentive compensation expense.

SG&A as a percentage of sales for the nine month period ended November 2, 2024 decreased 40 basis points compared to the nine month period ended October 28, 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 fiscal 2024.

Interest income, net. For the three month period ended November 2, 2024, interest income, net decreased $0.8 million compared to the three month period ended October 28, 2023, primarily due to decreased interest income from lower interest rates and lower average cash balances largely due to the repayment of the $250 million principal amount of the 3.375% Senior Notes in September 2024.

For the nine month period ended November 2, 2024, interest income, net increased $19.9 million compared to the nine month period ended October 28, 2023, primarily due to increased interest income from higher interest rates and higher average cash balances.

The table below shows the components of interest income, net for the three and nine month periods ended November 2, 2024 and October 28, 2023:

Three Months EndedNine Months Ended
($000)November 2, 2024October 28, 2023November 2, 2024October 28, 2023
Interest expense on long-term debt$20,025$21,159$62,342$63,458
Other interest expense4174241,1421,169
Capitalized interest(5,047)(3,342)(13,889)(8,268)
Interest income(57,922)(61,560)(181,422)(168,289)
Interest income, net$(42,527)$(43,319)$(131,827)$(111,930)

Taxes on earnings. Our effective tax rate for the three and nine month periods ended November 2, 2024 was approximately 24%, compared to approximately 25% for the three and nine month periods ended October 28, 2023. 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 November 2, 2024 and October 28, 2023 were 9.6% and 9.1%, respectively. Net earnings as a percentage of sales for the three month period ended November 2, 2024 were higher primarily due to lower cost of goods sold and lower SG&A expenses, partially offset by lower interest income.

Net earnings as a percentage of sales for the nine month periods ended November 2, 2024 and October 28, 2023 were 9.9% and 8.8%, respectively. Net earnings as a percentage of sales for the nine month period ended November 2, 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 November 2, 2024 was $1.48, compared to $1.33 for the three month period ended October 28, 2023. Diluted earnings per share for the nine month period ended November 2, 2024 was $4.53, compared to $3.74 for the nine month period ended October 28, 2023.

The $0.15 increase in the diluted earnings per share for the three month period ended November 2, 2024 was primarily attributable to a 9% 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 $0.79 increase in the diluted earnings per share for the nine month period ended November 2, 2024 was primarily attributable to a 19% increase in net earnings and a 2% 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. In September 2024, we repaid at maturity the $250 million principal amount of the 3.375% Senior Notes. As of November 2, 2024, we had $700 million principal amount of 4.600% Senior Notes that will reach maturity in 2025.

Nine Months Ended
($000)November 2, 2024October 28, 2023
Cash provided by operating activities$1,474,431$1,565,735
Cash used in investing activities(514,122)(540,458)
Cash used in financing activities(1,481,092)(1,075,510)
Net decrease in cash, cash equivalents, and restricted cash and cash equivalents$(520,783)$(50,233)

Operating Activities

Net cash provided by operating activities was $1.5 billion for the nine month period ended November 2, 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 $1.6 billion for the nine month period ended October 28, 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 nine month period ended November 2, 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 82% and 87% as of November 2, 2024 and October 28, 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 November 2, 2024, packaway inventory was 38% of total inventory, compared to 40% at the end of fiscal 2023.

Investing Activities

Net cash used in investing activities was $514.1 million and $540.5 million for the nine month periods ended November 2, 2024 and October 28, 2023, respectively, and was related to our capital expenditures. Our capital expenditures include costs to open new stores and improve existing stores, to build, expand, and improve distribution centers, 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 nine month period ended November 2, 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 $760 million. Our planned capital expenditures for fiscal 2024 are for costs to open new stores and improve existing stores, investments in our supply chain to support long-term growth, including construction of our next distribution centers, investments in our information technology systems, 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 $1.5 billion and $1.1 billion for the nine month periods ended November 2, 2024 and October 28, 2023, respectively, primarily resulting from stock repurchases under our stock repurchase program, dividend payments, and the repayment of the $250 million principal amount of the 3.375% Senior Notes in September 2024.

Revolving credit facilities. We have a $1.3 billion senior unsecured revolving credit facility. As of November 2, 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 November 2, 2024, we had approximately $2.2 billion of outstanding unsecured Senior Notes, of which $699.4 million was classified within Current Liabilities on our Condensed Consolidated Balance Sheet for the period ended November 2, 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 nine month period ended November 2, 2024, we repurchased 5.5 million shares of common stock for $787.5 million (excluding excise tax) under this program. For the nine month period ended October 28, 2023, we repurchased 6.4 million shares of common stock for $703.4 million (excluding excise tax) under our previous, publicly announced repurchase program. During the nine month periods ended November 2, 2024 and October 28, 2023, we also acquired 0.6 million and 0.5 million shares of treasury stock, respectively, to cover employee tax withholding obligations under our employee equity compensation programs, for aggregate purchase prices of approximately $86.1 million and $48.6 million, respectively.

On November 20, 2024, our Board of Directors declared a quarterly cash dividend of $0.3675 per common share, payable on December 31, 2024. The Board of Directors declared a cash dividend of $0.3675 per common share in March, May, and August 2024, and $0.3350 per common share in February, May, August, and November 2023.

For the nine month periods ended November 2, 2024 and October 28, 2023, we paid cash dividends of $367.5 million and $342.1 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 third quarter of fiscal 2024 with $4.3 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 November 2, 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 November 2, 2024, February 3, 2024, and October 28, 2023, we had $2.2 million, $2.2 million, and $2.6 million, respectively, in standby letters of credit outstanding. As of November 2, 2024, February 3, 2024, and October 28, 2023, we had $63.2 million, $60.8 million, and $59.9 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 third 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, tariffs, climate change, extreme weather, 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 and the price of necessities, 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, 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.

  • 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.

  • 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.

  • 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 November 2, 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 November 2, 2024, we had no borrowings outstanding under the Credit Facility.

As of November 2, 2024, we had outstanding six 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 nine month periods ended November 2, 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 third 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 third 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 third 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
August
(8/4/2024 - 8/31/2024)462,230$144.38462,230$1,508,280
September
(9/1/2024-10/5/2024)799,393$151.55706,546$1,401,500
October
(10/6/2024- 11/2/2024)619,346$143.67619,346$1,312,520
Total1,880,969$147.191,788,122$1,312,520

1 We acquired 92,847 shares of treasury stock during the quarter ended November 2, 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 5. OTHER INFORMATION

Insider Adoption of Trading Arrangements:

During the three months ended November 2, 2024, none of our directors or executive officers informed us of the adoption or termination of a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” except as follows:

On September 30, 2024, Michael J. Hartshorn, Group President and Chief Operating Officer, and a member of our Board of Directors, adopted a trading plan intended to satisfy the affirmative defense of Rule 10b5-1(c) to sell up to 40,000 shares of common stock. Unless otherwise terminated pursuant to its terms, the plan will terminate on September 30, 2025, or when all shares under the plan are sold.

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.
15Letter re: Unaudited Interim Financial Information from Deloitte & Touche LLP dated December 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
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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:December 10, 2024By:/s/Jeffrey P. Burrill
Jeffrey P. Burrill
Senior Vice President, Chief Accounting Officer and Corporate Controller (Principal Accounting Officer)