Ross Stores Reports Second Quarter Earnings, Provides Third Quarter Guidance

Rhea-AI Summary

Ross Stores, Inc. (NASDAQ: ROST) reported Q2 2021 earnings per share of $1.39, a 22% increase from $1.14 in 2019, driven by net income of $494 million. Sales rose 21% to $4.8 billion, with comparable store sales up 15%. For the first half of 2021, EPS was $2.73, up from $2.29, as sales reached $9.3 billion. The company forecasts Q3 same store sales growth of 5% to 7% and updated FY 2021 EPS guidance to $4.20 to $4.38. CEO Barbara Rentler highlighted uncertainties from COVID variants and supply chain issues impacting future performance.

Positive

• Q2 2021 EPS grew 22% to $1.39; net income at $494 million.
• Sales increased 21% to $4.8 billion; comparable store sales rose 15%.
• First half 2021 EPS was $2.73, up from $2.29; sales reached $9.3 billion.
• Operating margin improved to 14.1% despite rising costs.
• Share repurchase of 1.4 million shares for $176 million.
• Updated FY 2021 EPS forecast to $4.20 to $4.38.

Negative

• Ongoing risks from COVID variants and supply chain congestion.
• Anticipated higher freight, wage, and COVID-related operating costs.

Ross Stores, Inc. (NASDAQ: ROST) today reported earnings per share for the 13 weeks ended July 31, 2021 grew 22% to $1.39 on net income of $494 million. This compares to $1.14 per share on net earnings of $413 million for the 13 weeks ended August 3, 2019. Sales rose 21% to $4.8 billion, with comparable store sales up a robust 15%.

For the six months ended July 31, 2021, earnings per share were $2.73 on net earnings of $971 million, up from $2.29 per share on net income of $834 million for the same period in 2019. Sales for the first half of 2021 rose 20% to $9.3 billion, with comparable store sales up 14%.

Barbara Rentler, Chief Executive Officer, commented, “We are pleased that both second quarter sales and earnings substantially exceeded our expectations. Sales benefited from customers’ positive response to our broad assortment of great bargains. In addition, our results were bolstered by a number of external factors, including ongoing government stimulus, increasing vaccination rates, and diminishing COVID restrictions. Operating margin versus 2019 improved to 14.1% as leverage from the robust sales gains was partially offset by the anticipated expense pressures from higher freight, wage, and COVID-related costs.”

Ms. Rentler continued, “During the second quarter, we repurchased 1.4 million shares of common stock for an aggregate price of $176 million. As previously announced, we expect to buy back a total of $650 million in common stock during fiscal 2021.”

Ms. Rentler further noted, “Looking ahead, there remains much uncertainty regarding the sustainability of the positive external factors that benefited our first half results as well as the potential risks we may face from the spread of COVID variants and worsening industry-wide supply chain congestion. As a result, we are forecasting third quarter same store sales to be up 5% to 7% with earnings per share in the range of $0.61 to $0.69. This guidance reflects our expectation for escalating freight and supply chain costs, and ongoing COVID-related operating expenses.”

Ms. Rentler added, “Based on first half results and our third quarter outlook, we are updating our fiscal year 2021 earnings per share forecast to be in the range of $4.20 to $4.38 on a comparable store sales gain of 10% to 11%.”

Ms. Rentler concluded, “Moving forward, we remain optimistic about our prospects for continued growth in both sales and profitability over the longer term, especially given consumers’ increasing focus on value and convenience. Moreover, the significant number of retail closures and bankruptcies in recent years further enhances our ability to gain additional market share in the future.”

The Company will host a conference call on Thursday, August 19, 2021 at 4:15 p.m. Eastern time to provide additional details concerning its second quarter results and management’s outlook for the remainder of the year. A real-time audio webcast of the conference call will be available in the Investors section of the Company’s website, located at www.rossstores.com. An audio playback will be available at 404-537-3406, PIN #6377123 until 8:00 p.m. Eastern time on August 26, 2021, as well as on the Company’s website.

Forward-Looking Statements: This press release contains forward-looking statements regarding projected sales and earnings, planned new store growth, and other financial results and market conditions in future periods that are subject to risks and uncertainties which could cause our actual results to differ materially from management’s current expectations. The words “plan,” “expect,” “target,” “anticipate,” “estimate,” “believe,” “forecast,” “projected,” “guidance,” “outlook,” “looking ahead,” and similar expressions identify forward-looking statements. Risk factors for Ross Dress for Less^® (“Ross”) and dd’s DISCOUNTS^® include without limitation, the uncertainties and potential for the recurrence of significant business disruptions arising from the COVID-19 pandemic; changes in the level of consumer spending on or preferences for apparel and home-related merchandise; impacts from the macro-economic environment, financial and credit markets, geopolitical conditions, unemployment levels or public health issues (such as pandemics) that affect consumer confidence and consumer disposable income; our need to effectively manage our inventories, markdowns, and inventory shortage to achieve planned gross margins; competitive pressures in the apparel or home-related merchandise retailing industry; issues associated with importing and selling merchandise produced in other countries, including risks from supply chain disruptions due to port of exit/entry congestion, shipping delays and ocean freight cost increases, and risks from other supply chain related disruptions in other countries, including those due to COVID-19 closures; unseasonable weather that may affect shopping patterns and consumer demand for seasonal apparel and other merchandise, and that may result in temporary store closures and disruptions in deliveries of merchandise to our stores; market availability, quantity, and quality of attractive brand name merchandise at desirable discounts and our buyers’ ability to purchase merchandise that enables us to offer customers a wide assortment of merchandise at competitive prices; potential data security breaches, including cyber-attacks on our transaction processing and computer information systems, which could result in theft or unauthorized disclosure of customer, credit card, employee, or other private and valuable information that we handle in the ordinary course of our business; potential disruptions in our supply chain or information systems; 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; damage to our corporate reputation or brands; our need to continually attract, train, and retain associates to execute our off-price 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 that could adversely affect our business; volatility in revenues and earnings; an additional pandemic, natural or man-made disaster in California or in another region where we have a concentration of stores, offices, or a distribution center; unexpected issues or costs from expanding in existing markets and entering new geographic markets; obtaining acceptable new store sites with favorable consumer demographics; and maintaining sufficient liquidity to support our continuing operations, new store openings and reopenings, and ongoing capital expenditure plans. Other risk factors are set forth in our SEC filings including without limitation, the Form 10-K for fiscal 2020, and fiscal 2021 Form 10-Q and Form 8-Ks on file with the SEC. The factors underlying our forecasts are dynamic and subject to change. As a result, our forecasts speak only as of the date they are given and do not necessarily reflect our outlook at any other point in time. We do not undertake to update or revise these forward-looking statements.

Ross Stores, Inc. is an S&P 500, Fortune 500, and Nasdaq 100 (ROST) company headquartered in Dublin, California, with fiscal 2020 revenues of $12.5 billion. Currently, the Company operates Ross Dress for Less^® (“Ross”), the largest off-price apparel and home fashion chain in the United States with 1,611 locations in 40 states, the District of Columbia, and Guam. 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. The Company also operates 285 dd’s DISCOUNTS^® stores in 21 states 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. Additional information is available at www.rossstores.com.

Ross Stores, Inc.
Condensed Consolidated Statements of Operations
					Three Months Ended											Six Months Ended
($000, except stores and per share data, unaudited)					July 31, 2021			August 1, 2020			August 3, 2019					July 31, 2021			August 1, 2020				August 3, 2019
Sales					$	4,804,974		$	2,684,712		$	3,979,869				$	9,321,054		$	4,527,385			$	7,776,511
Costs and Expenses
	Cost of goods sold					3,410,871			2,080,120			2,843,850					6,609,267			3,970,111				5,545,518
	Selling, general and administrative					717,788			519,495			591,970					1,392,841			934,800				1,150,220
	Interest expense (income), net					18,707			28,855			(4,782	)				37,756			35,521				(10,417	)
		Total costs and expenses				4,147,366			2,628,470			3,431,038					8,039,864			4,940,432				6,685,321
Earnings (loss) before taxes						657,608			56,242			548,831					1,281,190			(413,047	)			1,091,190
Provision (benefit) for taxes on earnings (loss)						163,350			34,195			136,110					310,453			(129,252	)			257,327
Net earnings (loss)					$	494,258		$	22,047		$	412,721				$	970,737		$	(283,795	)		$	833,863
Earnings (loss) per share
	Basic				$	1.40		$	0.06		$	1.15				$	2.75		$	(0.81	)		$	2.31
	Diluted				$	1.39		$	0.06		$	1.14				$	2.73		$	(0.81	)		$	2.29
Weighted-average shares outstanding (000)
	Basic					352,865			352,276			359,794					352,927			352,239				361,439
	Diluted					354,935			354,232			362,074					355,161			352,239				364,007
Store count at end of period						1,896			1,832			1,772					1,896			1,832				1,772

Ross Stores, Inc.
Condensed Consolidated Balance Sheets
($000, unaudited)				July 31, 2021			August 1, 2020			August 3, 2019
Assets
Current Assets
	Cash and cash equivalents			$	5,569,071		$	3,793,043		$	1,382,025
	Accounts receivable				159,163			162,723			130,439
	Merchandise inventory				1,751,027			1,117,983			1,835,869
	Prepaid expenses and other				193,588			273,612			167,585
		Total current assets			7,672,849			5,347,361			3,515,918
Property and equipment, net					2,746,208			2,706,105			2,505,040
Operating lease assets					2,973,907			3,053,735			2,932,199
Other long-term assets					248,436			215,044			198,790
Total assets				$	13,641,400		$	11,322,245		$	9,151,947
Liabilities and Stockholders’ Equity
Current Liabilities
	Accounts payable			$	2,588,551		$	1,009,704		$	1,359,829
	Accrued expenses and other				609,719			557,475			474,273
	Current operating lease liabilities				608,123			579,277			549,841
	Accrued payroll and benefits				445,307			204,109			295,465
	Income taxes payable				19,526			-			-
	Short-term debt				-			802,507			-
	Current portion of long-term debt				64,964			-			-
		Total current liabilities			4,336,190			3,153,072			2,679,408
Long-term debt					2,450,245			2,286,295			312,665
Non-current operating lease liabilities					2,503,332			2,601,254			2,496,230
Other long-term liabilities					292,715			258,869			227,842
Deferred income taxes					154,932			155,556			139,538
Commitments and contingencies
Stockholders’ Equity					3,903,986			2,867,199			3,296,264
Total liabilities and stockholders’ equity				$	13,641,400		$	11,322,245		$	9,151,947

Ross Stores, Inc.
Condensed Consolidated Statements of Cash Flows
				Six Months Ended
($000, unaudited)				July 31, 2021				August 1, 2020				August 3, 2019
Cash Flows From Operating Activities
Net earnings (loss)				$	970,737			$	(283,795	)		$	833,863
Adjustments to reconcile net earnings (loss) to net cash provided by operating activities:
	Depreciation and amortization				174,094				179,626				166,898
	Stock-based compensation				58,258				46,897				44,613
	Deferred income taxes				33,065				5,877				21,868
	Change in assets and liabilities:
		Merchandise inventory			(242,045	)			714,356				(85,427	)
		Other current assets			(63,420	)			(51,924	)			(55,309	)
		Accounts payable			360,891				(289,710	)			187,050
		Other current liabilities			77,963				(44,671	)			(8,529	)
		Income taxes			(27,596	)			(145,001	)			(31,193	)
		Operating lease assets and liabilities, net			2,654				5,569				8,276
		Other long-term, net			794				35,197				1,353
		Net cash provided by operating activities			1,345,395				172,421				1,083,463
Cash Flows From Investing Activities
Additions to property and equipment					(254,437	)			(250,047	)			(250,314	)
Proceeds from investments					-				-				517
		Net cash used in investing activities			(254,437	)			(250,047	)			(249,797	)
Cash Flows From Financing Activities
Issuance of common stock related to stock plans					12,534				11,075				10,906
Treasury stock purchased					(49,015	)			(32,346	)			(52,349	)
Repurchase of common stock					(175,784	)			(132,467	)			(640,259	)
Dividends paid					(203,384	)			(101,414	)			(186,642	)
Net proceeds from issuance of short-term debt					-				805,601				-
Payments of short-term debt					-				(3,094	)			-
Net proceeds from issuance of long-term debt					-				1,976,030				-
Payments of debt issuance costs					-				(3,254	)			-
		Net cash (used in) provided by financing activities			(415,649	)			2,520,131				(868,344	)
Net increase (decrease) in cash, cash equivalents, and restricted cash and cash equivalents					675,309				2,442,505				(34,678	)
Cash, cash equivalents, and restricted cash and cash equivalents:
		Beginning of period			4,953,769				1,411,410				1,478,079
		End of period		$	5,629,078			$	3,853,915			$	1,443,401
Reconciliations:
	Cash and cash equivalents			$	5,569,071			$	3,793,043			$	1,382,025
	Restricted cash and cash equivalents included in prepaid expenses and other				10,801				10,348				11,048
	Restricted cash and cash equivalents included in other long-term assets				49,206				50,524				50,328
Total cash, cash equivalents, and restricted cash and cash equivalents:				$	5,629,078			$	3,853,915			$	1,443,401
Supplemental Cash Flow Disclosures
Interest paid				$	42,051			$	10,069			$	6,341
Income taxes paid				$	304,984			$	9,872			$	266,653

 

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FAQ

What is Ross Stores' earnings report for Q2 2021?

Ross Stores reported Q2 2021 EPS of $1.39, net income of $494 million, and sales of $4.8 billion.

How did Ross Stores perform in the first half of 2021?

For the first half of 2021, Ross Stores achieved an EPS of $2.73 and sales of $9.3 billion.

What is the EPS guidance for Ross Stores in fiscal year 2021?

Ross Stores updated its EPS guidance for FY 2021 to a range of $4.20 to $4.38.

What are the forecasts for Ross Stores' Q3 2021 sales?

Ross Stores forecasts Q3 same store sales growth of 5% to 7%.

What factors are affecting Ross Stores' future outlook?

Ross Stores faces uncertainties from COVID variants and potential supply chain issues.