ROST – Ross Stores Reports Fourth Quarter and Fiscal 2020 Results

DUBLIN, Calif.–(BUSINESS WIRE)–Ross Stores, Inc. (NASDAQ: ROST) today reported earnings for the 13 weeks ended January 30, 2021 of $238 million or $0.67 per share. Sales for the fourth quarter of 2020 were $4.2 billion, with comparable store sales down 6%, reflecting the negative impact from the upsurge of COVID-19 during the peak holiday selling season.

For the 2020 fiscal year, earnings per share were $0.24 on net income of $85 million, which includes a one-time, pre-tax charge of $240 million or $0.54 per share for the year from the refinancing of $775 million in senior notes. Total sales for 2020 declined to $12.5 billion.

Barbara Rentler, Chief Executive Officer, commented, “While our fourth quarter sales exceeded our expectations, the upsurge of the virus resulted in lower traffic, especially in California, our largest state, where we were subject to more stringent occupancy and operating hour restrictions.”

Ms. Rentler continued, “Fourth quarter operating margin of 9.5% declined versus last year as an increase in merchandise margin was more than offset by the deleveraging effect on expenses from lower sales, and higher supply chain and COVID-related operating costs.”

Reinstates Quarterly Cash Dividend

The Company’s Board of Directors recently authorized the reinstatement of the quarterly cash dividend at a rate of $0.285 per share. This quarterly dividend is payable on March 31, 2021 to stockholders of record as of March 16, 2021.

Ms. Rentler noted, “The resumption of our dividend payout in 2021 reflects our strong cash position and confidence in the Company’s long-term prospects.”

First Quarter Guidance and Fiscal 2021 Outlook

Our guidance and results throughout fiscal 2021 will be reported versus fiscal 2019. We believe the significant impact from the extended closure of our operations in the spring of 2020, and the ongoing headwinds caused by COVID-19 throughout last year, make this a more relevant basis for comparison.

Ms. Rentler commented, “As we enter 2021, there remains limited visibility regarding the pandemic and the pace and magnitude of an economic recovery. Given these factors, we are providing specific guidance for only the first quarter and a general outlook for the year.”

Ms. Rentler continued, “Comparable store sales for the 13 weeks ending May 1, 2021 are projected to be down 1% to down 5% compared to the 13 weeks ended May 4, 2019. Earnings per share for the 2021 first quarter are forecast to be $0.74 to $0.86, reflecting the deleveraging effect from the projected decline in same store sales, increased supply chain costs, higher wages, and ongoing COVID-related expenses.”

Ms. Rentler added, “With the continued roll out of vaccines, potential additional government stimulus, and likely pent-up consumer demand, we expect comparable store sales to strengthen as we move through the year. However, earnings will continue to be affected by the aforementioned cost pressures throughout the year and thus profitability will be well below recent historical high levels.”

Ms. Rentler further noted, “With regard to our expansion plans, we remain very optimistic about our longer-term growth opportunities. That said, we planned a more moderate pace of store openings this year, especially in the spring. For fiscal 2021, we expect to add about 60 new locations, consisting of approximately 40 Ross Dress for Less and 20 dd’s DISCOUNTS.”

Ms. Rentler concluded, “Going forward, we are very confident that our talented management team, seasoned associates, and robust financial foundation will enable us to navigate through these uncertain times. In addition, we believe our longer-term prospects remain bright. We operate in an attractive sector of retail that will be facing much less brick and mortar competition given the significant number of retail closures and bankruptcies. As a result, we believe we remain well-positioned to gain market share over time, especially given consumers’ heightened focus on value and convenience.”

The Company will host a conference call on Tuesday, March 2, 2021 at 4:15 p.m. Eastern time to provide additional details concerning its fourth quarter and fiscal year 2020 results, and management’s outlook for fiscal 2021. 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 #6207398 until 8:00 p.m. Eastern time on March 9, 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 further significant business disruptions arising from the ongoing COVID-19 pandemic, including potential distribution center and store closures and restrictions on customer access; 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 from selling and importing merchandise produced in other countries and from supply chain disruptions in other countries, including due to COVID-19 closures; unseasonable weather that may affect shopping patterns and consumer demand for seasonal apparel and other merchandise, and 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 2019, and fiscal 2020 Form 10-Qs and 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. The Company operates Ross Dress for Less® (“Ross”), the largest off-price apparel and home fashion chain in the United States with 1,585 locations in 40 states, the District of Columbia, and Guam at fiscal 2020 year-end. 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 274 dd’s DISCOUNTS® stores in 21 states at the end of fiscal 2020 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 Earnings
 
 
Three Months EndedTwelve Months Ended
($000, except stores and per share data, unaudited)

January 30, 2021

February 1, 2020

January 30, 2021

February 1, 2020

 
Sales

$

4,249,671

$

4,413,445

 

$

12,531,565

$

16,039,073

 

 
Costs and Expenses
Cost of goods sold

 

3,157,044

 

3,224,237

 

 

9,838,574

 

11,536,187

 

Selling, general and administrative

 

690,624

 

601,879

 

 

2,503,281

 

2,356,704

 

Interest income (expense), net

 

19,152

 

(3,287

)

 

83,413

 

(18,106

)

Total costs and expenses

 

3,866,820

 

3,822,829

 

 

12,425,268

 

13,874,785

 

 
Earnings before taxes

 

382,851

 

590,616

 

 

106,297

 

2,164,288

 

Provision for taxes on earnings

 

144,871

 

134,483

 

 

20,915

 

503,360

 

Net earnings

$

237,980

$

456,133

 

$

85,382

$

1,660,928

 

 
Earnings per share
Basic

$

0.67

$

1.29

 

$

0.24

$

4.63

 

Diluted

$

0.67

$

1.28

 

$

0.24

$

4.60

 

 
 
Weighted-average shares outstanding (000)
Basic

 

352,609

 

354,090

 

 

352,392

 

358,462

 

Diluted

 

355,163

 

356,918

 

 

354,619

 

361,182

 

 
 
Store count at end of period

 

1,859

 

1,805

 

 

1,859

 

1,805

 

 
Ross Stores, Inc.
Condensed Consolidated Balance Sheets
 
 
($000, unaudited)

January 30, 2021

February 1, 2020

Assets
 
Current Assets
Cash and cash equivalents

$

4,819,293

$

1,351,205

Accounts receivable

 

115,067

 

102,236

Merchandise inventory

 

1,508,982

 

1,832,339

Prepaid expenses and other

 

249,149

 

147,048

Total current assets

 

6,692,491

 

3,432,828

 
Property and equipment, net

 

2,710,496

 

2,653,436

Operating lease assets

 

3,084,819

 

3,053,782

Other long-term assets

 

230,061

 

208,321

Total assets

$

12,717,867

$

9,348,367

 
Liabilities and Stockholders’ Equity
 
Current Liabilities
Accounts payable

$

2,256,928

$

1,296,482

Accrued expenses and other

 

592,122

 

462,111

Current operating lease liabilities

 

598,120

 

564,481

Accrued payroll and benefits

 

400,273

 

364,435

Income taxes payable

 

54,680

 

14,425

Current portion of long-term debt

 

64,910

 

Total current liabilities

 

3,967,033

 

2,701,934

 
 
Long-term debt

 

2,448,175

 

312,891

Non-current operating lease liabilities

 

2,621,594

 

2,610,528

Other long-term liabilities

 

268,558

 

214,086

Deferred income taxes

 

121,867

 

149,679

 
Commitments and contingencies
 
Stockholders’ Equity

 

3,290,640

 

3,359,249

Total liabilities and stockholders’ equity

$

12,717,867

$

9,348,367

 
Ross Stores, Inc.
Condensed Consolidated Statements of Cash Flows
 
 

Twelve Months Ended

($000, unaudited)

January 30, 2021

February 1, 2020

 
Cash Flows From Operating Activities
Net earnings

$

85,382

 

$

1,660,928

 

Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization

 

364,245

 

 

350,892

 

Loss on early extinguishment of debt

 

239,953

 

 

 

Stock-based compensation

 

101,568

 

 

95,438

 

Deferred income taxes

 

(27,812

)

 

32,009

 

Change in assets and liabilities:
Merchandise inventory

 

323,357

 

 

(81,897

)

Other current assets

 

(39,406

)

 

(10,315

)

Accounts payable

 

938,837

 

 

114,153

 

Other current liabilities

 

171,444

 

 

30,513

 

Income taxes

 

39,806

 

 

(35,239

)

Operating lease assets and liabilities, net

 

13,669

 

 

15,631

 

Other long-term, net

 

34,890

 

 

(567

)

Net cash provided by operating activities

 

2,245,933

 

 

2,171,546

 

 
Cash Flows From Investing Activities
Additions to property and equipment

 

(405,433

)

 

(555,483

)

Proceeds from investments

 

 

 

517

 

Net cash used in investing activities

 

(405,433

)

 

(554,966

)

 
Cash Flows From Financing Activities
Net proceeds from issuance of short-term debt

 

805,601

 

 

 

Payments of short-term debt

 

(805,601

)

 

 

Net proceeds from issuance of long-term debt

 

2,965,115

 

 

 

Payments of long-term debt

 

(775,009

)

 

 

Payments of debt extinguishment and debt issuance costs

 

(232,688

)

 

 

Issuance of common stock related to stock plans

 

23,534

 

 

22,209

 

Treasury stock purchased

 

(45,222

)

 

(60,665

)

Repurchase of common stock

 

(132,467

)

 

(1,275,000

)

Dividends paid

 

(101,404

)

 

(369,793

)

Net cash provided by (used in) financing activities

 

1,701,859

 

 

(1,683,249

)

 
Net increase (decrease) in cash, cash equivalents, and restricted cash and cash equivalents

 

3,542,359

 

 

(66,669

)

 
Cash, cash equivalents, and restricted cash and cash equivalents:
Beginning of period

 

1,411,410

 

 

1,478,079

 

End of period

$

4,953,769

 

$

1,411,410

 

 
Reconciliations:
Cash and cash equivalents

$

4,819,293

 

$

1,351,205

 

Restricted cash and cash equivalents included in prepaid expenses and other

 

85,711

 

 

10,235

 

Restricted cash and cash equivalents included in other long-term assets

 

48,765

 

 

49,970

 

Total cash, cash equivalents, and restricted cash and cash equivalents:

$

4,953,769

 

$

1,411,410

 

 
Supplemental Cash Flow Disclosures
Interest paid

$

72,471

 

$

12,682

 

Income taxes paid

$

8,921

 

$

506,591