Ross Stores(ROST) - 2025 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Financial Statements (unaudited) The company reported strong Q2 and H1 fiscal 2024 sales and net earnings growth, maintaining a robust balance sheet Condensed Consolidated Statements of Earnings Consolidated Earnings Summary (in thousands, except per share data) | Metric | Three Months Ended Aug 3, 2024 ($ thousands) | Three Months Ended Jul 29, 2023 ($ thousands) | Six Months Ended Aug 3, 2024 ($ thousands) | Six Months Ended Jul 29, 2023 ($ thousands) | | :--- | :--- | :--- | :--- | :--- | | Sales | $5,287,519 | $4,934,905 | $10,145,586 | $9,429,591 | | Earnings before taxes | $702,583 | $594,854 | $1,339,646 | $1,082,109 | | Net earnings | $527,148 | $446,319 | $1,015,138 | $817,510 | | Diluted EPS | $1.59 | $1.32 | $3.05 | $2.41 | Condensed Consolidated Balance Sheets Consolidated Balance Sheet Highlights (in thousands) | Account | August 3, 2024 ($ thousands) | February 3, 2024 ($ thousands) | July 29, 2023 ($ thousands) | | :--- | :--- | :--- | :--- | | Assets | | | | | Cash and cash equivalents | $4,668,137 | $4,872,446 | $4,583,606 | | Merchandise inventory | $2,490,558 | $2,192,220 | $2,300,063 | | Total current assets | $7,594,983 | $7,398,138 | $7,273,752 | | Total assets | $14,678,021 | $14,300,109 | $13,987,302 | | Liabilities & Equity | | | | | Accounts payable | $2,217,227 | $1,955,850 | $2,150,999 | | Long-term debt | $1,513,826 | $2,211,017 | $2,458,615 | | Total liabilities | $9,547,489 | $9,428,783 | $9,532,560 | | Total stockholders' equity | $5,130,532 | $4,871,326 | $4,454,742 | Condensed Consolidated Statements of Cash Flows Cash Flow Summary for Six Months Ended (in thousands) | Cash Flow Activity | August 3, 2024 ($ thousands) | July 29, 2023 ($ thousands) | | :--- | :--- | :--- | | Net cash provided by operating activities | $961,042 | $1,116,281 | | Net cash used in investing activities | ($333,735) | ($363,459) | | Net cash used in financing activities | ($830,040) | ($719,766) | | Net (decrease) increase in cash | ($202,733) | $33,056 | Notes to Condensed Consolidated Financial Statements Sales Mix by Merchandise Category | Category | Six Months Ended Aug 3, 2024 | Six Months Ended Jul 29, 2023 | | :--- | :--- | :--- | | Home Accents and Bed and Bath | 25% | 25% | | Ladies | 23% | 24% | | Men's | 16% | 15% | | Accessories, Lingerie, etc. | 14% | 15% | | Shoes | 13% | 13% | | Children's | 9% | 8% | - The company facilitates a voluntary supply chain finance program, with $182.5 million owed to financial institutions as of August 3, 2024[40][41] - In March 2024, the Board approved a new two-year, $2.1 billion stock repurchase program, with 3.7 million shares repurchased for $525.0 million in the first six months of 2024[37] - The effective tax rate for the six-month period ended August 3, 2024, was approximately 24%, consistent with the prior year period[68] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management attributes strong Q2 performance to sales growth and improved operating margin, maintaining robust liquidity and strategic capital investments Results of Operations Key Performance Indicators | Metric | Q2 2024 | Q2 2023 | YTD 2024 | YTD 2023 | | :--- | :--- | :--- | :--- | :--- | | Sales growth | 7.1% | 7.7% | 7.6% | 5.8% | | Comparable store sales growth | 4% | 5% | 3% | 3% | | Cost of goods sold (% of sales) | 71.7% | 72.3% | 71.8% | 72.8% | | SG&A (% of sales) | 15.8% | 16.4% | 15.9% | 16.5% | | Net earnings (% of sales) | 10.0% | 9.0% | 10.0% | 8.7% | - Cost of goods sold as a percentage of sales decreased by 60 basis points in Q2 2024, driven by lower distribution costs (70 bps), buying costs (55 bps), and domestic freight (15 bps), partially offset by an 80 basis point decrease in merchandise margin[87] - SG&A as a percentage of sales decreased by 55 basis points in Q2 2024, primarily due to higher sales and lower incentive compensation expense[89] - The company opened 24 net new stores in Q2 2024 and is on track to open approximately 90 new stores for the full fiscal year, ending the quarter with 2,148 total stores[81][82] - The $0.27 increase in Q2 diluted EPS to $1.59 was driven by an 18% increase in net earnings and a 2% reduction in weighted-average shares outstanding from stock repurchases[93] Financial Condition, Liquidity and Capital Resources - Cash provided by operating activities decreased to $961.0 million for the first six months of 2024 from $1.1 billion in the prior year, mainly due to higher incentive compensation payments and lower accounts payable leverage[96] - Capital expenditures for fiscal 2024 are projected to be approximately $780 million, primarily for supply chain investments, new stores, and IT systems[101] - During the first six months of 2024, the company repurchased 3.7 million shares for $525.0 million under its new $2.1 billion repurchase program[104] - The company ended the second quarter with $4.7 billion in unrestricted cash balances and $1.3 billion available under its credit facility, considered adequate for the next 12 months[107] Item 3. Quantitative and Qualitative Disclosures About Market Risk The company's primary market risk is interest rate fluctuations on cash balances, with fixed-rate debt and no material impact expected - The company's primary market risk is from changes in interest rates affecting interest income on cash, cash equivalents, and restricted cash[114][115] - There were no borrowings outstanding under the variable-rate Credit Facility as of August 3, 2024, and all outstanding Senior Notes carry fixed interest rates[114] Item 4. Controls and Procedures Management concluded disclosure controls and procedures were effective, with no material changes to internal financial reporting controls - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of August 3, 2024[116] - No changes in internal control over financial reporting occurred during the second fiscal quarter of 2024 that materially affected or are likely to materially affect these controls[118] PART II. OTHER INFORMATION Item 1. Legal Proceedings The company is involved in various legal proceedings, primarily wage and hour lawsuits, with no material financial impact expected - The company is party to various legal proceedings, including class action lawsuits in California related to wage and hour laws[37][120] - Management does not expect the resolution of currently pending litigation to have a material adverse effect on the company's financial condition or results of operations[39] Item 1A. Risk Factors No material changes to risk factors previously disclosed in the Annual Report on Form 10-K - The report refers to the risk factors detailed in the Annual Report on Form 10-K for the fiscal year ended February 3, 2024, indicating no material changes[121] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company repurchased 1.8 million shares in Q2 2024 under its new $2.1 billion program, with $1.575 billion remaining Share Repurchases in Q2 2024 | Period | Total Shares Purchased | Average Price Paid ($) | Value of Shares Remaining for Repurchase ($ thousands) | | :--- | :--- | :--- | :--- | | May 2024 | 481,660 | $135.01 | $1,773,050 | | June 2024 | 732,033 | $145.64 | $1,667,130 | | July 2024 | 634,821 | $145.09 | $1,575,020 | | Total Q2 | 1,848,514 | $142.68 | $1,575,020 | - In March 2024, the Board of Directors approved a new two-year program to repurchase up to $2.1 billion of common stock through January 31, 2026[123] Item 6. Exhibits This section lists exhibits filed with the Form 10-Q, including CEO/CFO certifications and XBRL data files - The report includes standard exhibits such as CEO/CFO certifications under Sarbanes-Oxley Sections 302(a) and 1350, and Inline XBRL documents[125]