Ross Stores(ROST) - 2026 Q1 - Quarterly Report

PART I. FINANCIAL INFORMATION Financial Statements (unaudited) For the first quarter of fiscal 2025, Ross Stores reported a 2.6% increase in sales to $5.0 billion, while net earnings slightly decreased to $479 million from $488 million year-over-year, with diluted EPS rising to $1.47 from $1.46 aided by share repurchases, and cash decreasing to $3.8 billion due to debt repayment and stock buybacks, while cash flow from operations improved to $410 million Condensed Consolidated Statements of Earnings In Q1 2025, sales increased to $4.98 billion from $4.86 billion, operating income rose to $606.5 million, net earnings slightly declined to $479.2 million from $488.0 million, and diluted EPS increased to $1.47 from $1.46 due to reduced shares outstanding Q1 2025 vs Q1 2024 Earnings | Financial Metric | Three Months Ended May 3, 2025 | Three Months Ended May 4, 2024 | | :--- | :--- | :--- | | Sales | $4,984,971,000 | $4,858,067,000 | | Operating income | $606,470,000 | $591,113,000 | | Net earnings | $479,249,000 | $487,990,000 | | Diluted EPS | $1.47 | $1.46 | Condensed Consolidated Balance Sheets As of May 3, 2025, total assets decreased to $14.3 billion from $14.9 billion, cash and cash equivalents dropped to $3.8 billion from $4.7 billion due to debt repayment, merchandise inventory increased to $2.67 billion from $2.44 billion, and total stockholders' equity grew to $5.58 billion Key Balance Sheet Items ($000) | Account | May 3, 2025 | February 1, 2025 | May 4, 2024 | | :--- | :--- | :--- | :--- | | Cash and cash equivalents | $3,783,413 | $4,730,744 | $4,654,316 | | Merchandise inventory | $2,669,849 | $2,444,513 | $2,461,699 | | Total assets | $14,304,616 | $14,905,332 | $14,491,782 | | Total current liabilities | $4,435,759 | $4,661,825 | $4,885,549 | | Long-term debt | $1,016,897 | $1,515,080 | $1,513,200 | | Total stockholders' equity | $5,576,078 | $5,509,195 | $4,947,952 | Condensed Consolidated Statements of Stockholders' Equity For Q1 2025, total stockholders' equity increased from $5.51 billion to $5.58 billion, driven by $479.2 million in net earnings, partially offset by $264.4 million in stock repurchases and $133.3 million in dividends - During Q1 2025, the company repurchased common stock for $264.4 million (inclusive of excise tax) and declared dividends of $133.3 million ($0.4050 per share)[13] Condensed Consolidated Statements of Cash Flows Net cash from operating activities increased to $409.7 million in Q1 2025, investing activities used $207.4 million due to higher capital expenditures, and financing activities used $1.15 billion, primarily due to a $700 million debt repayment Cash Flow Summary ($000) | Cash Flow Activity | Three Months Ended May 3, 2025 | Three Months Ended May 4, 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $409,715 | $368,921 | | Net cash used in investing activities | ($207,378) | ($136,249) | | Net cash used in financing activities | ($1,149,809) | ($450,033) | | Net decrease in cash | ($947,472) | ($217,361) | Notes to Condensed Consolidated Financial Statements Key notes include the $700 million Senior Notes repayment, a new $2.1 billion stock repurchase program, a $0.4050 per share quarterly dividend, an effective tax rate increase to 25%, and the company operating as a single reportable segment - In April 2025, the company repaid the $700 million principal amount of its 4.600% Senior Notes at maturity[50] - In March 2024, the Board approved a two-year, $2.1 billion stock repurchase program, under which the company repurchased 2.0 million shares for $262.5 million in Q1 2025[30] - The company has one reportable segment, aggregating its two operating segments, Ross and dd's DISCOUNTS, due to similar economic characteristics[57] Management's Discussion and Analysis of Financial Condition and Results of Operations Management reported a 2.6% sales increase in Q1 2025, driven by 78 net new stores, with comparable store sales flat and operating margin stable at 12.2%, while navigating macroeconomic pressures and executing a $700 million debt repayment, $262.5 million in share repurchases, and plans for 90 new stores Q1 2025 Key Performance Indicators | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Sales growth | 3% | 8% | | Comparable store sales growth | 0% | 3% | | Operating margin | 12.2% | 12.2% | | Net earnings margin | 9.6% | 10.0% | - The company opened 19 new stores in Q1 2025 (16 Ross, 3 dd's DISCOUNTS) and plans to open approximately 90 new stores for the full fiscal year[69][70] - The company repaid $700 million of Senior Notes in April 2025, repurchased $262.5 million of common stock, and paid $133.3 million in dividends during the quarter[81][91][96] - Management expects merchandise margin to decrease in Q2 2025 due to announced tariffs and distribution costs to increase from the opening of a new distribution center[73] Quantitative and Qualitative Disclosures About Market Risk The company's primary market risk is interest rate changes affecting interest income from cash balances, with no variable-rate borrowings outstanding and all Senior Notes at fixed rates, and a 100 basis point change in rates is not expected to be material - The company's primary market risk is from changes in interest rates affecting interest income on cash and cash equivalents[105][107] - As of May 3, 2025, the company had no borrowings outstanding under its variable-rate credit facility, and all outstanding Senior Notes are fixed-rate[106] - A hypothetical 100 basis point change in interest rates is not expected to have a material impact on the company's financial position, results of operations, or cash flows[108] Controls and Procedures Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of May 3, 2025, with no material changes to internal control over financial reporting during the first quarter - Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective at the reasonable assurance level as of the end of the reporting period[110] - Management concluded that no changes in internal control over financial reporting occurred in Q1 2025 that have materially affected or are reasonably likely to materially affect these controls[112] PART II. OTHER INFORMATION Legal Proceedings The company is involved in various legal and regulatory proceedings, including class action lawsuits concerning wage and hour laws, which management believes will not have a material adverse effect on its financial condition or results - The company is named in class/representative action lawsuits, primarily in California, alleging wage and hour law violations, which remain pending[32][113] - Management's opinion is that the resolution of currently pending litigation will not have a material adverse effect on the company's financials[34] Risk Factors The company faces significant risks from macroeconomic factors like inflation and geopolitical conditions impacting consumer spending, high reliance on merchandise from China making it susceptible to U.S. trade policy changes, and potential supply chain disruptions - The business is subject to macroeconomic risks, including inflation, interest rates, and geopolitical conditions, which can negatively affect consumer confidence and spending[115][117] - A predominant portion of merchandise sold originates from other countries, with more than half from China, making the company highly susceptible to changes in U.S. trade policy, tariffs, and quotas[116][118][120] - Risks associated with importing merchandise include supply chain disruptions, shipping delays, higher freight costs, and geopolitical instability[119][121] Unregistered Sales of Equity Securities and Use of Proceeds In Q1 2025, Ross Stores repurchased approximately 2.0 million shares for $262.5 million under its $2.1 billion repurchase program, with $787.5 million remaining as of May 3, 2025 Q1 2025 Share Repurchases | Period | Total Shares Purchased | Average Price Paid | Shares Purchased Under Program | Remaining Authorization ($000) | | :--- | :--- | :--- | :--- | :--- | | March 2025 | 1,457,767 | $125.95 | 975,411 | $926,040 | | April 2025 | 1,008,676 | $137.85 | 1,004,809 | $787,500 | | Total | 2,466,443 | $130.82 | 1,980,220 | $787,500 | - The repurchases are part of a two-year, $2.1 billion program approved by the Board of Directors in March 2024[122] Exhibits This section lists all exhibits filed with the Form 10-Q, including the company's Certificate of Incorporation, Bylaws, executive employment agreements, and required CEO and CFO certifications under Sarbanes-Oxley Act - The filing includes certifications from the CEO and CFO as required by Sections 302(a) and 1350 of the Sarbanes-Oxley Act[125] Signatures The Form 10-Q report was officially signed on June 10, 2025, by Jeffrey P. Burrill, Senior Vice President, Chief Accounting Officer, and Corporate Controller, on behalf of Ross Stores, Inc - The report was duly signed and authorized on June 10, 2025, by Jeffrey P. Burrill, Senior Vice President, Chief Accounting Officer and Corporate Controller[127][128]