Ross Stores(ROST) - 2024 Q4 - Annual Report

Part I Business Ross Stores operates two off-price retail chains, Ross Dress for Less and dd's DISCOUNTS, offering discounted brand-name merchandise through opportunistic buying and a packaway inventory strategy, supported by efficient operations - As of February 3, 2024, the company operates 1,764 Ross Dress for Less stores and 345 dd's DISCOUNTS stores[6][7] - The company's "packaway" merchandise accounted for approximately 40% of total inventories at the end of fiscal 2023[16] - As of February 3, 2024, the company employed approximately 108,000 associates, with about 85% working in retail stores[30] Executive Officers of the Registrant | Name | Age | Position | | :--- | :--- | :--- | | Michael Balmuth | 73 | Executive Chairman | | Barbara Rentler | 66 | Chief Executive Officer | | Michael J. Hartshorn | 56 | Group President, Chief Operating Officer | | Michael Kobayashi | 59 | President, Chief Capability Officer | | Karen Fleming | 57 | President, Chief Merchandising Officer – dd's DISCOUNTS | | Stephen Brinkley | 50 | President, Operations | | Adam Orvos | 59 | Executive Vice President, Chief Financial Officer | Risk Factors The company faces significant macroeconomic, strategic, operational, and legal risks, including inflation, intense competition, supply chain disruptions, cybersecurity threats, and legal proceedings - Macroeconomic risks include inflation, geopolitical conflicts, and other external events affecting consumer disposable income and increasing company costs[50][52] - Strategic risks involve dependence on the availability of attractive brand-name merchandise at desirable discounts and the ability of buyers to procure it[58][59] - Operational risks highlighted include potential data security breaches, cyberattacks (like ransomware), and disruptions to information systems or the supply chain, which could significantly impact operations[73][74][76] - The company faces a geographic concentration risk, with almost 50% of its stores located in California, Texas, and Florida, and over half of its distribution capacity in California[85] - Compliance and legal risks include potential lawsuits related to employment matters, particularly class/representative actions in California, and issues with product quality, safety, or authenticity[87][91] Unresolved Staff Comments The company reports that there are no unresolved staff comments - Not applicable[97] Cybersecurity Ross Stores maintains a cybersecurity program led by its IT team and overseen by the Board's Audit Committee, utilizing industry frameworks like NIST to manage risks, with no material impact reported to date - The cybersecurity program is led by the IT team, with primary oversight from the Board's Audit Committee[99][102] - The program utilizes industry frameworks, including the National Institute of Standards and Technology (NIST) Cybersecurity Framework[99] - As of April 1, 2024, the company reports that its business strategy, operations, and financial condition have not been materially affected by cybersecurity risks or incidents[101] Properties As of February 3, 2024, the company operated 2,109 mostly leased stores across 43 states, with high concentration in California, Texas, and Florida, supported by a network of owned and leased distribution and office facilities Store Count by State/Territory (Top 5) | State/Territory | Feb 3, 2024 | Jan 28, 2023 | | :--- | :--- | :--- | | California | 463 | 452 | | Texas | 304 | 294 | | Florida | 244 | 239 | | Illinois | 102 | 101 | | Arizona | 89 | 84 | | Total | 2,109 | 2,015 | Distribution/Warehouse and Office Facilities | Location | Number of Facilities | Total Approx. Square Footage (Owned, in thousands) | Total Approx. Square Footage (Leased, in thousands) | | :--- | :--- | :--- | :--- | | Distribution/Warehouse | | | | | Buckeye, AZ | 1 | 1,700 | — | | Moreno Valley, CA | 3 | 1,300 | 1,850 | | Perris, CA | 2 | 1,999 | — | | Shafter, CA | 3 | 1,700 | 1,353 | | Fort Mill/Rock Hill, SC | 7 | 3,251 | 846 | | Brookshire, TX | 1 | 1,890 | — | | Office Space | | | | | Dublin, CA (HQ) | 1 | 414 | — | | New York City, NY | 1 | 572 | — | Legal Proceedings The company is involved in various legal proceedings, primarily class action lawsuits in California regarding wage and hour laws, which management believes will not materially affect its financial condition - The company is named in class/representative action lawsuits, primarily in California, alleging violations of wage and hour laws[111] - Management believes that the resolution of currently pending litigation will not have a material adverse effect on the company's financials[112] Mine Safety Disclosures This item is not applicable to the company - Not applicable[113] Part II Market for Registrant's Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities Ross Stores' common stock (ROST) trades on Nasdaq, with the company detailing its dividend history, including a recent $0.3675 per share declaration, and outlining stock repurchase programs, including a new $2.1 billion authorization - On March 5, 2024, the Board of Directors declared a quarterly cash dividend of $0.3675 per common share[114] - In March 2024, the Board approved a new two-year program to repurchase up to $2.1 billion of common stock through fiscal 2025[116] Issuer Purchases of Equity Securities (Q4 2023) | Period | Total number of shares purchased | Average price paid per share ($) | | :--- | :--- | :--- | | November 2023 | 461,842 | $122.54 | | December 2023 | 723,609 | $134.08 | | January 2024 | 672,906 | $138.18 | | Total | 1,858,357 | $132.70 | Reserved This item is reserved and contains no information Management's Discussion and Analysis of Financial Condition and Results of Operations In fiscal 2023, sales increased 9.0% to $20.4 billion, with net earnings reaching $1.87 billion and diluted EPS at $5.56, driven by higher merchandise margins and lower freight costs, while maintaining strong liquidity and projecting $840 million in capital expenditures for fiscal 2024 Fiscal 2023 vs. 2022 Performance | Metric | 2023 | 2022 | | :--- | :--- | :--- | | Sales (in millions) | $20,377 | $18,696 | | Sales growth | 9.0% | (1.2)% | | Comparable store sales growth | 5% | (4)% | | Net earnings (as % of sales) | 9.2% | 8.1% | | Diluted EPS | $5.56 | $4.38 | - Cost of goods sold as a percentage of sales decreased by 195 basis points from fiscal 2022, primarily due to a 160 basis point increase in merchandise margin (mainly from lower ocean freight costs) and a 60 basis point decrease in domestic freight costs[136] - Net cash provided by operating activities was $2.5 billion in fiscal 2023, a significant increase from $1.7 billion in fiscal 2022[145] - Capital expenditures for fiscal 2024 are projected to be approximately $840 million, up from $762.8 million in fiscal 2023, with a focus on supply chain investments and new stores[152] Stock Repurchase Activity | Fiscal Year | Shares repurchased (in millions) | Amount repurchased (in millions) | | :--- | :--- | :--- | | 2023 | 8.2 | $950 | | 2022 | 10.3 | $950 | | 2021 | 5.7 | $650 | Quantitative and Qualitative Disclosures about Market Risk The company's primary market risk is interest rate fluctuations, though with no outstanding variable-rate borrowings and fixed-rate Senior Notes, a hypothetical 100 basis point change would not materially impact its financials - The primary market risk exposure is to changes in interest rates[170] - As of February 3, 2024, there were no borrowings outstanding under the company's revolving credit facility[170] - A hypothetical 100 basis point increase or decrease in prevailing market interest rates would not have a material negative impact on the company's financials[171] Financial Statements and Supplementary Data This section presents the company's audited consolidated financial statements for fiscal years 2023-2021, including key statements and notes, with Deloitte & Touche LLP providing an unqualified opinion on both the financials and internal controls Consolidated Statements of Earnings (in thousands) | | Fiscal Year Ended Feb 3, 2024 | Fiscal Year Ended Jan 28, 2023 | | :--- | :--- | :--- | | Sales | $20,376,941 | $18,695,829 | | Cost of goods sold | $14,801,601 | $13,946,230 | | Earnings before taxes | $2,471,781 | $1,987,489 | | Net earnings | $1,874,520 | $1,512,041 | | Diluted EPS | $5.56 | $4.38 | Consolidated Balance Sheets (in thousands) | | As of Feb 3, 2024 | As of Jan 28, 2023 | | :--- | :--- | :--- | | Total Current Assets | $7,398,138 | $6,904,719 | | Cash and cash equivalents | $4,872,446 | $4,551,876 | | Merchandise inventory | $2,192,220 | $2,023,495 | | Total Assets | $14,300,109 | $13,416,463 | | Total Current Liabilities | $4,185,796 | $3,636,246 | | Long-term debt | $2,211,017 | $2,456,510 | | Total Stockholders' Equity | $4,871,326 | $4,288,583 | | Total Liabilities and Stockholders' Equity | $14,300,109 | $13,416,463 | - The independent auditor, Deloitte & Touche LLP, issued an unqualified opinion, stating the financial statements are presented fairly and the company maintained effective internal control over financial reporting[263] Changes in and Disagreements with Accountants on Accounting and Financial Disclosure The company reports no changes in or disagreements with its accountants on accounting and financial disclosure - None reported[271] Controls and Procedures Management, including the CEO and CFO, concluded that the company's disclosure controls and internal control over financial reporting were effective as of February 3, 2024, a conclusion affirmed by Deloitte & Touche LLP - The CEO and CFO concluded that the company's disclosure controls and procedures were effective at a reasonable assurance level as of the end of the fiscal year[271] - Management concluded that the company's internal control over financial reporting was effective as of February 3, 2024, based on the COSO framework[274] Other Information The company reports no other information - None[276] Disclosure Regarding Foreign Jurisdictions that Prevent Inspections The company reports no information under this item - None[278] Part III Directors, Executive Officers and Corporate Governance Information on directors, executive officers, and corporate governance is incorporated by reference from the company's 2024 Proxy Statement, with executive officer details also in Part I - Required information is incorporated by reference from the Proxy Statement for the 2024 Annual Meeting of Stockholders[279] Executive Compensation All required information regarding executive and director compensation, including the Compensation Discussion and Analysis, is incorporated by reference from the company's 2024 Proxy Statement - Required information is incorporated by reference from the Proxy Statement for the 2024 Annual Meeting of Stockholders[280] Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters This section summarizes the company's equity compensation plans as of February 3, 2024, with further details on security ownership incorporated by reference from the 2024 Proxy Statement Equity Compensation Plan Information (as of Feb 3, 2024) | Plan Category | Securities to be issued upon exercise (in thousands) | Securities remaining available for future issuance (in thousands) | | :--- | :--- | :--- | | Approved by security holders | 719 | 11,426 | | Not approved by security holders | — | — | | Total | 719 | 11,426 | - Information on security ownership of certain beneficial owners and management is incorporated by reference from the Proxy Statement[284] Certain Relationships and Related Transactions, and Director Independence All required information regarding related person transactions and director independence is incorporated by reference from the company's 2024 Proxy Statement - Required information is incorporated by reference from the Proxy Statement for the 2024 Annual Meeting of Stockholders[285] Principal Accountant Fees and Services Information concerning fees and services provided by the principal accountant is incorporated by reference from the Audit Committee Report section of the company's 2024 Proxy Statement - Required information is incorporated by reference from the Proxy Statement for the 2024 Annual Meeting of Stockholders[286] Part IV Exhibits and Financial Statement Schedules This section lists the consolidated financial statements, schedules, and exhibits filed as part of the 10-K report, with financial statements in Item 8 and a detailed index of all exhibits provided - This section lists the consolidated financial statements included in Item 8 and provides an index of all exhibits filed with the report[288][290]