Ross Stores Reports Improved Trends in Third Quarter Sales and Earnings
Dublin, CA — Ross Stores reported earnings for the 13 weeks ended October 31, 2020 of $0.37 per share versus $1.03 per share for the 13 weeks ended November 2, 2019. Net income was $131 million, compared to $371 million in the prior year period. These results include a one-time charge of $240 million or $0.65 per share impact to net earnings relating to the refinancing of $775 million in senior notes during the quarter. Third quarter 2020 sales declined 2% to $3.8 billion, with comparable store sales down 3%.
For the nine months ended October 31, 2020, the Company reported a per share loss of $(0.43) on a net loss of $153 million which includes the one-time debt refinancing costs. These results compare to net income of $1.2 billion or $3.32 per share for the same period in 2019. Sales year-to-date were $8.3 billion, down from $11.6 billion last year.
Barbara Rentler, Chief Executive Officer, commented, “Sales trends accelerated during the third quarter following a slower start in August, driven by an improvement in our merchandise assortments, a later back-to-school season, stronger performance in our larger markets, and our return to more normal store hours.”
Ms. Rentler continued, “Third quarter operating margin of 4.4% was down from 12.4% in 2019, and was negatively impacted by the one-time debt refinancing charge, which was equivalent to 640 basis points. In addition, the year-over-year margin decline reflects higher COVID-related operating costs in 2020 and the deleveraging effect on expenses throughout the business from the decline in same store sales.”
Ms. Rentler added, “Core business results improved during the quarter demonstrating consumers’ continued focus on value, and our ongoing ability to deliver the bargains our customers have come to expect from us.”
Ms. Rentler further commented, “We continue to maintain a strong financial position with over $5.2 billion of total liquidity. In addition to the refinancing of a portion of our senior notes during the third quarter which will significantly reduce the annual interest expense and total cash outlays over the life of the debt, we took other actions to lower our ongoing debt costs, including the repayment of the $800 million revolving credit facility and terminating the undrawn $500 million revolver.”
Ms. Rentler concluded, “As we enter the fourth quarter, our month-to-date comparable store sales in November are down mid-single-digits. In addition, there remains a high level of uncertainty related to the worsening health crisis and we are concerned with how the upsurge of this pandemic might impact consumer demand during what we expect to be a highly competitive holiday shopping season. Given the lack of visibility we have regarding these external risks and how they may evolve and impact our business, we will continue to manage our operations conservatively and will not be providing sales or earnings per share guidance for the fourth quarter.”
The Company will host a conference call on Thursday, November 19, 2020 at 4:15 p.m. Eastern time to provide additional details concerning its third quarter results. 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 #3089432 until 8:00 p.m. Eastern time on November 27, 2020, as well as on the Company’s website.
| Ross Stores, Inc. | ||||||||||||||||||
| Condensed Consolidated Statements of Operations | ||||||||||||||||||
| Three Months Ended | Nine Months Ended | |||||||||||||||||
| ($000, except stores and per share data, unaudited) | October 31, 2020 | November 2, 2019 | October 31, 2020 | November 2, 2019 | ||||||||||||||
| Sales | $ | 3,754,509 | $ | 3,849,117 | $ | 8,281,894 | $ | 11,625,628 | ||||||||||
| Costs and Expenses | ||||||||||||||||||
| Cost of goods sold | 2,711,419 | 2,766,432 | 6,681,530 | 8,311,950 | ||||||||||||||
| Selling, general and administrative | 877,857 | 604,605 | 1,812,657 | 1,754,825 | ||||||||||||||
| Interest expense (income), net | 28,740 | (4,402 | ) | 64,261 | (14,819 | ) | ||||||||||||
| Total costs and expenses | 3,618,016 | 3,366,635 | 8,558,448 | 10,051,956 | ||||||||||||||
| Earnings (loss) before taxes | 136,493 | 482,482 | (276,554 | ) | 1,573,672 | |||||||||||||
| Provision (benefit) for taxes on earnings (loss) | 5,296 | 111,550 | (123,956 | ) | 368,877 | |||||||||||||
| Net earnings (loss) | $ | 131,197 | $ | 370,932 | $ | (152,598 | ) | $ | 1,204,795 | |||||||||
| Earnings (loss) per share | ||||||||||||||||||
| Basic | $ | 0.37 | $ | 1.04 | $ | (0.43 | ) | $ | 3.35 | |||||||||
| Diluted | $ | 0.37 | $ | 1.03 | $ | (0.43 | ) | $ | 3.32 | |||||||||
| Weighted average shares outstanding (000) | ||||||||||||||||||
| Basic | 352,481 | 356,879 | 352,320 | 359,919 | ||||||||||||||
| Diluted | 354,457 | 359,299 | 352,320 | 362,455 | ||||||||||||||
| Store count at end of period | 1,869 | 1,810 | 1,869 | 1,810 | ||||||||||||||
| Ross Stores, Inc. | ||||||||
| Condensed Consolidated Balance Sheets | ||||||||
| ($000, unaudited) | October 31, 2020 | November 2, 2019 | ||||||
| Assets | ||||||||
| Current Assets | ||||||||
| Cash and cash equivalents | $ | 4,416,124 | $ | 1,142,709 | ||||
| Accounts receivable | 122,654 | 124,853 | ||||||
| Merchandise inventory | 1,630,390 | 2,168,796 | ||||||
| Prepaid expenses and other | 347,399 | 170,304 | ||||||
| Total current assets | 6,516,567 | 3,606,662 | ||||||
| Property and equipment, net | 2,706,884 | 2,565,882 | ||||||
| Operating lease assets | 3,132,056 | 3,042,298 | ||||||
| Other long-term assets | 215,159 | 200,999 | ||||||
| Total assets | $ | 12,570,666 | $ | 9,415,841 | ||||
| Liabilities and Stockholders’ Equity | ||||||||
| Current Liabilities | ||||||||
| Accounts payable | $ | 2,426,390 | $ | 1,480,205 | ||||
| Accrued expenses and other | 655,408 | 496,623 | ||||||
| Current operating lease liabilities | 590,122 | 559,433 | ||||||
| Accrued payroll and benefits | 269,709 | 321,977 | ||||||
| Total current liabilities | 3,941,629 | 2,858,238 | ||||||
| Long-term debt | 2,512,037 | 312,778 | ||||||
| Non-current operating lease liabilities | 2,672,139 | 2,601,372 | ||||||
| Other long-term liabilities | 290,795 | 225,934 | ||||||
| Deferred income taxes | 135,029 | 140,740 | ||||||
| Commitments and contingencies | ||||||||
| Stockholders’ Equity | 3,019,037 | 3,276,779 | ||||||
| Total liabilities and stockholders’ equity | $ | 12,570,666 | $ | 9,415,841 | ||||
| Ross Stores, Inc. | ||||||||||
| Condensed Consolidated Statements of Cash Flows | ||||||||||
| Nine Months Ended | ||||||||||
| ($000, unaudited) | October 31, 2020 | November 2, 2019 | ||||||||
| Cash Flows From Operating Activities | ||||||||||
| Net (loss) earnings | $ | (152,598 | ) | $ | 1,204,795 | |||||
| Adjustments to reconcile net (loss) earnings to net cash provided by operating activities: | ||||||||||
| Depreciation and amortization | 268,193 | 255,089 | ||||||||
| Loss on early extinguishment of debt | 239,769 | – | ||||||||
| Stock-based compensation | 74,267 | 70,600 | ||||||||
| Deferred income taxes | (14,650 | ) | 23,070 | |||||||
| Change in assets and liabilities: | ||||||||||
| Merchandise inventory | 201,949 | (418,354 | ) | |||||||
| Other current assets | (31,732 | ) | (46,161 | ) | ||||||
| Accounts payable | 1,126,574 | 305,648 | ||||||||
| Other current liabilities | 118,679 | 43,968 | ||||||||
| Income taxes | (119,513 | ) | (42,619 | ) | ||||||
| Operating lease assets and liabilities, net | 8,979 | 12,911 | ||||||||
| Other long-term, net | 63,206 | 1,983 | ||||||||
| Net cash provided by operating activities | 1,783,123 | 1,410,930 | ||||||||
| Cash Flows From Investing Activities | ||||||||||
| Additions to property and equipment | (339,545 | ) | (401,251 | ) | ||||||
| Proceeds from investments | – | 517 | ||||||||
| Net cash used in investing activities | (339,545 | ) | (400,734 | ) | ||||||
| Cash Flows From Financing Activities | ||||||||||
| Net proceeds from issuance of short-term debt | 805,601 | – | ||||||||
| Payments of short-term debt | (804,972 | ) | – | |||||||
| 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 | (232,000 | ) | – | |||||||
| Issuance of common stock related to stock plans | 17,088 | 16,451 | ||||||||
| Treasury (TSRMF) stock purchased | (45,091 | ) | (56,920 | ) | ||||||
| Repurchase of common stock | (132,467 | ) | (965,909 | ) | ||||||
| Dividends paid | (101,411 | ) | (278,370 | ) | ||||||
| Net cash provided by (used in) financing activities | 1,696,854 | (1,284,748 | ) | |||||||
| Net increase (decrease) in cash, cash equivalents, and restricted cash and cash equivalents | 3,140,432 | (274,552 | ) | |||||||
| Cash, cash equivalents, and restricted cash and cash equivalents: | ||||||||||
| Beginning of period | 1,411,410 | 1,478,079 | ||||||||
| End of period | $ | 4,551,842 | $ | 1,203,527 | ||||||
| Reconciliations: | ||||||||||
| Cash and cash equivalents | $ | 4,416,124 | $ | 1,142,709 | ||||||
| Restricted cash and cash equivalents included in prepaid expenses and other | 85,322 | 10,947 | ||||||||
| Restricted cash and cash equivalents included in other long-term assets | 50,396 | 49,871 | ||||||||
| Total cash, cash equivalents, and restricted cash and cash equivalents: | $ | 4,551,842 | $ | 1,203,527 | ||||||
| Supplemental Cash Flow Disclosures | ||||||||||
| Interest paid | $ | 70,347 | $ | 10,560 | ||||||
| Income taxes paid | $ | 10,207 | $ | 388,426 | ||||||
View source version on businesswire.com: https://www.businesswire.com/news/home/20201119006233/en/
Travis Marquette
Group Senior Vice President,
Chief Financial Officer
(925) 965-4550
Connie Kao
Group Vice President, Investor Relations
(925) 965-4668
connie.kao@ros.com
Source: Ross Stores, Inc.
Copyright Business Wire 2020
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