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  

 

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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.

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