52d2e018e32026c9cf18ce744205f2d9b990916fa30cbe2f3b6592ce8ac41927

Ross Stores, Inc. is the largest off-price apparel and home fashion chain in the United States, operating under the brands Ross Dress for Less and dd’s DISCOUNTS. The company offers first-quality, in-season, name brand and designer apparel, accessories, footwear, and home fashions for the entire family at significant savings off regular prices **[0000745732-24-000009_rost-20240203.htm:50]** **[0000745732-24-000009_rost-20240203.htm:2]** **[0000745732-24-000009_rost-20240203.htm:33]**. As of February 3, 2024, Ross had 1,764 locations across 43 states, the District of Columbia, and Guam, while dd’s DISCOUNTS had 345 stores in 22 states, providing a more moderately-priced assortment **[0000745732-24-000009_rost-20240203.htm:50]** **[0000745732-24-000009_rost-20240203.htm:2]** **[0000745732-24-000009_rost-20240203.htm:33]**. Ross Stores targets value-conscious customers, with Ross focusing on middle-income households and dd’s DISCOUNTS targeting households with more moderate incomes **[0000745732-24-000009_rost-20240203.htm:2]**.

1. **Home Accents and Bed and Bath** - Offers a wide range of home décor items and essentials for the bedroom and bathroom, catering to diverse tastes and styles.
2. **Ladies' Apparel** - Provides a variety of fashionable clothing options for women, including casual, formal, and seasonal wear.
3. **Men's Apparel** - Features a selection of men's clothing, from everyday casual wear to more formal attire.
4. **Accessories, Lingerie, Fine Jewelry, and Cosmetics** - Includes a diverse array of accessories, intimate wear, jewelry, and beauty products to complement any outfit.
5. **Shoes** - Offers footwear for all occasions, including casual, athletic, and formal styles for the entire family.
6. **Children's Apparel** - Provides clothing options for children, ranging from infants to teenagers, with a focus on comfort and style.

736f60ae7ca58492ab5cc922ae5e975783e759279af32776d419755af769dceb

Adjustments for Non-Cash Items [USD, Thousands]

Stock-Based Compensation [USD, Thousands]

Changes in Working Capital [USD, Thousands]

Capital Expenditures (CapEx) [USD, Thousands]

Proceeds from / Repayments of Debt [USD, Thousands]

Share Repurchases [USD, Thousands]

Dividend Payments [USD, Thousands]

Net Change in Cash [USD, Thousands]

6879805c4c9ee83bb6d9b389f66fbb147c98ed595dae90c1dc12895ef2364d07

eabd879f0db35a98027a0e0196d73699ac2717f772bfb4793a66d56c6263f903

1. Given the ongoing challenges with retail theft and the expected deterioration in shrink from last year, what specific loss prevention initiatives are you implementing to hold shrink at bay, and how do you anticipate this will impact your margins moving forward?
2. With increased wage pressures due to statutory increases and a tight labor market, how are you balancing the need to adjust wages to retain staff while managing overall wage inflation, and what is the anticipated impact on your operating expenses?
3. As you continue to intensify your value offerings to gain market share in a highly promotional environment, how do you plan to maintain merchandise margins, especially considering the 80 basis point drop in merchandise margin and the expectation of increased pressure in the second half?
4. Considering your strategy focuses on domestic growth with plans to expand to 2,900 Ross stores and 700 dd's DISCOUNTS, how do you address concerns about potential market saturation in the U.S., and what are your plans for growth once you reach these store counts?
5. With the addition of new vendors and expansion of your vendor base, how are you ensuring that the quality of inventory remains high and aligns with customer expectations, and are the new vendor partnerships contributing to better mark-on rates for margins?

6b98f6efe41172a379914d4729a58c88dbadcb53cf913ccb46b9feb9cf9f61f9

Total Revenue [USD, Thousands]

Cost of Goods Sold (COGS) [USD, Thousands]

Selling, General, and Administrative Expenses (SG&A) [USD, Thousands]

Research and Development (R&D) [USD, Thousands]

Depreciation and Amortization (D&A) [USD, Thousands]

Interest Expense [USD, Thousands]

Operating Income (EBIT) [USD, Thousands]

Net Income [USD, Thousands]

Earnings Per Share (EPS) - Basic [USD, Units]

Earnings Per Share (EPS) - Diluted [USD, Units]

e0f5edd423bcfa6932834f295036f663a99961343dbe705744d6583ede9d8f4e

Home Accents and Bed and Bath

Ladies

Men's

Accessories, Lingerie, Fine Jewelry, and Cosmetics

Shoes

Children's

Total Revenue

a6c94f7de3d8f641e897e6eda1a06a318eb6610abfbf0544d6c076fa5657a764

**Quarterly guidance for Q4 2025:**
- **Comparable store sales**: 2% to 3%  **[ROST_3409808_1]**  (no change from 2% to 3%  **[ROST_3399743_1]** )  
- **EPS**: $1.57 to $1.64  **[ROST_3409808_1]**  (lowered from $1.60 to $1.67  **[ROST_3399743_1]** )  
- **Total Sales**: decline 1% to 3%  **[ROST_3409808_1]**  (no prior guidance)  
- **Operating margin**: 11.2% to 11.5%  **[ROST_3409808_1]**  (no prior guidance)  
- **Net interest income**: $35 million  **[ROST_3409808_1]**  (no prior guidance)  
- **Tax rate**: 24%  **[ROST_3409808_1]**  (no prior guidance)  
- **Weighted average diluted shares outstanding**: 329 million  **[ROST_3409808_1]**  (no prior guidance)  

**Annual guidance for FY 2025:**
- **EPS**: $6.10 to $6.17  **[ROST_3409808_1]**  (raised from $6.00 to $6.13  **[ROST_3399743_1]** )  

e8edcfaecf2b31abf8cdfa5347e7303aa749a2772727ee2fa5c6ca1e10acae5f

23794d91c53ae875c8e247d72561e35d9d06ee07c70c9e0dbcc977a6d161504a

### Q2 2025 Earnings Call
- **Issued Period**: Q2 2025
- **Guided Period**: Q3 2024, Q4 2024, FY 2024

**Guidance:**
1. **Comparable Sales Growth**: 
   - Q3 2024 and Q4 2024: **2% to 3%**  **[ROST_3399743_1]** .
2. **Earnings Per Share (EPS)**:
   - Q3 2024: **$1.35 to $1.41**  **[ROST_3399743_1]** .
   - Q4 2024: **$1.60 to $1.67**  **[ROST_3399743_1]** .
   - FY 2024: **$6 to $6.13**  **[ROST_3399743_1]** .
3. **Total Sales Growth**:
   - Q3 2024: **3% to 5%**  **[ROST_3399743_1]** .
4. **Operating Margin**:
   - Q3 2024: **10.9% to 11.2%**  **[ROST_3399743_1]** .
5. **Net Interest Income**:
   - Q3 2024: **$39 million**  **[ROST_3399743_1]** .
6. **Tax Rate**:
   - Q3 2024: **24% to 25%**  **[ROST_3399743_1]** .
7. **Diluted Shares Outstanding**:
   - Q3 2024: **331 million**  **[ROST_3399743_1]** .
8. **Store Openings**:
   - Q3 2024: **47 stores** (43 Ross and 4 dd's)  **[ROST_3399743_1]** .

### Q1 2025 Earnings Call
- **Issued Period**: Q1 2025
- **Guided Period**: Q2 2024, FY 2024

**Guidance:**
1. **Comparable Store Sales**: 
   - Q2 2024: **2% to 3%**  **[ROST_3390642_1]** .
   - FY 2024: **2% to 3%**  **[ROST_3390642_1]** .
2. **Earnings Per Share (EPS)**:
   - Q2 2024: **$1.43 to $1.49**  **[ROST_3390642_1]** .
   - FY 2024: **$5.79 to $5.98**  **[ROST_3390642_1]** .
3. **Total Sales**:
   - Q2 2024: **5% to 7%**  **[ROST_3390642_1]** .
4. **Operating Margin**:
   - Q2 2024: **11.5% to 11.8%**  **[ROST_3390642_1]** .
5. **Net Interest Income**:
   - Q2 2024: **$37 million**  **[ROST_3390642_1]** .
6. **Tax Rate**:
   - Q2 2024: **25%**  **[ROST_3390642_1]** .
7. **Diluted Shares Outstanding**:
   - Q2 2024: **332 million**  **[ROST_3390642_1]** .
8. **Store Openings**:
   - Q2 2024: **24 locations** (21 Ross and 3 dd's)  **[ROST_3390642_1]** .
   - FY 2024: **90 new stores** (75 Ross and 15 dd's)  **[ROST_3390642_0]** .

### Q4 2024 Earnings Call
- **Issued Period**: Q4 2024
- **Guided Period**: FY 2024

**Guidance:**
1. **Comparable Store Sales**: 
   - Q1 2024: **2% to 3%**  **[ROST_3376551_4]** **[ROST_3376551_3]** .
   - FY 2024: **2% to 3%**  **[ROST_3376551_3]** .
2. **Earnings Per Share (EPS)**:
   - Q1 2024: **$1.29 to $1.35**  **[ROST_3376551_4]** .
   - FY 2024: **$5.64 to $5.89**  **[ROST_3376551_3]** .
3. **Total Sales Growth**:
   - Q1 2024: **6% to 8%**  **[ROST_3376551_4]** .
   - FY 2024: **2% to 4%**  **[ROST_3376551_3]** .
4. **Operating Margin**:
   - Q1 2024: **11.1% to 11.4%**  **[ROST_3376551_4]** .
   - FY 2024: **11.2% to 11.5%**  **[ROST_3376551_3]** .
5. **Net Interest Income**:
   - Q1 2024: **$44 million**  **[ROST_3376551_4]** .
   - FY 2024: **$143 million**  **[ROST_3376551_3]** .
6. **Tax Rate**:
   - Q1 2024 and FY 2024: **24% to 25%**  **[ROST_3376551_4]** **[ROST_3376551_3]** .
7. **Diluted Shares Outstanding**:
   - Q1 2024: **335 million**  **[ROST_3376551_4]** .
   - FY 2024: **332 million**  **[ROST_3376551_3]** .
8. **Capital Expenditures**:
   - FY 2024: **$840 million**  **[ROST_3376551_3]** .
9. **Store Openings**:
   - Q1 2024: **18 new stores** (11 Ross and 7 dd's)  **[ROST_3376551_4]** .
   - FY 2024: **90 new locations** (75 Ross and 15 dd's)  **[ROST_3376551_3]** .
10. **Depreciation and Amortization Expense**:
    - FY 2024: **$610 million**  **[ROST_3376551_3]** .

### Q3 2025 Earnings Call
- **Issued Period**: Q3 2025
- **Guided Period**: N/A

**Guidance**: The documents do not provide the guidance for the Q3 2025 earnings call. They only contain information up to the Q2 2025 earnings call.

5f4ee04f00722b171b6e0d8cf0fde9d294cb415371d7398d483c960623b13ee4

| Name               | Position                                                                 | Start Date          | Short Bio                                                                                                                                                                                                 |
|--------------------|--------------------------------------------------------------------------|---------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Michael Balmuth    | Executive Chairman                                                       | September 2023      | Michael Balmuth has been with Ross Stores since **1989**. He served as Strategic Advisor from 2021 to August 2023, and as Chairman of the Board and Senior Advisor from 2019 to 2021  **[0000745732-24-000009_rost-20240203.htm:9]** **[0000745732-24-000015_rost-20240408.htm:11]** .                                                   |
| Barbara Rentler    | Chief Executive Officer (until February 1, 2025), then Senior Advisor    | February 1, 2025    | Barbara Rentler has been CEO since **2014**. She joined Ross in **1986** and held various merchandising roles. She will transition to Senior Advisor through March 31, 2027  **[0000745732-24-000015_rost-20240408.htm:13]** **[0000745732-24-000009_rost-20240203.htm:9]** **[0000745732-23-000013_rost-20230128.htm:9]** **[0000745732-24-000052_rost-20241028.htm:1]** **[0000745732-24-000062_rost-20241102.htm:18]** .                                                  |
| Michael J. Hartshorn| Group President, Chief Operating Officer                                | 2019                | Michael J. Hartshorn joined Ross in **2000**. He has held various financial roles, including CFO and Group Executive Vice President, Finance and Legal  **[0000745732-24-000009_rost-20240203.htm:9]** **[0000745732-24-000015_rost-20240408.htm:12]** **[0000745732-23-000023_rost-20230403.htm:12]** .                                                                               |
| Michael Kobayashi  | President, Chief Capability Officer                                      | February 2022       | Michael Kobayashi joined Ross after being a Partner at Accenture. He held roles such as President, Operations and Technology from 2019 to 2022  **[0000745732-24-000009_rost-20240203.htm:10]** **[0000745732-23-000013_rost-20230128.htm:9]** .                                                                                         |
| Karen Fleming      | President and Chief Merchandising Officer, Ross Dress for Less           | December 1, 2024    | Karen Fleming joined Ross in **1999**. She has held various merchandising positions and was President and Chief Merchandising Officer at dd’s DISCOUNTS since April 2024  **[0000745732-24-000047_rost-20240909.htm:1]** .                                                                 |
| Stephen Brinkley   | President, Operations                                                    | October 30, 2023    | Stephen Brinkley joined Ross after serving as President of SportChek. He held senior roles at Save A Lot Food Stores Ltd. and Target Corporation  **[0000745732-24-000009_rost-20240203.htm:10]** **[0000745732-24-000009_rost-20240203.htm:9]** .                                                                                        |
| Adam Orvos         | Executive Vice President, Chief Financial Officer                        | October 2021        | Adam Orvos joined Ross in January 2021. He held senior financial roles at Lowe's and Neiman Marcus before joining Ross  **[0000745732-24-000009_rost-20240203.htm:10]** **[0000745732-23-000013_rost-20230128.htm:10]** .                                                                                                                 |
| James G. Conroy    | Chief Executive Officer (effective February 2, 2025)                     | February 2, 2025    | James G. Conroy will become CEO in February 2025. He joined Ross as CEO-Elect on December 2, 2024, and was previously CEO of Boot Barn Holdings, Inc.  **[0000745732-24-000052_rost-20241028.htm:1]** **[0000745732-24-000052_conroy-991.htm:0]** .                                                                                   |
| Karen Sykes        | President and Chief Merchandising Officer, dd’s DISCOUNTS                | December 1, 2024    | Karen Sykes joined Ross in **1992**. She has held various merchandising roles and was most recently Executive Vice President, Merchandising since January 2022  **[0001415889-24-028124_xslF345X02/form3-12032024_101244.xml:0]** **[0000745732-24-000047_rost-20240909.htm:1]** .                                                                        |
| Connie Kao         | Group Vice President, Investor Relations                                 | N/A                 | The documents do not provide specific details about Connie Kao's start date or a detailed biography. However, she is mentioned as the Group Vice President, Investor Relations at Ross Stores, Inc.  **[0000745732-24-000059_q324exhibit991.htm:0]** **[ROST_3399743_0]** **[0000745732-24-000052_conroy-991.htm:0]** **[0000745732-24-000041_q224exhibit991.htm:0]** **[0000745732-24-000047_karen-991.htm:0]** **[0000745732-24-000022_q124exhibit991.htm:0]** .                    |

b5d2a6d516b5a45eb79557abbc0b41e3d18a941793d230ac38e87388060e9663

| Program Details          | Program 1       |
|--------------------------|-----------------|
| Approval Date            | March 2024  **[0000745732-24-000062_rost-20241102.htm:32]** **[0000745732-24-000062_rost-20241102.htm:24]**  |
| End Date/Duration        | January 31, 2026  **[0000745732-24-000062_rost-20241102.htm:32]** **[0000745732-24-000062_rost-20241102.htm:24]**  |
| Total additional amount  | **$2.1 billion**  **[0000745732-24-000062_rost-20241102.htm:32]** **[0000745732-24-000062_rost-20241102.htm:24]**  |
| Remaining authorization amount | **$1,312,520,000** as of November 2, 2024  **[0000745732-24-000062_rost-20241102.htm:32]** **[0000745732-24-000062_rost-20241102.htm:24]**  |
| Details                  | Enhances stockholder value and returns, reflecting strong balance sheet and cash generation  **[ROST_3376551_1]**  |

c67e4249775a2fef811713e33c1df04953a6ce243eaf624f3b7255fa93f3176d

| Name                  | Start Date | End Date | Reason for Change |
|-----------------------|------------|----------|-------------------|
| Deloitte & Touche LLP | 1982  **[0000745732-24-000009_rost-20240203.htm:67]**  | Present  | Current auditor   |

5762f14104b5a9e9af4466030cc12daa5631e6dd2bcc40bdff50b6a0c150cfb4

- Total Revenue: $5,071 million (+3% YoY)  **[0000745732-24-000062_rost-20241102.htm:2]** **[0000745732-23-000072_rost-20231028.htm:2]**   
- Operating Income: $646.7 million (**+9%** YoY)  **[0000745732-24-000062_rost-20241102.htm:2]** **[0000745732-23-000072_rost-20231028.htm:2]**   
- Net Income: $488.8 million (**+9%** YoY)  **[0000745732-24-000062_rost-20241102.htm:2]** **[0000745732-23-000072_rost-20231028.htm:2]**   
- EPS (Basic): $1.49 (**+12%** YoY)  **[0000745732-24-000062_rost-20241102.htm:2]** **[0000745732-23-000072_rost-20231028.htm:2]**   
- EPS (Diluted): $1.48 (+11% YoY)  **[0000745732-24-000062_rost-20241102.htm:2]** **[0000745732-23-000072_rost-20231028.htm:2]**   

fe5233f65c8f2f989282f0f6b6ae8d877b3aeebe9459fde9edd295f5bab7e91b

Number of Ross Dress for Less locations (locations)

989ee056abc7d17d74c94db1c21ce2bf9f43b6989ee9b02d5ea90a3db16c5899

| Year | Amount Due (Millions) | Debt Type         | Interest Rate (%) | % of Total Debt                     |
|----------|---------------------------|-----------------------|-----------------------|------------------------------------------|
| 2025     | 699.4 **[0000745732-24-000062_rost-20241102.htm:15]**             | 4.600% Senior Notes   | 4.600 **[0000745732-24-000062_rost-20241102.htm:15]**         | 31.6% = (699.4 / 2,213.9) * 100 **[0000745732-24-000062_rost-20241102.htm:15]** |
| 2026     | 498.2 **[0000745732-24-000062_rost-20241102.htm:15]**             | 0.875% Senior Notes   | 0.875 **[0000745732-24-000062_rost-20241102.htm:15]**         | 22.5% = (498.2 / 2,213.9) * 100 **[0000745732-24-000062_rost-20241102.htm:15]** |
| 2027     | 240.7 **[0000745732-24-000062_rost-20241102.htm:15]**             | 4.700% Senior Notes   | 4.700 **[0000745732-24-000062_rost-20241102.htm:15]**         | 10.9% = (240.7 / 2,213.9) * 100 **[0000745732-24-000062_rost-20241102.htm:15]** |
| 2030     | 132.9 **[0000745732-24-000062_rost-20241102.htm:15]**             | 4.800% Senior Notes   | 4.800 **[0000745732-24-000062_rost-20241102.htm:15]**         | 6.0% = (132.9 / 2,213.9) * 100 **[0000745732-24-000062_rost-20241102.htm:15]**  |
| 2031     | 496.2 **[0000745732-24-000062_rost-20241102.htm:15]**             | 1.875% Senior Notes   | 1.875 **[0000745732-24-000062_rost-20241102.htm:15]**         | 22.4% = (496.2 / 2,213.9) * 100 **[0000745732-24-000062_rost-20241102.htm:15]** |
| 2050     | 146.4 **[0000745732-24-000062_rost-20241102.htm:15]**             | 5.450% Senior Notes   | 5.450 **[0000745732-24-000062_rost-20241102.htm:15]**         | 6.6% = (146.4 / 2,213.9) * 100 **[0000745732-24-000062_rost-20241102.htm:15]**  |

d2a8e489325d11997ed5d96e86c25e572abf4f7efac9818e21ca8d3ea10a0994

1. **Merchandising Execution & Brand Strategy Impact**  
   **Q:** Are execution issues related to brand strategy shift?  
   **A:** Execution issues are due to merchandise mix issues, not directly related to the brand strategy. The brand strategy continues to iterate based on customer feedback, aiming to deliver compelling value at all brand tiers without focusing on increasing AUR. Over time, we expect slight improvements in margins as we build brand relationships and learn what works best with our customers.  **[ROST_3409808_2]** **[ROST_3409808_4]** **[ROST_3409808_7]** 

2. **Fourth Quarter Guidance and Comp Confidence**  
   **Q:** What gives you confidence in achieving 2–3% comps for Q4?  
   **A:** Many of the businesses important during the holiday season, such as gifting, cosmetics, and accessories, have been strengths for us. We are building on last year's success in gift giving, and these businesses are performing well now, which gives us confidence in guiding to **2% to 3%** comps in the fourth quarter.  **[ROST_3409808_2]** 

3. **Margin Outlook and Shrink Impact**  
   **Q:** How did shrink impact margins, and what is the outlook?  
   **A:** Merchandise margin declined by **60 basis points** in Q3, but we benefited from better-than-expected shrink results after our physical inventory process. Looking forward to Q4, we expect increased pressure on merchandise margin as we offer more sharply priced brands for the holiday season. For the year, shrink looks to be about flat to 2023.  **[ROST_3409808_2]** **[ROST_3409808_4]** 

4. **Management Transition and Strategy Continuity**  
   **Q:** Will there be changes to strategy with new leadership?  
   **A:** We don't foresee any changes to our strategy because our brand strategy is key to our market share gains. My focus will be to help Jim onboard and to ensure merchandising continues effectively. Jim is a seasoned CEO who complements our strengths in merchandising and operations, so we expect a smooth transition.  **[ROST_3409808_3]** 

5. **Sales Cadence and Comp Drivers**  
   **Q:** How did sales trend during the quarter, and what drove comps?  
   **A:** Sales were strongest early in the quarter but became more challenging as weather deteriorated. We saw improvements in sell-throughs when weather improved. Comps were driven by traffic, while other components like basket size were relatively neutral.  **[ROST_3409808_6]** 

6. **Brand Strategy and Margin Implications**  
   **Q:** Is the brand strategy causing multiyear margin headwinds?  
   **A:** Over time, as we build brand relationships and learn what works best with our customers, we expect earnings accretion and slight improvements in margins. The brand strategy is not about raising average unit retail but about delivering compelling value across all brand tiers.  **[ROST_3409808_5]** **[ROST_3409808_7]** 

7dc51803cdf87c6612a45326f717581e885dc1b1460a29371f73d3d76d8edfd0

- **Strong value offering is resonating with customers**, leading to potential market share gains as Ross continues to enhance its value strategy in response to customers dealing with high costs in necessities.  **[ROST_3399743_3]**
- **Investments in automation and operational efficiencies** are driving higher productivity and cost savings, especially in distribution centers, helping to offset merchandise margin pressures and improve margins.  **[ROST_3399743_3]** **[ROST_3399743_25]** **[ROST_3399743_9]**
- **Significant growth potential within the U.S.,** with plans to expand from the current **2,100 stores to 2,900 Ross stores and 700 dd's DISCOUNTS stores**, indicating strong long-term growth prospects without the need to expand internationally.  **[ROST_3399743_24]**

fa1ac3b1c9d471853dd5b65c3a3dc1675749f51c316ba9c40152585411e00ab7

- **Ross Stores plans to gain market share due to increased store closures, aiming to attract both current and new customers by offering strong value propositions.**  **[ROST_3376551_33]**
- **The company is investing about 40% of its capital expenditure in expanding distribution capacity, with two new distribution centers planned, indicating preparation for future growth.**  **[ROST_3376551_27]**
- **Lower domestic freight costs are expected due to lower fuel prices, leading to slight benefits to operating margins throughout the year.**  **[ROST_3376551_15]**

92c395f8c6db088f97383e09f84c609ee9f7119e1021e890c83bb2bb40fdcc4c

- **dd's DISCOUNTS new market performance has been disappointing**, with the company admitting that they "clearly didn't satisfy them with the assortments we've been offering there" in more diverse markets.  **[ROST_3376551_8]**
- **Increased competition for store locations** due to other off-price retailers expanding aggressively, resulting in "a lot of competition for our locations" which could impact Ross Stores' growth plans.  **[ROST_3376551_29]**
- **Potential cost pressures from uncertain freight expenses**, as benefits from lower ocean freight costs are "negligible over the course of the year," and geopolitical conflicts, such as the situation in the Suez Canal, could impact freight costs despite currently affecting "a very small portion of our freight."  **[ROST_3376551_15]** **[ROST_3376551_16]**

53e47d40aa28ce6afcbdb0289716a4184030d33f668e5c5cfb453581f23f2782

1. **Same-Store Sales Guidance**  
   **Q:** Why raise comp sales guidance to 2-3% from historical 1-2%?  
   **A:** Due to strong performance and customer response to our value offerings, we've raised our initial comp sales guidance for 2024 to **2% to 3%**, up from the historical **1% to 2%**. This reflects confidence in our strategy to drive sales and gain market share.  **[ROST_3376551_7]** 

2. **Margin Outlook and Acceleration**  
   **Q:** How will strategies impact margins and comps in 2024?  
   **A:** Our plan to offer more sharply priced brands is expected to drive sales and market share. While this may pressure merchandise margins as we pass savings to customers, we anticipate acceleration in comp growth throughout 2024, improving our **EBIT margin flow-through by about 10 to 15 basis points** for each additional point of above-plan sales.  **[ROST_3376551_8]** **[ROST_3376551_9]** 

3. **EBIT Margin Recovery**  
   **Q:** What's hampering return to pre-COVID EBIT levels?  
   **A:** Higher wages and freight costs have impacted EBIT margin recovery. Over time, we expect gradual improvement through sustained sales growth and efficiency investments, aiming for EBIT leverage in the **3% to 4% comp range** in the long term.  **[ROST_3376551_10]** 

4. **Shrink and Inventory Loss**  
   **Q:** Expectations for shrink in 2024?  
   **A:** Shrink levels in 2023 were in line with 2022. For 2024, our guidance assumes shrink will be **up slightly**, but we're investing in initiatives to mitigate theft and organized retail crime to keep it in line.  **[ROST_3376551_11]** 

5. **Freight and Wage Impacts**  
   **Q:** How will freight and wages affect margins this year?  
   **A:** We expect slight improvement in domestic freight costs due to lower fuel prices, but less than in 2023. Ocean freight benefits will be negligible, and any changes depend on external factors like the situation in the Suez Canal. Wage pressures have stabilized, and we're offsetting minimum wage increases through efficiencies.  **[ROST_3376551_12]** **[ROST_3376551_13]** **[ROST_3376551_14]** **[ROST_3376551_15]** 

6. **Store Growth Plans**  
   **Q:** What's the plan for new store openings in 2024 and beyond?  
   **A:** Our long-term targets remain **2,900 Ross Stores** and **700 dd's DISCOUNTS** locations. For 2024, we plan to open about **75 Ross stores** annually and will assess dd's expansion after refining our strategy, aiming for approximately **100 new stores per year** overall.  **[ROST_3376551_16]** **[ROST_3376551_17]** 

7. **dd's DISCOUNTS Performance**  
   **Q:** Why is dd's underperforming in new markets?  
   **A:** dd's DISCOUNTS stores in new markets haven't met expectations due to assortments not fully satisfying local customers' diverse preferences. We're conducting customer research to adjust offerings and improve performance.  **[ROST_3376551_18]** 

8. **Capital Expenditures and AI**  
   **Q:** Where are you investing CapEx, and how are you leveraging AI?  
   **A:** Approximately **40% of CapEx** is allocated to expanding capacity, including new distribution centers opening in early 2025 and starting construction on another this year. We currently use AI in automated parts of our business and are exploring generative AI to enhance efficiencies.  **[ROST_3376551_19]** 

9. **Customer Traffic and Trade-Down**  
   **Q:** Are you seeing benefits from customers trading down?  
   **A:** It's difficult to discern trade-down effects, but our **7% comp sales increase** was entirely driven by higher traffic, with gains broad-based across income levels and regions.  **[ROST_3376551_20]** **[ROST_3376551_21]** 

10. **Sharply Priced Brands Impact on AUR**  
    **Q:** Will sharply priced brands affect average unit retail prices?  
    **A:** **Average Unit Retail (AUR)** may fluctuate based on product mix and value, but there's no specific AUR pricing strategy. Our focus is on offering great value, and AUR could vary as assortments change.  **[ROST_3376551_22]** **[ROST_3376551_23]** 

---

**Citations:**

 **[ROST_3376551_7]** : Document index 1  
 **[ROST_3376551_8]** : Document index 0  
 **[ROST_3376551_9]** : Document index 2  
 **[ROST_3376551_10]** : Document index 6  
 **[ROST_3376551_11]** : Document index 4  
 **[ROST_3376551_12]** : Document index 0  
 **[ROST_3376551_13]** : Document index 8  
 **[ROST_3376551_14]** : Document index 9  
 **[ROST_3376551_15]** : Document index 10  
 **[ROST_3376551_16]** : Document index 22  
 **[ROST_3376551_17]** : Document index 6  
 **[ROST_3376551_18]** : Document index 2  
 **[ROST_3376551_19]** : Document index 21  
 **[ROST_3376551_20]** : Document index 7  
 **[ROST_3376551_21]** : Document index 11  
 **[ROST_3376551_22]** : Document index 12  
 **[ROST_3376551_23]** : Document index 14

3ba4a0dc3a34aa3b703ed464b4b7d995bc94cb484be4c3720fa1157825be2e31

1. **Margin Outlook**  
   **Q:** Is 3% comp growth and 200 bps margin expansion the new normal?  
   **A:** Management does not expect to leverage **200 basis points** on a **3%** comp going forward. The first quarter benefited from lower distribution costs and favorable freight expenses, which may not repeat at the same level. Margins will be pressured throughout the year, especially in the back half, due to investments in higher-quality branded merchandise that typically carries lower margins.  **[ROST_3390642_4]** ,  **[ROST_3390642_3]** ,  **[ROST_3390642_4]** 

2. **Comp Guidance and Sales Growth**  
   **Q:** What drives your confidence in accelerating comps to 2%-3%?  
   **A:** Management believes the business is appropriately planned based on merchandising initiatives to increase branded bargains as the year progresses. Historically, stronger comps are achieved beyond the first quarter, and they plan to continue executing strategies to drive sales and gain market share.  **[ROST_3390642_19]** ,  **[ROST_3390642_6]** ,  **[ROST_3390642_7]** 

3. **Impact of Value Strategy on Margins**  
   **Q:** What is the margin impact of offering more branded products?  
   **A:** Investing in higher-quality branded merchandise will pressure margins throughout the year, particularly in the back half of fiscal 2024. These brands typically carry lower margins compared to less recognizable brands, but management believes this strategy will help gain market share long term.  **[ROST_3390642_3]** ,  **[ROST_3390642_7]** 

4. **dd's Performance and Strategy**  
   **Q:** What drove dd's outperformance, and plans to adjust growth?  
   **A:** dd's sales trends were ahead of Ross due to easier prior year comparisons and improved value offerings that resonated with customers. While encouraged by the initial response, sustained trends are needed before reaccelerating growth in newer markets.  **[ROST_3390642_4]** ,  **[ROST_3390642_9]** ,  **[ROST_3390642_16]** 

5. **Buying Environment and Merchandise Availability**  
   **Q:** How is the current buying environment across categories?  
   **A:** There is broad-based merchandise availability, with some categories offering more opportunities than others. Merchants are obtaining better deals, and the company passes these savings to customers by offering good quality, branded products at sharp prices.  **[ROST_3390642_7]** ,  **[ROST_3390642_8]** 

6. **Consumer Health and Outlook**  
   **Q:** What's your view on the health of your core consumer?  
   **A:** The low- to moderate-income consumer remains under pressure due to prolonged inflation and the macroeconomic environment. However, customers are seeking value more than ever, and management aims to deliver the best possible branded bargains to drive sales and gain market share.  **[ROST_3390642_6]** 

7. **Inventory Levels and Implications**  
   **Q:** Why did inventory grow faster than sales?  
   **A:** Inventory increased due to a fiscal calendar shift placing the company closer to Mother's Day, driving receipts and leading to in-store inventory up **4%**. Additionally, more goods are in transit due to the Suez Canal situation, affecting transit times but not costs.  **[ROST_3390642_20]** 

8. **Gross Margin Outlook**  
   **Q:** What is the gross margin outlook for fiscal '24 and path to pre-COVID levels?  
   **A:** Merchandise margins will be below last year as the company invests in branded merchandise. Returning to pre-COVID gross margin levels of **28%-29%** will require outsized comp sales growth. Key factors include fuel prices and wage stabilization.  **[ROST_3390642_23]** 

9. **Distribution and Freight Costs**  
   **Q:** Will distribution and freight cost efficiencies continue?  
   **A:** Favorable domestic freight costs and higher productivity in distribution centers are expected to continue through the year but not at the same level as the first quarter, which included benefits from packaway timing.  **[ROST_3390642_4]** ,  **[ROST_3390642_5]** ,  **[ROST_3390642_23]** 

10. **Marketing and Customer Acquisition**  
    **Q:** Are you attracting younger shoppers through more digital marketing?  
    **A:** The marketing strategy has shifted more towards digital channels, which may be reaching younger customers. The company continues to perform well with younger shoppers and is attracting a broad customer base across demographics.  **[ROST_3390642_22]** 

0694c6841f14caea4b9d5328275a8e484fec0c834a13e2a6a12266c71753565a

- **Management maintained a cautious outlook for Q4**, citing macroeconomic volatility, a promotional retail environment, geopolitical uncertainties, and tough sales comparisons, indicating potential headwinds for the company's performance.  **[ROST_3367514_6]** ,  **[ROST_3367514_1]**
- **Key merchandise categories like apparel and home are underperforming**, with both trailing the chain average, suggesting challenges in these important areas.  **[ROST_3367514_8]** ,  **[ROST_3367514_20]**
- **Margin benefits from lower ocean freight costs are expected to moderate in Q4**, potentially limiting further margin expansion; additionally, higher incentive compensation is increasing costs, offsetting some of the benefits from lower freight expenses.  **[ROST_3367514_5]** ,  **[ROST_3367514_1]** ,  **[ROST_3367514_22]**

230e80554c068a6c3c4b4236343d54fa9c8b90e0ba6ad1be9e6a40c78c62adfb

- **dd's DISCOUNTS sales trends were ahead of Ross**, with shoppers responding favorably to improved value offerings, indicating potential for growth in this segment.  **[ROST_3390642_9]**
- **Operating margin improved to 12.2%**, up 205 basis points from last year's 10.1%, driven by higher sales and lower expenses, showing effective cost management and profitability.  **[ROST_3390642_24]**
- Ross Stores is **attracting a broad customer base, including younger shoppers**, and continues to see strong customer response to its branded value offerings, suggesting resilience and potential market share gains.  **[ROST_3390642_23]**

6082e4d6224633213928465985333923eaf51768b218724cfefe3fc30164b111

1. **Merchandise Margin Outlook**  
   **Q:** How much will merchandise margins decline in H2?  
   **A:** We expect merchandise margin pressure to step up in the second half, with declines higher than the **80 basis points** reported in Q2. This is due to our branded strategy increasing penetration. Offsets will include domestic freight benefits and distribution center improvements.  **[ROST_3399743_10]** 

2. **Cost Savings and Efficiencies**  
   **Q:** What are the cost savings initiatives impacting guidance?  
   **A:** We are leveraging automation in distribution centers, such as automated vehicles and robots, and implementing efficiencies like self-checkout and new handheld devices in stores. These initiatives have yielded additional expense savings, and we expect some will continue into next year  **[ROST_3399743_9]** ,.  **[ROST_3399743_25]** 

3. **Comp and EPS Guidance**  
   **Q:** Any key changes to outlook after Q2 beat?  
   **A:** We flowed through the **$0.10** EPS beat from Q2 to raise our full-year guidance by **$0.15**. There are no significant changes to our operating outlook for the back half; we plan to continue expense initiatives and cost savings.  **[ROST_3399743_5]** 

4. **Ladies Apparel Performance**  
   **Q:** Is ladies apparel improving as planned?  
   **A:** While apparel is now in line with the chain average, ladies is still below. We expect to see more progress in apparel through the year as we build on learnings and adjust our assortments to include more branded products and value offerings.  **[ROST_3399743_21]** 

5. **Shrink and Retail Theft**  
   **Q:** How is shrink affecting your business?  
   **A:** We are facing a very difficult retail theft environment and are not immune to it. We continue to invest in loss prevention initiatives but expect some deterioration in shrink compared to last year.  **[ROST_3399743_13]** 

6. **Impact of Branded Strategy on Margins**  
   **Q:** How does the branded strategy affect margins?  
   **A:** The merchandise margin pressure is related to our branded strategy, which increases penetration of branded products with slightly higher AURs. This strategy has led to an **80 basis point** decline in merchandise margin in Q2, with more pressure expected in the second half  **[ROST_3399743_8]** ,.  **[ROST_3399743_15]** 

7. **Consumer Behavior and Promotions**  
   **Q:** Are customer behaviors changing amid promotions?  
   **A:** We haven't seen significant changes in customer behavior or traffic patterns. As the retail environment becomes more promotional, we're focused on pricing as sharply as possible to offer great value and drive market share gains.  **[ROST_3399743_14]** 

8. **Inventory and Vendor Relationships**  
   **Q:** How is inventory availability and vendor base?  
   **A:** Inventory availability remains favorable and broad-based. Vendors are looking to build relationships and do more business with us, and we are expanding our vendor base, which supports our value strategy.  **[ROST_3399743_12]** 

9. **Long-term Operating Margin Potential**  
   **Q:** What's the outlook for long-term margins?  
   **A:** We still believe an additional point of comp gives **10 to 15 basis points** of margin expansion. Long-term margin growth depends on delivering outsized comp sales and managing inflationary pressures like fuel rates and wages.  **[ROST_3399743_19]** 

10. **U.S. Store Growth vs. International Expansion**  
    **Q:** Any plans for international expansion?  
    **A:** We have no current plans for international expansion. With 2,100 stores, we see potential to grow to 2,900 Ross stores and 700 dd's Discounts in the U.S., and we're focused on growing our domestic store base profitably.  **[ROST_3399743_24]** 

9cada8fc124adf01eec0c4298285b70b98ddd17c2dab1c46f798a4b2a149134b

- **Merchandise margin dropped by 80 basis points** and the company expects this pressure to **increase in the second half of the year** due to its branded strategy, potentially impacting gross margins.  **[ROST_3399743_3]** ,  **[ROST_3399743_5]**
- **Shrink (retail theft) is a growing concern**, with guidance assuming **some deterioration from last year**, which could negatively affect profitability.  **[ROST_3399743_13]**
- The company acknowledges **uncertainty regarding future inflationary pressures**, especially in **fuel rates and wages**, which could impact long-term operating margins without outsized comparable sales gains.  **[ROST_3399743_19]**

db261750ba26170a2c832a23389b4578126a86277b4616e7cef8b4c7ed3d5f83

- The company's core low to moderate income customers are still being squeezed by **prolonged inflation** and macroeconomic pressures, which may negatively impact sales growth. **"Our low to moderate income consumer is still being squeezed... I don't foresee anyone thinking that the pressure on that customer is going to be any different."**  **[ROST_3390642_6]**
- The **Q1 operating margin improvement** benefited from **one-time factors** such as packaway timing and lower distribution costs, which are not expected to recur at the same level in future quarters. **"But not -- just clarifying, not at the level we saw in Q1, right? So the Q1 number that we reported is -- it has the benefit of the packaway timing right?"**  **[ROST_3390642_5]**
- Returning to pre-COVID gross margin levels will be challenging, as it requires **outsized comp sales growth** and favorable macroeconomic conditions, which may not materialize. **"It'll take -- to get back to pre-COVID levels, it'll take outsized comp sales growth... The kind of the biggest variables are where fuel prices over time and assuming that wages continue to stabilize."**  **[ROST_3390642_21]**

9443b436710e11099cc90bc2d78ae4073c72501d5ad9780ba9b84f6c1e761bbb

- **Ross Stores experienced broad-based performance across geographies and income demographics, with traffic being the primary driver of a comparable store sales gain of 5%**.  **[ROST_3367514_8]** **[ROST_3367514_3]** **[ROST_3367514_12]**  This indicates strong customer engagement and appeal across different regions and income levels.
- **Footwear was one of the best-performing categories, with shoes performing well across all types**.  **[ROST_3367514_22]**  This highlights the company's strong product assortment and ability to meet customer demand in key categories.
- **dd's DISCOUNTS showed improved sales trends during the quarter, performing in line with Ross**, as customers responded to the broad assortment of values offered, and easing inflation helped their customers.  **[ROST_3367514_20]**  This demonstrates the company's strength across different store formats and potential for continued growth.

228114c734291eacbeb9af992bfb14a70ec73c80102e744bec2eaad8976ebc53

Ross Stores Inc (ROST)

Financials