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Ross Stores Increases Profits

Pleasanton, Calif. — Helped by a double-digit boost in sales, fueled by new store openings, first quarter profits at Ross Stores Inc. increased 4 percent, to $50.1 million from $48.1 million last year.

Earnings per share, the number Wall Street fixates on, climbed more than twice as fast, rising 9.7 percent, to 34 cents from 31 cents a year ago, as the company's aggressive share repurchase program reduced the number of shares outstanding.

Sales at the diversified apparel and soft home retailer rose 13.3 percent, to $1.1 billion from $991.9 million during the same period the year before. Same-store sales rose 3 percent.

Putting a modest cap on profits, average gross margin thinned 80 basis points, or eight-tenths of a percentage point, to 23.5 percent from 24.3 percent. Michael Balmuth, vice chairman, president and CEO, commented, “As expected, a combination of higher markdowns and higher distribution center costs contributed to lower gross margin.”

When measured as a percentage of rising sales, operating costs held steady at 16.3 percent.

Providing a lift to the bottom line, Ross kept a tight grip on stockpiles, which climbed at a modestly slower pace than sales, rising 12.3 percent, to $967.4 million, compared with the 13.3 percent increase in sales.

In a further assist, Ross recorded interest income of $298,000, after paying $170,000 in interest expense during the year-before period.

Balmuth noted, “Our balance sheet and cash flows remain strong and healthy. We continue to return capital to stockholders through our stock repurchase and dividend programs. During the first three months of 2005, we repurchased 1.5 million shares of common stock for an aggregate of $42.6 million under the two-year, $350 million program.” He said $132 million remains available for future stock repurchases, which he expects to be completed by the end of the year.

Ross Stores Inc.

Qtr. 4/30 (x000) 2005 2004 % change
a. First quarter results include interest income of $298,000, compared with interest expense of $170,000 during the same period a year ago.
Sales $1,123,937 $991,892 13.3
Oper. Income (EBIT) 81,885 79,230 3.4
Net income 50,050a 48,147a 4.0
Per share (diluted) 0.34 0.31 9.7
Average gross margin 23.5% 24.3%
SG&A expenses 16.3% 16.3%


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