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Growth Is the Focus at Ross Stores

dd's Discounts Living Up to Company's Expectations

Michele SanFilippo -- Home Textiles Today, March 21, 2005

Pleasanton, Calif. — Ross Stores is on target to reach 1,000 stores by the end of 2008, said Michael Balmuth, vice chairman, president and CEO, during the company's fourth-quarter conference call last week.

“We have the potential to more than triple our number of combined Ross and dd stores to 2,000 in the next five years and meet our goal of 15 percent or more growth in earnings per share,” he said.

As for the company's new off-price concept that debuted in the third quarter with 10 California stores of 2,500-square-feet each, he said dd's Discounts sales are in line with company expectations, with average retails of about $7. “We believe it has the ability to enhance our growth prospects in the near future and the potential to grow to 500 stores,” Balmuth said.

The company plans to open 85 to 90 new locations this year, with another 10 dd's Discounts stores in the second half, he said.

Ross Stores will also be entering new markets this year and exhibit a 12 percent expansion. “The long-term fundamentals of our business model remain strong and healthy,” he added.

The strongest performing region for the company was California, while Florida and the Southeast were the weakest, primarily due to hurricanes. The best departments for the company were shoes and juniors, while home furnishings was weak. “We plan to see some improvement in home this year, but it is a slower turning business for us,” said Balmuth.

No major changes to the merchandising mix are planned in the near future.

The company reported net earnings for the 13 weeks ended Jan. 29 of $49.4 million. The results include a non-cash lease accounting charge of $2.3 million to net earnings. For the comparable period last year, Ross generated $71.3 million in net earnings. That number reflects a reduction in net earnings of $2.4 million due to changes in lease accounting.

For the fiscal year ended Jan. 29, net earnings totaled $168.5 million which also includes the corrective lease accounting adjustment. For the prior fiscal year, net earnings totaled $225.7 million, again reflecting a reduction due to changes in lease accounting.

Sales for the fourth quarter increased 10 percent to $1.212 billion, with comparable-store sales flat to the prior year. For the fiscal 2004 year ended Jan. 29, sales increased 8 percent to $4.240 billion with comparable-store sales down 1 percent from the prior year.

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