10-K 1 rost-20190202x10k.htm 10-K Document


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
 
 
(Mark one)
 
X
 
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
 
For the fiscal year ended February 2, 2019
 
 
or
 
 
TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
 
For the transition period from ________ to ________
Commission file number 0-14678
Ross Stores, Inc.
(Exact name of registrant as specified in its charter)
Delaware
 
94-1390387
(State or other jurisdiction of incorporation or organization)
 
(I.R.S. Employer Identification No.)
 
5130 Hacienda Drive, Dublin, California
 
94568-7579
(Address of principal executive offices)
 
(Zip Code)
 
Registrant’s telephone number, including area code
 
(925) 965-4400
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
 
Name of each exchange on which registered
Common stock, par value $.01
 
Nasdaq Global Select Market
Securities registered pursuant to Section 12(g) of the Act:
Title of each class
None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes   X   No      
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes        No    X   
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes    X    No         
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes    X    No        
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.        
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer    X    Accelerated filer         Non-accelerated filer         (Do not check if a smaller reporting company)
Smaller reporting company         Emerging growth company        
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.        
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes         No    X   
The aggregate market value of the voting common stock held by non-affiliates of the Registrant as of August 4, 2018 was $32,578,316,211, based on the closing price on that date as reported by the NASDAQ Global Select Market®. Shares of voting stock held by each director and executive officer have been excluded in that such persons may be deemed to be affiliates. This determination of affiliate status is not necessarily a conclusive determination for other purposes.
The number of shares of Common Stock, with $.01 par value, outstanding on March 11, 2019 was 368,247,009.
Documents incorporated by reference:
Portions of the Proxy Statement for the Registrant’s 2019 Annual Meeting of Stockholders, which will be filed on or before June 3, 2019, are incorporated herein by reference into Part III.

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Ross Stores, Inc.
Form 10-K
Table of Contents


 
 
Page
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

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PART I
ITEM 1. BUSINESS
Ross Stores, Inc. and its subsidiaries (“we” or the “Company”) operate two brands of off-price retail apparel and home fashion stores—Ross Dress for Less® (“Ross”) and dd’s DISCOUNTS®.
Ross is the largest off-price apparel and home fashion chain in the United States, with 1,480 locations in 38 states, the District of Columbia, and Guam, as of February 2, 2019. Ross offers first-quality, in-season, name brand and designer apparel, accessories, footwear, and home fashions for the entire family at savings of 20% to 60% off department and specialty store regular prices every day. Ross’ target customers are primarily from middle income households.
We also operate 237 dd’s DISCOUNTS stores in 18 states as of February 2, 2019. dd’s DISCOUNTS features more moderately-priced first-quality, in-season, name brand apparel, accessories, footwear, and home fashions for the entire family at savings of 20% to 70% off moderate department and discount store regular prices every day. The typical dd’s DISCOUNTS store is located in an established shopping center in a densely populated urban or suburban neighborhood and its target customers typically come from households with more moderate incomes than Ross customers.
The merchant, store field, and distribution organizations for Ross and dd’s DISCOUNTS are separate and distinct. The two chains share certain other corporate and support services.
Both our Ross and dd’s DISCOUNTS brands target value-conscious women and men between the ages of 18 and 54. The decisions we make, from merchandising, purchasing, and pricing, to the locations of our stores, are based on these customer profiles. We believe that both brands derive a competitive advantage by offering a wide assortment of product within each of our merchandise categories in organized and easy-to-shop store environments.
Our mission is to offer competitive values to our target customers by focusing on the following key strategic objectives:
Maintain an appropriate level of recognizable brands, labels, and fashions at strong discounts throughout the store.
Meet customer needs on a local basis.
Deliver an in-store shopping experience that reflects the expectations of the off-price customer.
Manage real estate growth to compete effectively across all our markets.
We refer to our fiscal years ended February 2, 2019, February 3, 2018, and January 28, 2017 as fiscal 2018, fiscal 2017, and fiscal 2016, respectively. Fiscal 2017 was a 53-week year. Fiscal 2018 and 2016 were each 52-week years.

Merchandising, Purchasing, and Pricing

We seek to provide our customers with a wide assortment of first-quality, in-season, brand name and designer apparel, accessories, footwear, and home merchandise for the entire family at savings of 20% to 60% below department and specialty store regular prices every day at Ross, and 20% to 70% below moderate department and discount store regular prices at dd’s DISCOUNTS. We sell recognizable brand name merchandise that is current and fashionable in each category. New merchandise typically is received from three to six times per week at both Ross and dd’s DISCOUNTS stores. Our buyers review their merchandise assortments on a weekly basis, enabling them to respond to selling trends and purchasing opportunities in the market. Our merchandising strategy is reflected in our advertising, which emphasizes a strong value message. Our stores offer a treasure-hunt shopping experience where customers can find great savings every day on a broad assortment of brand name bargains for the family and the home.

Merchandising. Our merchandising strategy incorporates a combination of off-price buying techniques to purchase advance-of-season, in-season, and past-season merchandise for both Ross and dd’s DISCOUNTS. We believe nationally recognized name brands sold at compelling discounts will continue to be an important determinant of our success. We generally leave the brand name label on the merchandise we sell.

We have established merchandise assortments that we believe are attractive to our target customers. Although we offer fewer classifications of merchandise than most department stores, we generally offer a large selection within each classification with a wide assortment of vendors, labels, prices, colors, styles, and fabrics within each size or item. Our merchandise offerings include, but are not limited to, apparel (including footwear and accessories), small furniture, home accents, bed and bath, beauty, toys, luggage, gourmet food, cookware, and watches.


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Purchasing. We have a combined network of about 8,000 merchandise vendors and manufacturers for both Ross and dd’s DISCOUNTS and believe we have adequate sources of first-quality merchandise to meet our requirements. We purchase the vast majority of our merchandise directly from manufacturers, and we have not experienced any difficulty in obtaining sufficient merchandise inventory.

We believe our ability to effectively execute certain off-price buying strategies is a key factor in our success. Our buyers use a number of methods that enable us to offer our customers brand name and designer merchandise at strong discounts every day relative to department and specialty stores for Ross, and moderate department and discount stores for dd’s DISCOUNTS. By purchasing later in the merchandise buying cycle than department, specialty, and discount stores, we are able to take advantage of imbalances between retailers’ demand for products and manufacturers’ supply of those products.

Unlike most department and specialty stores, we typically do not require that manufacturers provide promotional allowances, co-op advertising allowances, return privileges, split shipments, drop shipments to stores, or delayed deliveries of merchandise. For most orders, only one delivery is made to one of our six distribution centers. These flexible requirements further enable our buyers to obtain significant discounts on purchases.

The majority of the apparel and apparel-related merchandise that we offer in all of our stores is acquired through opportunistic purchases created by manufacturer overruns and canceled orders both during and at the end of a season. These buys are referred to as "close-out" purchases. Close-outs can be shipped to stores in-season, allowing us to get in-season goods into our stores at great values or can be stored as packaway merchandise.

Packaway merchandise is purchased with the intent that it will be stored in our warehouses until a later date, which may even be the beginning of the same selling season in the following year. Packaway purchases are an effective method of increasing the percentage of prestige and national brands at competitive savings within our merchandise assortments. Packaway merchandise is mainly fashion basics and, therefore, not usually affected by shifts in fashion trends.

In fiscal 2018, we continued our emphasis on this important sourcing strategy in response to compelling opportunities available in the marketplace. Packaway accounted for approximately 46% and 49% of total inventories as of February 2, 2019 and February 3, 2018, respectively. We believe the strong discounts we offer on packaway merchandise are one of the key drivers of our business results.

Our primary buying offices are located in New York City and Los Angeles, the nation’s two largest apparel markets. These strategic locations allow our buyers to be in the market on a daily basis, sourcing opportunities and negotiating purchases with vendors and manufacturers. These locations also enable our buyers to strengthen vendor relationships—a key element to the success of our off-price buying strategies.

At the end of fiscal 2018, we had approximately 850 merchants for Ross and dd’s DISCOUNTS combined. The Ross and dd’s DISCOUNTS buying organizations are separate and distinct, and each includes merchandise management, buyers, and assistant buyers. Ross and dd’s DISCOUNTS buyers have on average seven years of experience, including merchandising positions with other retailers such as Bloomingdale’s, Burlington Stores, Foot Locker, Kohl’s, Lord & Taylor, Macy’s, Nordstrom, Saks, and TJX. We expect to continue to make additional targeted investments in our merchant organization to further develop our relationships with our manufacturers and vendors. Our ongoing objective is to strengthen our ability to procure the most desirable brands and fashions at competitive discounts.

The off-price buying strategies utilized by our experienced team of merchants enable us to purchase Ross merchandise at net prices that are lower than prices paid by department and specialty stores, and to purchase dd’s DISCOUNTS merchandise at net prices that are lower than prices paid by moderate department and discount stores.

Pricing. Our policy is to sell brand name merchandise at Ross that is priced 20% to 60% below most department and specialty store regular prices. At dd’s DISCOUNTS, we sell more moderate brand name merchandise that is priced 20% to 70% below most moderate department and discount store regular prices. Our pricing policy is reflected on most of our price tags which display our selling price as well as the comparable value for that item in department and specialty stores for Ross merchandise, or in more moderate department and discount stores for dd’s DISCOUNTS merchandise.

Our pricing strategy at Ross differs from that of a department or specialty store. We purchase our merchandise at lower prices and mark it up less than a department or specialty store. This strategy enables us to offer customers

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consistently low prices and compelling value. On a weekly basis our buyers review specified departments in our stores for possible markdowns based on the rate of sale, as well as at the end of fashion seasons, to promote faster turnover of merchandise inventory and to accelerate the flow of fresh product. A similar pricing strategy is in place at dd’s DISCOUNTS where prices are compared to those in moderate department and discount stores.

Stores

As of February 2, 2019, we operated a total of 1,717 stores comprised of 1,480 Ross stores and 237 dd’s DISCOUNTS stores. Our stores are located predominantly in community and neighborhood shopping centers in heavily populated urban and suburban areas. Where the size of the market and real estate opportunities permit, we cluster Ross stores to benefit from economies of scale in advertising, distribution, and field management. We do the same for dd’s DISCOUNTS stores.

We believe a key element of our success at both Ross and dd’s DISCOUNTS is our organized, attractive, easy-to-shop, in-store environments which allow customers to shop at their own pace. While our stores promote a self-service, treasure hunt shopping experience, the layouts are designed to enhance customer convenience in their merchandise presentation, dressing rooms, checkout, and merchandise return areas. Our store’s sales area is based on a prototype single floor design with a racetrack aisle layout. A customer can locate desired departments by signs displayed just below the ceiling of each department. We enable our customers to select among sizes and prices through prominent category and sizing markers. At most stores, shopping carts and/or baskets are available at the entrance for customer convenience. Cash registers are primarily located at store exits for customer ease and efficient staffing.

We accept a variety of payment methods. We provide refunds on all merchandise (not used, worn, or altered) returned with a receipt within 30 days. Merchandise returns having a receipt older than 30 days are exchanged or refunded with store credit.

Operating Costs

Consistent with the other aspects of our business strategy, we strive to keep operating costs as low as possible. Among the factors which have enabled us to do this are: labor costs that are generally lower than full-price department and specialty stores due to a store design that creates a self-service retail format and due to the utilization of labor saving technologies; economies of scale with respect to general and administrative costs resulting from centralized merchandising, marketing, and purchasing decisions; and flexible store layout criteria which facilitate conversion of existing buildings to our formats.

Information Systems

We continue to invest in new information systems and technology to provide a platform for growth over the next several years. Recent initiatives include continued enhancements to our information and data security, merchandising, distribution, transportation, store, and financial systems. These initiatives support future growth, the execution and achievement of our plans, as well as ongoing stability and compliance.

Distribution

We own and operate six distribution processing facilities—three in California, one in Pennsylvania, and two in South Carolina. We ship all of our merchandise to our stores through these distribution centers, which are large, highly automated, and built to suit our specific off-price business model.

We own four and lease five other warehouse facilities for packaway storage. We also use other third-party facilities, including three warehouses, for storage of packaway inventory.

We utilize a combination of our own and third-party cross dock facilities to distribute merchandise to stores on a regional basis. Shipments are made by contract carriers to the stores three to six times per week depending on location.

We believe that our distribution centers with their current expansion capabilities will provide adequate processing capacity to support our current store growth. Information on the size and locations of our distribution centers and warehouse facilities is found under “Properties” in Item 2.


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Advertising

Advertising for Ross Dress for Less relies primarily on television to communicate the Ross value proposition—savings off the same brands carried at leading department or specialty stores every day. This strategy reflects our belief that television is the most efficient and cost effective medium for communicating our brand position. While television is our primary advertising medium, we continue to utilize additional channels, including social media, to communicate our brand position. Advertising for dd’s DISCOUNTS is primarily focused on radio and new store grand openings.

Trademarks

The trademarks for ROSS®, Ross Dress For Less®, and dd’s DISCOUNTS® have been registered with the United States Patent and Trademark Office.

Employees

As of February 2, 2019, we had approximately 88,100 total employees, which includes both full and part-time employees. Additionally, we hire temporary employees especially during the peak seasons. Our employees are non-union. Management considers the relationship between the Company and our employees to be good.

Competition

We believe the principal competitive factors in the off-price retail apparel and home fashion industry are offering significant discounts on brand name merchandise, offering a well-balanced assortment that appeals to our target customers, and consistently providing store environments that are convenient and easy to shop. To execute this concept, we continue to make strategic investments in our merchandising organization. We also continue to make improvements to our merchandising systems to strengthen our ability to plan, buy, and allocate product based on more local versus regional trends. We believe that we are well-positioned to compete based on each of these factors.

Nevertheless, the retail apparel market is highly fragmented and competitive. We face a challenging macro-economic and retail environment that creates intense competition for business from on-line retailers, department stores, specialty stores, discount stores, warehouse stores, other off-price retailers, and manufacturer-owned outlet stores, many of which are units of large national or regional chains that have substantially greater resources. The retail apparel and home-related businesses may become even more competitive in the future.

Available Information

The internet address for our corporate website is www.rossstores.com. Our Annual Reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, Proxy Statements, and any amendments to those reports are made available free of charge on or through the Investors section of our corporate website promptly after being electronically filed with the Securities and Exchange Commission. The information found on our corporate website is not part of this report, or any other report or regulatory filing we file with or furnish to the Securities and Exchange Commission.


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ITEM 1A. RISK FACTORS

Our Annual Report on Form 10-K for fiscal 2018, and information we provide in our Annual Report to Stockholders, press releases, and other investor communications, including those on our corporate website, may contain forward-looking statements with respect to anticipated future events and our projected growth, financial performance, operations, and competitive position that are subject to risks and uncertainties that could cause our actual results to differ materially from those forward-looking statements and from our prior expectations and projections. Refer to Management’s Discussion and Analysis for a more complete identification and discussion of “Forward-Looking Statements.”

Our financial condition, results of operations, cash flows, and the performance of our common stock may be adversely affected by a number of risk factors. Risks and uncertainties that apply to both Ross and dd’s DISCOUNTS include, without limitation, the following:

Competitive pressures in the apparel and home-related merchandise retailing industry are high.
The retail industry is highly competitive and the marketplace is highly fragmented, as many different retailers compete for market share by utilizing a variety of store and on-line formats and merchandising strategies. We expect competition to increase in the future. There are no significant economic barriers for others to enter our retail sector. We compete for customers, associates, store locations, and merchandise with many other local, regional, and national retailers, traditional department stores, upscale mass merchandisers, other off-price retailers, specialty stores, internet and catalog businesses, and other forms of retail commerce. Our retail competitors constantly adjust their pricing, business strategies and promotional activity (particularly during holiday periods) in response to changing market conditions or their own financial condition. The substantial sales growth in e-commerce within the last decade has also encouraged the entry of many new competitors, new business models, and an increase in competition from established companies looking for ways to create successful on-line off-price shopping alternatives. Intense pressures from our competitors, our inability to adapt effectively and quickly to a changing competitive landscape, or a failure to effectively execute our off-price model, could reduce demand for our merchandise, decrease our inventory turnover, cause us to take greater markdowns, and negatively affect our sales and margins.

Unexpected changes in the level of consumer spending on or preferences for apparel and home-related merchandise could adversely affect us.
Our success depends on our ability to effectively buy and resell merchandise that meets customer demand. We work on an ongoing basis to identify customer trends and preferences, and to obtain merchandise inventory to meet anticipated customer needs. It is very challenging to successfully do this well and consistently across our diverse merchandise categories and in the multiple markets in which we operate throughout the United States. Although our off-price business model provides us certain advantages and may allow us greater flexibility than traditional retailers have in adjusting our merchandise mix to ever-changing consumer tastes, our merchandising decisions may still fail to correctly anticipate and match consumer trends and preferences, particularly in our newer geographic markets. Failure to correctly anticipate and match the trends, preferences, and demands of our customers could adversely affect our business, financial condition, and operating results.

Adverse and/or unseasonable weather may affect shopping patterns and consumer demand for seasonal apparel and other merchandise, and may result in temporary store closures and disruptions in deliveries of merchandise to our stores.
Unseasonable weather and prolonged, extreme temperatures, and events such as storms, affect consumers’ buying patterns and willingness to shop, and may adversely affect the demand for merchandise in our stores, particularly in apparel and seasonal merchandise. Among other things, weather conditions may also affect our ability to deliver our products to our stores or require us to close certain stores temporarily, thereby reducing store traffic. Even if stores are not closed, many customers may be unable to go, or may decide to avoid going to stores in bad weather. As a result, adverse or unseasonable weather in any of our markets could lead to disappointing sales and cause us to increase our markdowns, which may negatively affect our sales and margins.

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We are subject to impacts from the macro-economic environment, financial and credit markets, and geopolitical conditions that affect consumer confidence and consumer disposable income.
Consumer spending habits for the merchandise we sell are affected by many factors, including prevailing economic conditions, recession and fears of recession, levels of unemployment, salaries and wage rates, housing costs, energy and fuel costs, income tax rates and the timing of tax refunds, inflation, consumer confidence in future economic conditions, consumer perceptions of personal well-being and security, availability of consumer credit, consumer debt levels, and consumers’ disposable income. Adverse developments in any of these areas could reduce demand for our merchandise, decrease our inventory turnover, cause greater markdowns, and negatively affect our sales and margins. All of our stores are located in the United States and its territories, so we are especially susceptible to changes in the U.S. economy.    

In order to achieve our planned gross margins, we must effectively manage our inventories, markdowns, and inventory shortage.
We purchase the majority of our inventory based on our sales plans. If our sales plans significantly differ from actual demand, we may experience higher inventory levels and need to take markdowns on excess or slow-moving inventory, resulting in decreased profit margins. We also may have insufficient inventory to meet customer demand, leading to lost sales opportunities. As a regular part of our business, we purchase “packaway” inventory with the intent that it will be stored in our warehouses until a later date. The timing of the release of packaway inventory to our stores varies by merchandise category and by season, but it typically remains in storage less than six months. Packaway inventory is frequently a significant portion of our overall inventory. If we make packaway purchases that do not align with consumer preferences at the later time of release to our stores, we could have significant inventory markdowns. Changes in packaway inventory levels could impact our operating cash flow. Although we have various systems to help protect against loss or theft of our inventory, both when in storage and once distributed to our stores, we may have damaged, lost, or stolen inventory (called “shortage”) in higher amounts than we forecast, which would result in write-offs, lost sales, and reduced margins.

We depend on the market availability, quantity, and quality of attractive brand name merchandise at desirable discounts, and on the ability of our buyers to purchase merchandise to enable us to offer customers a wide assortment of merchandise at competitive prices.
Opportunistic buying, lean inventory levels, and frequent inventory turns are critical elements of our off-price business strategy. Maintaining an overall pricing differential to department and specialty stores is also key to our ability to attract customers and sustain our sales and gross margins. Our opportunistic buying places considerable discretion with our merchants, who are in the marketplace continually and who are generally purchasing merchandise for the current or upcoming season. Our ability to meet or exceed our operating performance targets depends upon the continuous, sufficient availability of high quality merchandise that we can acquire at prices sufficiently below those paid by conventional retailers and that represent a value to our customers. To the extent that certain of our vendors are better able to manage their inventory levels and reduce the amount of their excess inventory, the amount of high quality merchandise available to us could be materially reduced. To the extent that certain of our vendors decide not to sell to us or go out of business, the amount of high quality merchandise available to us could also be materially reduced. Because a significant portion of the apparel and other goods we sell is originally manufactured in other countries, changes in U.S. tariffs, trade relationships, or tax policies that reduce the supply or increase the relative cost of imported goods, could also result in disruptions to our existing supply relationships. Shortages or disruptions in the availability to us of high quality, value-priced merchandise would likely have a material adverse effect on our sales and margins.


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Information or data security breaches, including cyber-attacks on our transaction processing and computer information systems, could result in theft or unauthorized disclosure of customer, credit card, employee, or other private and valuable information that we handle in the ordinary course of our business, disrupt our operations, damage our reputation, and increase our costs.
Like other large retailers, we rely on commercially available computer and telecommunications systems to process, transmit, and store payment card and other personal and confidential information, and to provide information or data security for those transactions. Some of the key information systems and processes we use to handle payment card transactions and check approvals, and the levels of security technology utilized in payment cards, are controlled by the banking and payment card industry, not by us. Cyber criminals may attempt to penetrate our point of sale and other information systems to misappropriate customer or business information, including but not limited to credit/debit card, personnel, or trade information. Despite security measures we have in place, and our efforts to prevent, monitor, and mitigate attacks and errors, our facilities and systems (or those of third-party service providers we utilize or connect to) may be vulnerable to security breaches, acts of vandalism, computer viruses, misplaced or lost data, programming and/or human errors, phishing and similar fraudulent attacks, or other similar events. It is also possible that an associate within our Company, or a third party we do business with, may purposefully or inadvertently cause a security breach involving such information. The increasing sophistication of cyber criminals and advances in computer capabilities and remote access increases these risks. A breach of our information or data security, a system shut down or other response we may take, or our failure or delay in detecting and mitigating a loss of personal or business information, could result in damage to our reputation, loss of customer confidence, violation (or alleged violation) of applicable laws, and expose us to civil claims, litigation, and regulatory action, and to unanticipated costs and disruption of our operations.

Disruptions in our supply chain or in our information systems could impact our ability to process sales and to deliver product to our stores in a timely and cost-effective manner.
Various information systems are critical to our ability to operate and to manage key aspects of our business. We depend on the integrity, continuous availability, and consistent operations of these systems to process transactions in our stores, track inventory flow, manage merchandise allocation and distribution logistics, generate performance and financial reports, and support merchandising decisions.

We are currently making, and will continue to make, significant technology investments to improve or replace information processes and systems that are key to managing our business. We must monitor and choose sound investments and implement them at the right pace. The risk of system disruption is increased whenever significant system changes are undertaken. An excessive rate of technological change could detract from the effectiveness of adoption, and could make it more difficult for us to realize benefits from new technology. Poorly targeting opportunities, failing to make good investments, or making an investment commitment significantly above or below our needs could damage our competitive position and adversely impact our business and results of operations. Additionally, the potential problems and interruptions associated with implementing technology system changes could disrupt or reduce the efficiency of our operations in the short term. These initiatives might not provide us with the anticipated benefits, or may provide them on a delayed schedule or at a higher cost.

Our information systems, including our back-up systems, are subject to damage or interruption from power outages, computer and telecommunications failures, computer viruses, internal or external security breaches, catastrophic events such as severe storms, fires, earthquakes, floods, acts of terrorism, and design or usage errors by our employees or by third parties. If our information systems or our back-up systems are damaged or cease to function properly, we may have to make significant investments to fix or replace them, and we may suffer interruptions in our operations in the interim. Any material interruption in our computer systems could have a material adverse effect on our business and results of operations.

A disruption within our logistics or supply chain network could adversely affect our ability to timely and efficiently transport merchandise to our stores or our distribution centers, which could impair our ability to meet customer demand for products and result in lost sales or increased supply chain costs. Such disruptions may result from: damage or destruction to our distribution centers; weather-related events; natural disasters; trade restrictions; tariffs; third-party strikes or ineffective cross dock operations; work stoppages or slowdowns; shipping capacity constraints; supply or shipping interruptions or costs; or other factors beyond our control. Any such disruptions could negatively impact our financial performance or financial condition.

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We need to obtain acceptable new store sites with favorable consumer demographics to achieve our planned growth.
Successful growth requires us to find appropriate real estate sites in our targeted market areas. We compete with other retailers and businesses for acceptable store locations. For the purpose of identifying locations we rely, in part, on consumer demographics. While we believe consumer demographics are helpful indicators of acceptable store locations, we recognize that this information cannot predict future consumer preferences and buying trends with complete accuracy. Time frames for negotiations and store development vary from location to location and can be subject to unforeseen delays or unexpected cancellations. We may not be able to open new stores or, if opened, operate those new stores profitably. Construction and other delays in store openings could have a negative impact on our business and operating results. Additionally, we may not be able to renegotiate our current lease terms which could negatively impact our operating results. New stores may not achieve the same sales or profit levels as our existing stores, and adding stores to existing markets may adversely affect the sales and profitability of other existing stores. If we cannot acquire sites on attractive terms, it could limit our ability to grow or adversely affect the economics of our new stores in various markets.

To achieve growth, we need to expand in existing markets and enter new geographic markets.
Our growth strategy is based on successfully expanding our off-price model in current markets and in new geographic regions. There are significant risks associated with our ability to continue to expand our current business and to enter new markets. Stores we open in new markets may take longer to reach expected sales and profit levels on a consistent basis and may have higher construction, occupancy, advertising, or operating costs than stores we open in existing markets, thereby affecting our overall profitability. New markets may have competitive conditions, consumer tastes, and discretionary spending patterns that are more difficult to predict or satisfy than our existing markets. Our limited operating experience and limited brand recognition in new markets may require us to build brand awareness in that market through greater investments in advertising and promotional activity than we originally planned. We may find it more difficult in new markets to hire, motivate, and retain qualified associates.

Consumer problems or legal issues involving the quality, safety, or authenticity of products we sell could harm our reputation, result in lost sales, and/or increase our costs.
Various governmental authorities regulate the quality and safety of merchandise we sell. These regulations and related laws frequently change, and the ultimate cost of compliance cannot be precisely estimated. Because of our opportunistic buying strategy, we sometimes obtain merchandise in new categories or from new vendors that we have not dealt with before. Although our vendor arrangements typically place contractual responsibility on the vendor for resulting liability and we generally rely on our vendors to provide authentic merchandise that matches the stated quality attributes, and complies with applicable product safety and other laws, vendor non-compliance with consumer product safety laws may subject us to product recalls, make certain products unsalable, or require us to incur significant compliance costs.

Regardless of fault, any real or perceived issues with the quality and safety of merchandise we offer, particularly products such as food and children’s items, issues with the authenticity of merchandise, or our inability, or that of our vendors, to comply on a timely basis with laws and regulatory requirements, could adversely affect our reputation, result in lost sales, inventory write-offs, uninsured product liability or other legal claims, penalties or losses, merchandise recalls, and increased costs.

An adverse outcome in various legal, regulatory, or tax matters could damage our reputation or brand and increase our costs.
As an ordinary part of our business, we are involved in various legal proceedings, regulatory reviews, tax audits, or other legal matters. These may include lawsuits, inquiries, demands, or other claims or proceedings by governmental entities and private plaintiffs, including those relating to employment and employee benefits (including classification, employment rights, discrimination, wage and hour, and retaliation), securities, real estate, tort, commercial, consumer protection, privacy, product compliance and safety, advertising, comparative pricing, intellectual property, tax, escheat, and whistle-blower claims. We continue to be involved in a number of employment-related lawsuits, including class actions which are primarily in California.


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We are subject to federal, state, and local rules and regulations in the United States, and to various international laws, which change from time to time. These legal requirements collectively affect multiple aspects of our business, including the cost of health care, workforce management and employee benefits, minimum wages, advertising, comparative pricing, import/export, sourcing and manufacturing, data protection, intellectual property, and others. If we fail to comply (or are alleged not to comply) with any of these requirements, we may be subject to fines, settlements, penalties, or other costs. In addition, an adverse outcome (or the adverse publicity from the claims) in any of these matters may damage our reputation or brand. We are also subject to the continuous examination of our tax returns and reports by federal, state, and local tax authorities, and these examining authorities may challenge positions we take.

Significant judgment is required in evaluating and estimating our tax provisions and accruals for legal claims. Actual results may differ and our costs may exceed the reserves we establish in estimating the probable outcomes. In addition, applicable accounting principles and interpretations may change from time to time, and those changes could have material effects on our reported operating results and financial condition.

Damage to our corporate reputation or brands could adversely affect our sales and operating results.
Our reputation is partially based on perceptions of various subjective qualities and overall integrity. Any incident that erodes the trust or confidence of our customers or the general public could adversely affect our reputation and business, particularly if the incident results in significant adverse publicity or governmental inquiry. Such an incident could also include alleged acts or omissions by or situations involving our suppliers (or their contractors or subcontractors), the landlord for our stores, or our associates outside of work, and may pertain to social or political issues or protests largely unrelated to our business. The use of social media platforms, including blogs, social media websites, and other forms of internet-based communications which allow individuals access to a broad audience of consumers and other interested persons, continues to increase. The availability of information (whether correct or erroneous) on social media platforms is virtually immediate, as is its impact. Many social media platforms immediately publish the content their subscribers and participants post, often without filters or checks on accuracy of the content. The opportunity for dissemination of information, including inaccurate information, is seemingly limitless and readily available. Information concerning our Company may be posted on such platforms at any time. Information posted may be adverse to our interests or may be inaccurate, which could negatively affect our sales, diminish customer trust, reduce employee morale and productivity, and lead to difficulties in recruiting and retaining qualified associates. The harm may be immediate, without affording us an opportunity for redress or correction. 

We must continually attract, train, and retain associates with the retail talent necessary to execute our off-price retail strategies.
Like other retailers, we face challenges in recruiting and retaining sufficient talent in our buying organization, management, stores, and other key areas. Many of our retail store associates are in entry level or part-time positions with historically high rates of turnover. Our ability to control labor costs is subject to numerous external factors, including prevailing wage rates and health and other insurance costs, as well as the impact of legislation or regulations governing minimum wage or healthcare benefits.

Any increase in labor costs may adversely impact our profitability or, if we fail to pay such higher wages, may result in increased turnover. Excessive turnover may result in higher costs associated with finding, hiring, and training new associates. If we cannot hire enough qualified associates, or if there is a disruption in the supply of personnel we hire from third-party providers, especially during our peak seasons, our operations could be negatively impacted.

Because of the distinctive nature of our off-price model, we must also attract, train, and retain our key associates across the Company, especially within our buying organization. The loss of one or more of our key personnel, or the inability to effectively identify a suitable successor for a key role could have a material adverse effect on our business. There is no assurance that we will be able to attract or retain highly qualified associates in the future, and any failure to do so could have a material adverse effect on our growth, operations, or financial position.

We must effectively advertise and market our business.
Customer traffic and demand for our merchandise is influenced by our advertising and marketing activities, the name recognition and reputation of our brands, and the location of our stores. Although we use marketing and advertising programs to attract customers to our stores, particularly through television, our competitors may spend more or use different approaches, which could provide them with a competitive advantage. Our advertising and other promotional programs may not be effective or may be perceived negatively, or could require increased expenditures, any of which could adversely affect sales or increase costs.


11



We are subject to risks associated with selling and importing merchandise produced in other countries.
Risks in importing and selling such merchandise include import duties and quotas, compliance with anti-dumping regulations, economic uncertainties and adverse economic conditions (including inflation, recession, and exchange rate fluctuations), foreign government regulations, employment and labor matters, concerns relating to human rights, working conditions, and other issues in factories or countries where merchandise is produced, transparency of sourcing and supply chains, exposure on product warranty and intellectual property issues, consumer perceptions of the safety of imported merchandise, wars and fears of war, political unrest, natural disasters, regulations to address climate change, and trade restrictions.

A predominant portion of the apparel and other goods we sell (even when we purchase it domestically, often as excess inventory sold to us by a domestic vendor) is originally manufactured in other countries. In addition, we directly source a portion of the products sold in our stores from foreign vendors predominantly in Asia (including China). We also buy products that originate from foreign sources indirectly through domestic vendors and manufacturers’ representatives. Although our foreign purchases of merchandise are negotiated and paid for in U.S. dollars, decreases in the value of the U.S. dollar relative to foreign currencies could increase the cost of products we purchase from overseas vendors. When we are the importer of record, we may be subject to regulatory or other requirements similar to those applicable to a manufacturer.

To the extent that our vendors are located overseas or rely on overseas sources for a large portion of their products, any event causing a disruption of imports, including the imposition of import restrictions, war, and acts of terrorism could adversely affect our business. The flow of merchandise from our vendors could also be adversely affected by financial or political instability in any of the countries in which the goods we purchase are manufactured. Trade restrictions in the form of tariffs or quotas, or both, applicable to the products we sell could also affect the importation of those products and could increase the cost and reduce the supply of products available to us. We cannot predict whether any of the countries from which our products are sourced, or in which our products are currently manufactured or may be manufactured in the future, will be subject to trade restrictions imposed by the U.S. or foreign governments or the likelihood, type or effect of any such restrictions.

We require our vendors (for both import and domestic purchasing) to contractually confirm that they adhere to various conduct, compliance, and other requirements, including those relating to environmental, employment and labor (including wages and working conditions), health, safety, and anti-bribery standards. From time to time, our vendors, their contractors, or their subcontractors may be alleged to not be in compliance with these standards or with applicable local laws. Although we have implemented policies and procedures to facilitate our compliance with laws and regulations relating to doing business in foreign markets and importing merchandise, and to monitor our suppliers, this does not guarantee that suppliers and other third parties with whom we do business will not violate such laws and regulations or our policies. Significant or continuing noncompliance with such standards and laws by one or more vendors could have a negative impact on our reputation, could subject us to claims and liability, and could have an adverse effect on our results of operations.

Changes in U.S. tax or trade policy regarding apparel and home-related merchandise produced in other countries could adversely affect our business.
A predominant portion of the apparel and other goods we sell is originally manufactured in other countries. The U.S. government has at times indicated a willingness to significantly change existing trade policies, including those with China. This exposes us to risks of disruption and cost increases in our established patterns for sourcing our merchandise, and creates increased uncertainties in planning our sourcing strategies and forecasting our margins. Changes in U.S. tariffs, quotas, trade relationships, or tax provisions that reduce the supply or increase the relative cost of goods produced in other countries could increase our cost of goods and/or increase our effective tax rate. Although such changes would have implications across the entire industry, we may fail to effectively adapt and to manage the adjustments in strategy that would be necessary in response to those changes. In addition to the general uncertainty and overall risk from potential changes in U.S. laws and policies, as we make business decisions in the face of uncertainty as to potential changes, we may incorrectly anticipate the outcomes, miss out on business opportunities, or fail to effectively adapt our business strategies and manage the adjustments that are necessary in response to those changes. These risks could adversely affect our revenues, increase our effective tax rates, and reduce our profitability.


12



We may experience volatility in revenues and earnings.
Our business has slower and busier periods based on holiday and back-to-school seasons, weather, and other factors. Although our off-price business is historically subject to less seasonality than traditional retailers, we may still experience unexpected decreases in sales from time to time, which could result in increased markdowns and reduced margins. Significant operating expenses, such as rent expense and associate salaries, do not adjust proportionately with our sales. If sales in a certain period are lower than our plans, we may not be able to adjust these operating expenses concurrently, which could adversely affect our operating results.

A natural or man-made disaster in California or in another region where we have a concentration of stores, offices, or a distribution center could harm our business.
Our corporate headquarters, Los Angeles buying office, three distribution centers, three warehouses, and approximately 23% of our stores are located in California. Natural or other disasters, such as earthquakes and hurricanes, tornadoes, floods, or other extreme weather and climate conditions, or fires, explosions, and acts of war or terrorism, or public health issues (such as epidemics), in any of our markets could disrupt our operations or our supply chain, or could shut down, damage, or destroy our stores or distribution facilities.

To support our continuing operations, our new store and distribution center growth plans, and our stock repurchase program and quarterly dividends, we must maintain sufficient liquidity.
We depend upon our operations to generate strong cash flows to support our general operating activities, and to supply capital to finance our operations, make capital expenditures and acquisitions, manage our debt levels, and return value to our stockholders through dividends and stock repurchases. If we are unable to generate sufficient cash flows from operations to support these activities, our growth plans and our financial performance would be adversely affected. If necessary to support our operations, we could be forced to suspend our stock repurchase program and/or discontinue payment of our quarterly cash dividends. Any failure to pay dividends or repurchase stock, after we have announced our intention to do so, may negatively impact our reputation and investor confidence in us, and may negatively affect our stock price.

We have borrowed on occasion to finance some of our activities. If our access to capital is restricted or our borrowing costs increase, our operations and financial condition could be adversely impacted. In addition, if we do not properly allocate our capital to maximize returns, our operations, cash flows, and returns to stockholders could be adversely affected.

ITEM 1B. UNRESOLVED STAFF COMMENTS
Not applicable.

ITEM 2. PROPERTIES
At February 2, 2019, we operated a total of 1,717 stores, of which 1,480 were Ross stores in 38 states, the District of Columbia, and Guam, and 237 were dd’s DISCOUNTS stores in 18 states. All stores are leased, with the exception of two locations which we own.
During fiscal 2018, we opened 75 new Ross stores and closed four existing stores. The average approximate Ross store size is 28,000 square feet.
During fiscal 2018, we opened 24 new dd’s DISCOUNTS stores and closed no existing stores. The average approximate dd’s DISCOUNTS store size is 23,000 square feet.
During fiscal 2018, no one store accounted for more than 1% of our sales.
We carry fire, flood, wind, and earthquake insurance to help mitigate the risk of financial loss that may result from such events.
Our real estate strategy in 2019 is to primarily open stores in states where we currently operate, to increase our market penetration and leverage overhead and advertising expenses as a percentage of sales in each market. We also expect to continue our store expansion in newer markets in 2019. Important considerations in evaluating a new store location in both newer and more established markets are the availability and quality of potential sites, demographic characteristics, competition, and population density of the local trade area. In addition, we continue to consider opportunistic real estate acquisitions.

13



The following table summarizes the locations of our stores by state/territory as of February 2, 2019 and February 3, 2018.
State/Territory
 
February 2, 2019
 
February 3, 2018
Alabama
 
24
 
23
Arizona
 
80
 
78
Arkansas
 
8
 
8
California
 
400
 
379
Colorado
 
37
 
34
Delaware
 
3
 
2
District of Columbia
 
2
 
1
Florida
 
205
 
195
Georgia
 
61
 
59
Guam
 
2
 
2
Hawaii
 
22
 
20
Idaho
 
12
 
11
Illinois
 
79
 
67
Indiana
 
15
 
14
Iowa
 
6
 
4
Kansas
 
12
 
11
Kentucky
 
11
 
11
Louisiana
 
18
 
18
Maryland
 
25
 
24
Mississippi
 
9
 
9
Missouri
 
26
 
23
Montana
 
6
 
6
Nebraska
 
1
 
0
Nevada
 
39
 
37
New Jersey
 
14
 
14
New Mexico
 
15
 
14
North Carolina
 
47
 
46
North Dakota
 
2
 
1
Oklahoma
 
26
 
26
Oregon
 
31
 
30
Pennsylvania
 
48
 
48
South Carolina
 
27
 
24
South Dakota
 
2
 
2
Tennessee
 
34
 
32
Texas
 
244
 
230
Utah
 
21
 
19
Virginia
 
39
 
38
Washington
 
43
 
43
Wisconsin
 
18
 
16
Wyoming
 
3
 
3
Total
 
1,717
 
1,622


14



Where possible, we obtain sites in buildings requiring minimal alterations, allowing us to establish stores in new locations in a relatively short period of time at reasonable costs in a given market. At February 2, 2019, the majority of our stores had unexpired original lease terms ranging from three to ten years, with three to four renewal options of five years each. The average unexpired original lease term of our leased stores is five years, or 20 years if renewal options are included. See Note E of Notes to Consolidated Financial Statements.
See additional discussion under “Stores” in Item 1.
The following table summarizes the location and approximate sizes of our distribution centers, warehouses, and office locations as of February 2, 2019. Square footage information for the distribution centers and warehouses represents total ground floor area of the facility. Square footage information for office space represents total space owned and leased. See additional discussion in Management’s Discussion and Analysis.
Location
 
Approximate Square Footage

 
Own / Lease
Distribution centers/Warehouses
 
 
 
 
Carlisle, Pennsylvania
 
465,000

 
Own
Carlisle, Pennsylvania
 
239,000

 
Lease
Carlisle, Pennsylvania
 
246,000

 
Lease
Fort Mill, South Carolina
 
1,200,000

 
Own
Fort Mill, South Carolina
 
428,000

 
Own
Fort Mill, South Carolina
 
423,000

 
Own
Fort Mill, South Carolina
 
255,000

 
Lease
Moreno Valley, California
 
1,300,000

 
Own
Perris, California
 
1,300,000

 
Own
Perris, California
 
699,000

 
Own
Riverside, California
 
449,000

 
Own
Rock Hill, South Carolina
 
1,200,000

 
Own
Rock Hill, South Carolina
 
431,000

 
Lease
Shafter, California
 
1,700,000

 
Own
Shafter, California
 
1,003,000

 
Lease
 
 
 
 
 
Office space
 
 
 
 
Boston, Massachusetts
 
5,000

 
Lease
Dublin, California
 
414,000

 
Own
Los Angeles, California
 
103,000

 
Lease
New York City, New York
 
572,000

 
Own
See additional discussion under “Distribution” in Item 1.


15



ITEM 3. LEGAL PROCEEDINGS

Like many retailers, we have been named in class action lawsuits, primarily in California, alleging violation of wage and hour laws and consumer protection laws. Class action litigation remains pending as of February 2, 2019.

We are also party to various other legal and regulatory proceedings arising in the normal course of business. Actions filed against us may include commercial, product and product safety, consumer, intellectual property, and labor and employment-related claims, including lawsuits in which private plaintiffs or governmental agencies allege that we violated federal, state, and/or local laws. Actions against us are in various procedural stages. Many of these proceedings raise factual and legal issues and are subject to uncertainties.
We believe that the resolution of our pending class action litigation and other currently pending legal and regulatory proceedings will not have a material adverse effect on our financial condition, results of operations, or cash flows.

ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.


16



Executive Officers of the Registrant
The following sets forth the names and ages of our executive officers, indicating each person’s principal occupation or employment during at least the past five years. The term of office is at the discretion of our Board of Directors.
Name
 
Age

 
Position
Michael Balmuth
 
68

 
Executive Chairman of the Board
Barbara Rentler
 
61

 
Chief Executive Officer
Bernie Brautigan
 
54

 
President, Merchandising, Ross Dress for Less
James S. Fassio
 
64

 
President and Chief Development Officer
Brian Morrow
 
59

 
President and Chief Merchandising Officer, dd’s DISCOUNTS
Michael O’Sullivan
 
55

 
President and Chief Operating Officer
Michael J. Hartshorn
 
51

 
Group Executive Vice President, Finance and Legal, Chief Financial Officer and Principal Accounting Officer

Mr. Balmuth has served as Executive Chairman of the Board of Directors since 2014. From 1996 to 2014, he was Vice Chairman of the Board of Directors and Chief Executive Officer. He also served as President from 2005 to 2009. Previously, Mr. Balmuth was Executive Vice President, Merchandising from 1993 to 1996 and Senior Vice President and General Merchandise Manager from 1989 to 1993. Before joining Ross, he was Senior Vice President and General Merchandising Manager at Bon Marché in Seattle from 1988 to 1989 and Executive Vice President and General Merchandising Manager for Karen Austin Petites from 1986 to 1988.

Ms. Rentler has served as Chief Executive Officer and a member of the Board of Directors since 2014. From 2009 to 2014, she was President and Chief Merchandising Officer, Ross Dress for Less and Executive Vice President, Merchandising, from 2006 to 2009. She also served at dd’s DISCOUNTS as Executive Vice President and Chief Merchandising Officer from 2005 to 2006 and Senior Vice President and Chief Merchandising Officer from 2004 to 2005. Prior to that, she held various merchandising positions since joining the Company in 1986.

Mr. Brautigan has served as President, Merchandising, Ross Dress for Less since March 2016 with responsibility for the Ladies and Children’s apparel businesses, Shoes, Lingerie, Cosmetics, and Accessories. Previously he was Group Executive Vice President, Merchandising, Ross Dress for Less from 2014 to 2016. He was also Executive Vice President of Merchandising at Ross from 2009 to 2014, Senior Vice President and General Merchandise Manager, from 2006 to 2009, and Group Vice President of Shoes from 2003 to 2006. Prior to Ross, he spent 20 years in various merchandising positions at Macy’s East.

Mr. Fassio has served as President and Chief Development Officer since 2009. Prior to that, he was Executive Vice President, Property Development, Construction and Store Design from 2005 to 2009 and Senior Vice President, Property Development, Construction and Store Design from 1991 to 2005. He joined the Company in 1988 as Vice President of Real Estate. Prior to joining Ross, Mr. Fassio held various retail and real estate positions with Safeway Stores, Inc.

Mr. Morrow has served as President and Chief Merchandising Officer, dd’s DISCOUNTS since December 2015. Prior to joining Ross, Mr. Morrow served as President, Chief Merchandising Officer of Stein Mart from 2014 to 2015 and Executive Vice President and Chief Merchandising Officer from 2010 to 2014. From 2008 to 2009, he served as Executive Vice President, General Merchandise Manager at Macy’s West. He also held roles as Senior Vice President, General Merchandise Manager at Mervyn’s in 2008 and Macy’s North/Marshall Field’s from 2006 to 2008. For approximately 20 years prior to this, Mr. Morrow held various merchandising roles at The May Department Stores Company.

Mr. O’Sullivan has served as President and Chief Operating Officer since 2009 and a member of the Board of Directors since 2014. From 2005 to 2009, he was Executive Vice President and Chief Administrative Officer, and Senior Vice President, Strategic Planning and Marketing from 2003 to 2005. Before joining Ross, Mr. O’Sullivan was a partner with Bain & Company, providing consulting advice to retail, consumer goods, financial services, and private equity clients since 1991.

Mr. Hartshorn has served as Group Executive Vice President, Finance and Legal, Chief Financial Officer since March 2019. Previously, he was Executive Vice President, Chief Financial Officer from 2018 to 2019, Group Senior Vice President, Chief Financial Officer from 2015 to 2018, Senior Vice President and Chief Financial Officer from 2014 to 2015, and Senior Vice President and Deputy Chief Financial Officer from 2012 to 2014. He was also Group

17



Vice President, Finance and Treasurer from 2011 to 2012, and Vice President, Finance and Treasurer from 2006 to 2011. From 2002 to 2006, he held a number of management roles in the Ross IT and supply chain organizations. He initially joined the Company in 2000 as Director and Assistant Controller. For seven years prior to joining Ross, Mr. Hartshorn held various financial roles at The May Department Stores Company.

PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
General information. See the information set forth under the caption "Quarterly Financial Data (Unaudited)" under Note K of Notes to Consolidated Financial Statements in Item 8 of this Annual Report, which is incorporated herein by reference. Our stock is traded on The NASDAQ Global Select Market® under the symbol ROST. There were 904 stockholders of record as of March 11, 2019 and the closing stock price on that date was $90.74 per share.
Cash dividends. On March 5, 2019, our Board of Directors declared a quarterly cash dividend of $0.255 per common share, payable on March 29, 2019. Our Board of Directors declared cash dividends of $0.225 per common share in March, May, August, and November 2018, cash dividends of $0.160 per common share in February, May, August, and November 2017, and cash dividends of $0.135 per common share in March, May, August, and November 2016.
Issuer purchases of equity securities. Information regarding shares of common stock we repurchased during the fourth quarter of fiscal 2018 is as follows:
Period
 
Total number
of shares
(or units) purchased¹

 
Average price
paid per share (or unit)
 
Total number
of shares
(or units)
purchased as
part of publicly
announced
plans or programs

 
Maximum
number (or
approximate
dollar value) of
shares (or units)
that may yet be
purchased under
the plans or programs ($000)
 
November
 
 
 
 
 
 
 
 
 
(11/04/2018 - 12/01/2018)
 
749,726

 
$94.24
 
749,726

 
$197,842
 
December
 
 
 
 
 
 
 
 
 
(12/02/2018 - 01/05/2019)
 
1,352,850

 
$80.60
 
1,344,392

 
$89,500
 
January
 
 
 
 
 
 
 
 
 
(01/06/2019 - 02/02/2019)
 
982,600

 
$91.09
 
982,558

 
$0

Total
 
3,085,176

 
$87.26
 
3,076,676

 
$0

¹ We acquired 8,500 shares of treasury stock during the quarter ended February 2, 2019. Treasury stock includes shares acquired from employees for tax withholding purposes related to vesting of restricted stock grants. All remaining shares were repurchased under our publicly announced stock repurchase program.

In March 2019, our Board of Directors approved a new, two-year $2.55 billion stock repurchase program through fiscal 2020.
See Note H of Notes to Consolidated Financial Statements for equity compensation plan information. The information under Item 12 of this Annual Report on Form 10-K under the caption “Equity compensation plan information” is incorporated herein by reference.

18



Stockholder Return Performance Graph
The following information in this Item 5 shall not be deemed filed for purposes of Section 18 of the Securities Act of 1934, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933.
The graph below compares total stockholder returns over the last five years for our common stock with the Standard & Poor’s (“S&P”) 500 Index, and the Dow Jones Apparel Retailers Index.
We use the Dow Jones Apparel Retailers Index in our performance graph because we believe the retail companies comprising that index are aligned with the segment of the retail industry in which we operate, and it provides a relevant comparison against which to measure our stock performance.
The cumulative total return listed below assumed an initial investment of $100 and reinvestment of dividends at each fiscal year end, and measures the performance of this investment as of the last trading day in the month of January for each of the following five years. These measurement dates are based on the historical month-end data available and vary slightly from our actual fiscal year-end date for each period. Data with respect to returns for the S&P index and the Dow Jones Apparel Retailers Index is not readily available for periods shorter than one month. The graph is a historical representation of past performance only and is not necessarily indicative of future performance.


19



COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN
Among Ross Stores, Inc., the S&P 500 Index, and Dow Jones Apparel Retailers


rost_chart2018a04.jpg

 
 
 
 
Indexed Returns for Years Ended
 
 
Base Period

 
 
 
 
 
 
 
 
 
 
Company / Index
 
2014

 
2015

 
2016

 
2017

 
2018

 
2019

Ross Stores, Inc.
 
100

 
136

 
169

 
198

 
242

 
284

S&P 500 Index
 
100

 
114

 
113

 
136

 
172

 
168

Dow Jones Apparel Retailers
 
100

 
121

 
120

 
118

 
134

 
146




20



ITEM 6. SELECTED FINANCIAL DATA
The following selected financial data is derived from our consolidated financial statements. The data set forth below should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” the section “Forward-Looking Statements” in this Annual Report on Form 10-K and our consolidated financial statements and notes thereto.
($000, except per share data)
2018

 
2017 1

 
2016

 
2015


2014


 
 
 
 
 
 
 
 
 
 
 
Operations
 
 
 
 
 
 
 
 
 
 
Sales
$
14,983,541

 
$
14,134,732

 
$
12,866,757

 
$
11,939,999

 
$
11,041,677

 
Cost of goods sold
10,726,277

 
10,042,638

 
9,173,705

 
8,576,873

 
7,937,956

 
Percent of sales
71.6
%
 
71.0
%
 
71.3
%
 
71.8
%
 
71.9
%
 
Selling, general and administrative
2,216,550

 
2,043,698

 
1,890,408

 
1,738,755

 
1,615,371

 
Percent of sales
14.8
%
 
14.5
%
 
14.7
%
 
14.6
%
 
14.6
%
 
Interest (income) expense, net
(10,162
)
 
7,676

 
16,488

 
12,612

 
2,984

 
Earnings before taxes
2,050,876

 
2,040,720

 
1,786,156

 
1,611,759

 
1,485,366

 
Percent of sales
13.7
%
 
14.4
%
 
13.9
%
 
13.5
%
 
13.5
%
 
Provision for taxes on earnings
463,419

 
677,967

 
668,502

 
591,098

 
560,642

 
Net earnings
$
1,587,457

 
$
1,362,753

 
$
1,117,654

 
$
1,020,661

 
$
924,724

 
Percent of sales
10.6
%
 
9.6
%
 
8.7
%
 
8.5
%
 
8.4
%
 
Basic earnings per share²
$
4.30

4 
$
3.58

3 
$
2.85

 
$
2.53

 
$
2.24

 
Diluted earnings per share²
$
4.26

4 
$
3.55

3 
$
2.83

 
$
2.51

 
$
2.21

 
 
 
 
 
 
 
 
 
 
 
 
Cash dividends declared
 
 
 
 
 
 
 
 
 
 
per common share²
$
0.900

 
$
0.640

 
$
0.540

 
$
0.470

 
$
0.400

 
 
 
 
 
 
 
 
 
 
 
 
¹ Fiscal 2017 was a 53-week year; all other fiscal years presented were 52 weeks.
 
² All per share amounts have been adjusted for the two-for-one stock split effective June 11, 2015.
 
3 Includes a per share benefit of approximately $0.21 from tax reform legislation enacted in December 2017 and $0.10 from the 53rd week.
 
4 Includes a per share benefit of approximately $0.70 from tax reform legislation enacted in December 2017 and $0.07 from the favorable resolution of a tax matter.

 


21



Selected Financial Data
($000, except per share data)
 
2018

 
2017 1

 
2016

 
2015


2014


 
 
 
 
 
 
 
 
 
 
 
 
Financial Position
 
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
 
$
1,412,912

 
$
1,290,294

 
$
1,111,599

 
$
761,602

 
$
696,608

 
Merchandise inventory
 
1,750,442

 
1,641,735

 
1,512,886

 
1,419,104

 
1,372,675

 
Property and equipment, net
 
2,475,201

 
2,382,464

 
2,328,048

 
2,342,906

 
2,273,752

 
Total assets
 
6,073,691

 
5,722,051


5,309,351


4,869,119


4,687,370


Return on average assets
 
27
%
 
25
%
 
22
%
 
21
%
 
22
%
 
Working capital
 
1,394,535

 
1,224,755

 
1,060,543

 
769,348

 
590,471

 
Current ratio
 
1.7:1

 
1.6:1
 
1.6:1
 
1.5:1
 
1.4:1
 
Long-term debt
 
312,440

 
396,967


396,493


396,025


395,562


Long-term debt as a percent
 


 
 
 
 
 
 
 
 
 
of total capitalization
 
9
%
 
12
%
 
13
%
 
14
%
 
15
%
 
Stockholders’ equity
 
3,305,746

 
3,049,308

 
2,748,017

 
2,471,991
 
2,279,210

 
Return on average
 


 
 
 
 
 
 
 
 
 
stockholders’ equity
 
50
%
 
47
%
 
43
%
 
43
%
 
43
%
 
Book value per common share
 


 
 
 
 
 
 
 
 
 
outstanding at year-end2
 
$
8.98

 
$
8.03

 
$
7.01

 
$
6.14

 
$
5.49

 
 
 


 
 
 
 
 
 
 
 
 
Operating Statistics
 


 
 
 
 
 
 
 
 
 
Number of stores opened
 
99

 
96

 
93

 
90

 
95

 
Number of stores closed
 
4

 
7

 
6

 
6

 
9

 
Number of stores at year-end
 
1,717

 
1,622

 
1,533

 
1,446

 
1,362

 
Comparable store sales increase3
 
 
 
 
 
 
 
 
 
 
 
(52-week basis)
 
4
%
 
4
%
 
4
%
 
4
%
 
3
%
 
Sales per average square foot of
 


 
 
 
 
 
 
 
 
 
selling space (52-week basis)
 
$
422

 
$
409

 
$
395

 
$
383

 
$
372

 
Square feet of selling space
 


 
 
 
 
 
 
 
 
 
at year-end (000)
 
36,300

 
34,700

 
33,300

 
31,900

 
30,400

 
Number of employees at year-end
 
88,100

 
82,700

 
78,600

 
77,800

 
71,400

 
Number of common stockholders
 


 
 
 
 
 
 
 
 
 
of record at year-end
 
902

 
880

 
848

 
842

 
817

 
 
 
 
 
 
 
 
 
 
 
 
 
¹ Fiscal 2017 was a 53-week year; all other fiscal years presented were 52 weeks.
 
 
2 All per share amounts have been adjusted for the two-for-one stock split effective June 11, 2015.
 
3 Comparable stores are stores open for more than 14 complete months.


22



ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Overview

Ross Stores, Inc. operates two brands of off-price retail apparel and home fashion stores—Ross Dress for Less® (“Ross”) and dd’s DISCOUNTS®. Ross is the largest off-price apparel and home fashion chain in the United States with 1,480 locations in 38 states, the District of Columbia, and Guam, as of February 2, 2019. Ross offers first-quality, in-season, name brand and designer apparel, accessories, footwear, and home fashions for the entire family at savings of 20% to 60% off department and specialty store regular prices every day. We also operate 237 dd’s DISCOUNTS stores in 18 states as of February 2, 2019 that feature a more moderately-priced assortment of first-quality, in-season, name brand apparel, accessories, footwear, and home fashions for the entire family at savings of 20% to 70% off moderate department and discount store regular prices every day.

Our primary objective is to pursue and refine our existing off-price strategies to maintain and improve both profitability and financial returns over the long term. In establishing appropriate growth targets for our business, we closely monitor market share trends for the off-price industry and believe our share gains over the past few years were driven mainly by continued focus on value by consumers. Our sales and earnings gains in 2018 continued to benefit from efficient execution of our off-price model throughout all areas of our business. Our merchandise and operational strategies are designed to take advantage of the expanding market share of the off-price industry as well as the ongoing customer demand for name brand fashions for the family and home at compelling discounts every day.

We refer to our fiscal years ended February 2, 2019, February 3, 2018, and January 28, 2017 as fiscal 2018, fiscal 2017, and fiscal 2016, respectively. Fiscal 2017 was a 53-week year. Fiscal 2018 and 2016 were each 52-week years.


Results of Operations

The following table summarizes the financial results for fiscal 2018, 2017, and 2016:
 
 
2018

 
2017


2016

Sales
 
 
 
 
 
 
Sales (millions)
 
$
14,984

 
$
14,135

 
$
12,867

Sales growth
 
6.0
%
 
9.9
%
 
7.8
%
Comparable store sales growth (52-week basis)
 
4
%
 
4
%
 
4
%
 
 
 
 
 
 
 
Costs and expenses (as a percent of sales)
 
 
 
 
 
 
Cost of goods sold
 
71.6
%
 
71.0
%
 
71.3
%
Selling, general and administrative
 
14.8
%
 
14.5
%
 
14.7
%
Interest (income) expense, net
 
(0.1
)%
 
0.1
%
 
0.1
%
 
 
 
 
 
 
 
Earnings before taxes (as a percent of sales)
 
13.7
%
 
14.4
%
 
13.9
%

 
 
 
 
 
 
Net earnings (as a percent of sales)
 
10.6
%
 
9.6
%
 
8.7
%



23




Stores. Total stores open at the end of fiscal 2018, 2017, and 2016 were 1,717, 1,622, and 1,533, respectively. The number of stores at the end of fiscal 2018, 2017, and 2016 increased by 6%, 6%, and 6% from the respective prior years. Our expansion strategy is to open additional stores based on market penetration, local demographic characteristics, competition, expected store profitability, and the ability to leverage overhead expenses. We continually evaluate opportunistic real estate acquisitions and opportunities for potential new store locations. We also evaluate our current store locations and determine store closures based on similar criteria.
Store Count
2018

 
2017

 
2016

Beginning of the period
1,622

 
1,533

 
1,446

Opened in the period
99

 
96

 
93

Closed in the period
(4
)
 
(7
)
 
(6
)
End of the period
1,717

 
1,622

 
1,533

 
 
 
 
 
 
Selling square footage at the end of the period (000)
36,300

 
34,700

 
33,300


Sales. Sales for fiscal 2018 increased $0.8 billion, or 6.0%, compared to the prior year due to the opening of 95 net new stores during 2018 and a 4% increase in comparable store sales (defined as stores that have been open for more than 14 complete months). Sales for fiscal 2017 increased $1.3 billion, or 9.9%, compared to the prior year due to the opening of 89 net new stores during 2017 and a 4% increase in sales from comparable stores, and the impact of the 53rd week.
Our sales mix is shown below for fiscal 2018, 2017, and 2016:

 
2018
 
2017

 
2016

Ladies
 
26
%
 
27
%
 
28
%
Home Accents and Bed and Bath
 
26
%
 
26
%
 
25
%
Mens
 
14
%
 
13
%
 
13
%
Accessories, Lingerie, Fine Jewelry, and Fragrances
 
13
%
 
13
%
 
13
%
Shoes
 
13
%
 
13
%
 
13
%
Childrens
 
8
%
 
8
%
 
8
%
Total
 
100
%
 
100
%
 
100
%

 
 
 
 
 
 

We intend to address the competitive climate for off-price apparel and home goods by pursuing and refining our existing strategies and by continuing to strengthen our organization, diversify our merchandise mix, and more fully develop our systems to improve regional and local merchandise offerings. Although our strategies and store expansion program contributed to sales gains in fiscal 2018, 2017, and 2016, we cannot be sure that they will result in a continuation of sales growth or in an increase in net earnings.

Cost of goods sold. Cost of goods sold in fiscal 2018 increased $683.6 million compared to the prior year mainly due to increased sales from the opening of 95 net new stores during the year and a 4% increase in sales from comparable stores.

Cost of goods sold as a percentage of sales for fiscal 2018 increased approximately 55 basis points from the prior year primarily due to a 40 basis point increase in freight costs, a 15 basis point increase in distribution expenses, higher buying costs of 10 basis points, and higher occupancy costs of five basis points. These increases were partially offset by an increase of 15 basis points in merchandise gross margin.

Cost of goods sold in fiscal 2017 increased $868.9 million compared to the prior year mainly due to increased sales from the opening of 89 net new stores during the year and a 4% increase in sales from comparable stores, and the impact of the 53rd week.

Cost of goods sold as a percentage of sales for fiscal 2017 decreased approximately 25 basis points from the prior year primarily due to a 25 basis point increase in merchandise gross margin, a 25 basis point decrease in occupancy costs,

24



and a five basis point decrease in distribution expenses. The improvements were partially offset by a 25 basis point increase in freight costs and higher buying costs of five basis points.
We cannot be sure that the gross profit margins realized in fiscal 2018, 2017, and 2016 will continue in future years.
Selling, general and administrative expenses. For fiscal 2018, selling, general and administrative expenses (“SG&A”) increased $172.9 million compared to the prior year, mainly due to increased store operating costs reflecting the opening of 95 net new stores during the year. SG&A as a percentage of sales for fiscal 2018 increased by approximately 30 basis points compared to the prior year primarily due to higher wages.
For fiscal 2017, SG&A increased $153.3 million compared to the prior year, mainly due to increased store operating costs reflecting the opening of 89 net new stores during the year, and the impact of the 53rd week. SG&A as a percentage of sales for fiscal 2017 decreased by approximately 25 basis points compared to the prior year primarily due to leverage resulting from the 4% increase in comparable store sales.
Interest expense (income), net. In fiscal 2018, net interest income improved by $17.8 million compared to 2017 primarily due to an increase in interest income, and higher capitalized interest on information systems projects. In fiscal 2017, net interest expense decreased by $8.8 million compared to 2016 primarily due to an increase in interest income. The table below shows the components of interest expense and income for fiscal 2018, 2017, and 2016:

($000)
 
2018

 
2017

 
2016

Interest expense on long-term debt
 
$
17,900

 
$
18,578

 
$
18,573

Other interest expense
 
1,004

 
979

 
1,022

Capitalized interest
 
(2,497
)
 
(710
)
 
(26
)
Interest income
 
(26,569
)
 
(11,171
)
 
(3,081
)
Interest (income) expense, net
 
$
(10,162
)
 
$
7,676

 
$
16,488


Taxes on earnings. Our effective tax rates for fiscal 2018, 2017, and 2016 were approximately 23%, 33% and 37%, respectively. The effective tax rate represents the applicable combined federal and state statutory rates reduced by the federal benefit of state taxes deductible on federal returns. The effective rate is impacted by changes in laws, location of new stores, level of earnings, and the resolution of tax positions with various taxing authorities. We anticipate that our effective tax rate for fiscal 2019 will be between 23% and 24%.

In November 2018, we resolved uncertain federal tax positions related to fiscal 2015 with the Internal Revenue Service. As a result, we recognized a tax benefit of approximately $26.0 million or approximately $0.07 of earnings per share in the Consolidated Statement of Earnings.

In fiscal 2017, the Tax Cuts and Jobs Act (the “Tax Act” or "tax reform") was signed into law. The Tax Act made significant changes to U.S. corporate taxation including reducing the U.S. federal corporate income tax rate from 35% to 21% effective January 1, 2018, the last month of fiscal 2017. U.S. GAAP requires that the impact of tax legislation be recognized in the period in which the law was enacted. We applied a U.S. federal income tax rate of 21% for fiscal 2018 and a blended U.S. federal income tax rate of approximately 34% for fiscal 2017. This rate reduction resulted in an increase to our earnings per share of approximately $0.70 for fiscal 2018. For fiscal 2017, the rate reduction, along with the remeasurement of deferred taxes, resulted in an increase to our earnings per share of approximately $0.21.

Net earnings. Net earnings as a percentage of sales for fiscal 2018 were higher than in fiscal 2017, primarily due to lower taxes as a result of tax reform, and higher interest income, partially offset by higher cost of goods sold and higher SG&A expenses. Net earnings as a percentage of sales for fiscal 2017 were higher compared to fiscal 2016, primarily due to lower taxes due to tax reform, lower cost of goods sold, and lower SG&A expenses.


25



Earnings per share. Diluted earnings per share in fiscal 2018 was $4.26, which includes a per share benefit of approximately $0.70 from tax reform and $0.07 from the favorable resolution of a tax matter, compared to $3.55 in the prior year, which included a per share benefit of approximately $0.21 from tax reform and a $0.10 benefit from the 53rd week. The 20% increase in diluted earnings per share is attributable to an increase of approximately 16% in net earnings (which included a 14% impact from tax reform and a 2% impact from the favorable resolution of a tax matter) and 4% from the reduction in weighted average diluted shares outstanding, largely due to the repurchase of common stock under our stock repurchase program. Diluted earnings per share in fiscal 2017 was $3.55, which included a per share benefit of approximately $0.21 from tax reform and $0.10 from the 53rd week, compared to $2.83 in fiscal 2016. The 25% increase in diluted earnings per share was attributable to an increase of approximately 22% in net earnings (which included a 7% impact from tax reform and a 4% impact from the 53rd week) and 3% from the reduction in weighted average diluted shares outstanding, largely due to the repurchase of common stock under our stock repurchase program.

Financial Condition

Liquidity and Capital Resources

Our primary sources of funds for our business activities are cash flows from operations and short-term trade credit. Our primary ongoing cash requirements are for merchandise inventory purchases, payroll, rent, taxes, and capital expenditures in connection with new and existing stores, and investments in distribution centers, information systems, and buying and corporate offices. We also use cash to repurchase stock under our stock repurchase program and to pay dividends, and for the repayment of debt as it becomes due.

($ millions)
2018

 
2017 1

 
2016 1

Cash provided by operating activities
$
2,066.7

 
$
1,681.3

 
$
1,558.9

Cash used in investing activities
(410.4
)
 
(354.8
)
 
(296.2
)
Cash used in financing activities
(1,531.5
)
 
(1,149.4
)
 
(916.1
)
Net increase in cash, cash equivalents, and restricted cash and cash equivalents
$
124.8

 
$
177.1

 
$
346.6


1 As the result of the adoption of ASU 2016-18, Statement of Cash Flow (Topic 230): Restricted Cash, the prior year amounts were retrospectively adjusted. See Note A.

Operating Activities

Net cash provided by operating activities was $2,066.7 million, $1,681.3 million, and $1,558.9 million in fiscal 2018, 2017, and 2016, respectively, and was primarily driven by net earnings excluding non-cash expenses for depreciation and amortization and for deferred taxes. Our primary source of operating cash flow is the sale of our merchandise inventory. We regularly review the age and condition of our merchandise and are able to maintain current merchandise inventory in our stores through replenishment processes and liquidation of slower-moving merchandise through clearance markdowns.

The increase in cash flow from operating activities in 2018 compared to fiscal 2017 was primarily driven by higher earnings, the timing of merchandise receipts and related payments versus last year, and lower income tax payments. The timing of merchandise receipts and related payments versus last year resulted in higher accounts payable leverage (defined as accounts payable divided by merchandise inventory) which was 67%, 65%, and 68% as of February 2, 2019, February 3, 2018, and January 28, 2017, respectively.

The increase in cash flow from operating activities in fiscal 2017 compared to fiscal 2016 was primarily driven by higher earnings, partially offset by the timing of merchandise receipts and related payments versus the prior year, and by the timing of income taxes payments.

As a regular part of our business, packaway inventory levels will vary over time based on availability of compelling merchandise purchase opportunities in the marketplace. Packaway merchandise is purchased with the intent that it will be stored in our warehouses until a later date. The timing of the release of packaway inventory to our stores is principally driven by the product mix and seasonality of the merchandise, and its relation to our store merchandise assortment plans. As such, the aging of packaway varies by merchandise category and seasonality of purchase, but

26



typically packaway remains in storage less than six months. We expect to continue to take advantage of packaway inventory opportunities to maximize our ability to deliver bargains to our customers.

Changes in packaway inventory levels impact our operating cash flow. At the end of fiscal 2018, packaway inventory was 46% of total inventory compared to 49% and 49% at the end of fiscal 2017 and 2016, respectively.

Investing Activities

Net cash used in investing activities was $410.4 million, $354.8 million, and $296.2 million in fiscal 2018, 2017, and 2016, respectively. The increase in cash used for investing activities in fiscal 2018 compared to fiscal 2017 and fiscal 2016 was primarily due to an increase in our capital expenditures.

In fiscal 2018, 2017, and 2016, our capital expenditures were $413.9 million, $371.4 million, and $297.9 million, respectively. Our capital expenditures include costs to build, expand, and improve distribution centers, open new stores and improve existing stores, and for various other expenditures related to our information technology systems, buying, and corporate offices. The increase in capital expenditures in fiscal 2018 compared to fiscal 2017 was primarily due to investments in our distribution centers, and information technology infrastructure investments for our stores, buying, corporate offices, and transportation. The increase in capital expenditures in fiscal 2017 compared to fiscal 2016 was primarily due to information technology infrastructure investments for our stores, buying, and corporate offices. We opened 99, 96, and 93 new stores in fiscal 2018, 2017, and 2016, respectively.

In November 2017, we entered into a sale-leaseback transaction for one of our previously owned stores and received net cash proceeds of $16.0 million, recognized a gain on sale of $6.3 million, and deferred the residual $7.5 million gain over the remaining ten-year lease term.
Our capital expenditures over the last three years are set forth in the table below:
($ millions)
 
2018

 
2017

 
2016

New stores
 
$
134.5

 
$
137.1

 
$
117.7

Existing stores
 
130.5

 
126.0

 
90.3

Information systems, corporate, and other
 
84.9

 
66.4

 
48.5

Distribution and transportation
 
64.0

 
41.9

 
41.4

Total capital expenditures
 
$
413.9

 
$
371.4

 
$
297.9

We are forecasting approximately $600 million in capital expenditures for fiscal year 2019 to fund costs for fixtures and leasehold improvements to open new Ross and dd’s DISCOUNTS stores, the upgrade or relocation of existing stores, investments in information technology systems, initial investment in our next distribution center, and for various other expenditures related to our stores, distribution centers, buying and corporate offices. We expect to fund capital expenditures with available cash and cash flows from operations.

Financing Activities

Net cash used in financing activities was $1,531.5 million, $1,149.4 million, and $916.1 million in fiscal 2018, 2017, and 2016, respectively. During fiscal 2018, 2017, and 2016, our liquidity and capital requirements were provided by available cash and cash flows from operations.

In February 2017, our Board of Directors approved a two-year $1.75 billion stock repurchase program through fiscal 2018. In March 2018, our Board of Directors approved an increase in the stock repurchase authorization for fiscal 2018 by $200 million to $1.075 billion, up from the previously available $875 million.

We repurchased 12.5 million, 13.5 million, and 11.6 million shares of common stock for aggregate purchase prices of approximately $1,075 million, $875 million, and $700 million in fiscal 2018, 2017, and 2016, respectively. We also acquired 0.7 million, 0.7 million, and 0.7 million shares in fiscal 2018, 2017, and 2016, respectively, of treasury stock from our employee stock equity compensation programs, for aggregate purchase prices of approximately $54.4 million, $45.4 million, and $43.3 million during fiscal 2018, 2017, and 2016, respectively.


27



In March 2019, our Board of Directors approved a new, two-year $2.55 billion stock repurchase program through fiscal 2020.
On March 5, 2019, our Board of Directors declared a quarterly cash dividend of $0.255 per common share, payable on March 29, 2019. Our Board of Directors declared cash dividends of $0.225 per common share in March, May, August, and November 2018, cash dividends of $0.160 per common share in February, May, August, and November 2017, and cash dividends of $0.135 per common share in March, May, August, and November 2016.
During fiscal 2018, 2017, and 2016, we paid dividends of $337.2 million, $247.5 million, and $214.6 million, respectively.

On December 13, 2018, we repaid at maturity the $85 million principal amount of the Series A 6.38% unsecured Senior Notes.

Short-term trade credit represents a significant source of financing for merchandise inventory. Trade credit arises from customary payment terms and trade practices with our vendors. We regularly review the adequacy of credit available to us from all sources and expect to be able to maintain adequate trade credit, bank lines, and other credit sources to meet our capital and liquidity requirements, including lease payment obligations, in 2019.

Our existing $600 million unsecured revolving credit facility expires in April 2021 and contains a $300 million sublimit for issuance of standby letters of credit (subject to increase in proportion to any increase in the size of the credit facility). The facility also contains an option allowing us to increase the size of our revolving credit facility by up to an additional $200 million, with the agreement of the lenders. Interest on any borrowings under this facility is based on LIBOR plus an applicable margin (currently 100 basis points) and is payable quarterly and upon maturity. As of February 2, 2019, we had no borrowings or standby letters of credit outstanding on this facility and our $600 million credit facility remains in place and available.

The revolving credit facility is subject to a financial leverage ratio covenant. As of February 2, 2019, we were in compliance with this covenant.

We estimate that existing cash balances, cash flows from operations, bank credit lines, and trade credit are adequate to meet our operating cash needs and to fund our planned capital investments, repayment of debt, common stock repurchases, and quarterly dividend payments for at least the next twelve months.

Contractual Obligations

The table below presents our significant contractual obligations as of February 2, 2019:
 
Less than
1 year

 
1 - 3
years

 
3 - 5
years

 
After 5
years

 
Total¹

($000)
 
 
 
 
Senior notes
$

 
$
65,000

 
$

 
$
250,000

 
$
315,000

Interest payment obligations
12,682

 
25,364

 
16,875

 
8,438

 
63,359

Operating leases (rent obligations)
549,929

 
1,067,555

 
750,137

 
621,057

 
2,988,678

New York buying office ground lease²
5,883

 
12,835

 
13,898

 
954,616

 
987,232

Purchase obligations
2,528,656

 
33,405

 
8,546

 
806

 
2,571,413

Total contractual obligations
$
3,097,150

 
$
1,204,159

 
$
789,456

 
$
1,834,917

 
$
6,925,682


1We have a $77.9 million liability for unrecognized tax benefits that is included in Other long-term liabilities on our Consolidated Balance Sheets. This liability is excluded from the schedule above as the timing of payments cannot be reasonably estimated.

²Our New York buying office building is subject to a 99-year ground lease.

Senior notes. As of February 2, 2019, we had outstanding unsecured 3.375% Senior Notes due September 2024 with an aggregate principal amount of $250 million. Interest on the 2024 Notes is payable semi-annually.

As of February 2, 2019, we also had outstanding Series B unsecured Senior Notes in the aggregate principal amount of $65 million, held by various institutional investors. The Series B notes are due in December 2021 and bear interest at a rate of 6.53%. Borrowings under these Senior Notes are subject to certain financial covenants, including interest coverage and other financial ratios. As of February 2, 2019, we were in compliance with those covenants.

28




The 2024 Notes, and Series B Senior Notes are subject to prepayment penalties for early payment of principal.

Off-Balance Sheet Arrangements

Operating leases. We currently lease all but two of our store locations. We also lease five warehouse facilities and two buying offices. In addition, we have a ground lease related to our New York buying office. Except for certain leasehold improvements and equipment, these leased locations do not represent long-term capital investments.

Two of our leased warehouses are in Carlisle, Pennsylvania with leases expiring in 2019 and 2020, one is in Fort Mill, South Carolina, with the lease expiring in 2024, one is in Rock Hill, South Carolina, with the lease expiring in 2028, and one is in Shafter, California, with the lease expiring in 2029. All of the warehouse leases contain renewal provisions.

We currently lease approximately 103,000 and 5,000 square feet of office space for our Los Angeles and Boston buying offices, respectively. The lease terms for these facilities expire in 2022 and 2020, respectively, and contain renewal provisions.

Purchase obligations. As of February 2, 2019 we had purchase obligations of approximately $2.6 billion. These purchase obligations primarily consist of merchandise inventory purchase orders, commitments related to construction projects, store fixtures and supplies, and information technology services, transportation, and maintenance contracts.

Standby letters of credit and collateral trust. We use standby letters of credit outside of our revolving credit facility in addition to a funded trust to collateralize our insurance obligations. As of February 2, 2019 and February 3, 2018, we had $7.3 million and $8.7 million, respectively, in standby letters of credit outstanding and $58.3 million and $57.1 million, respectively, in a collateral trust. The standby letters of credit are collateralized by restricted cash and the collateral trust consists of restricted cash, cash equivalents, and investments.

Trade letters of credit. We had $13.3 million and $20.7 million in trade letters of credit outstanding at February 2, 2019 and February 3, 2018, respectively.

Effects of inflation or deflation. We do not consider the effects of inflation or deflation to be material to our financial position and results of operations.

Other

Critical Accounting Policies
The preparation of our consolidated financial statements requires our management to make estimates and assumptions that affect the reported amounts. These estimates and assumptions are evaluated on an ongoing basis and are based on historical experience and on various other factors that management believes to be reasonable. We believe the following critical accounting policies describe the more significant judgments and estimates used in the preparation of our consolidated financial statements and are not intended to be a comprehensive list of all of our accounting policies.
In many cases, the accounting treatment of a particular transaction is specifically dictated by Generally Accepted Accounting Principles (“GAAP”), with no need for management’s judgment in their application. There are also areas in which management’s judgment in selecting one alternative accounting principle over another would not produce a materially different result. See our audited consolidated financial statements and notes thereto under Item 8 in this Annual Report on Form 10-K, which contain descriptions of our accounting policies and other disclosures required by GAAP.
Merchandise inventory. Our merchandise inventory is stated at the lower of cost (determined using a weighted average basis) or net realizable value. We purchase inventory that can either be shipped to stores or processed as packaway merchandise with the intent that it will be warehoused and released to stores at a later date. The timing of the release of packaway inventory to our stores is principally driven by the product mix and seasonality of the merchandise, and its relation to the Company’s store merchandise assortment plans. As such, the aging of packaway varies by merchandise category and seasonality of purchase, but typically packaway remains in storage less than six months. Packaway inventory accounted for approximately 46%, 49%, and 49% of total inventories as of February 2, 2019, February 3, 2018, and January 28, 2017, respectively. Merchandise inventory includes acquisition, processing, and storage costs related to packaway inventory.

29



Included in the carrying value of our merchandise inventory is a provision for shortage. The shortage reserve is based on historical shortage rates as evaluated through our annual physical merchandise inventory counts and cycle counts. If actual market conditions, markdowns, or shortage are less favorable than those projected by us, or if sales of the merchandise inventory are more difficult than anticipated, additional merchandise inventory write-downs may be required.
Long-lived assets. We review our long-lived assets for a potential impairment charge when events or changes in circumstances indicate that the carrying amount of a long-lived asset may not be recoverable based on estimated future cash flows. If analysis of the undiscounted cash flow of an asset group was less than the carrying value of the asset group, an impairment loss would be recognized to write the asset group down to its fair value. If our actual results differ materially from projected results, an impairment charge may be required in the future. In the course of performing our annual analysis, we determined that no long-lived asset impairment charge was required for fiscal 2018, 2017, or 2016.
Lease accounting. When a lease contains “rent holidays” or requires fixed escalations of the minimum lease payments, we record rental expense on a straight-line basis over the term of the lease and the difference between the average rental amount charged to expense and the amount payable under the lease is recorded as deferred rent. We begin recording rent expense on the lease possession date. Tenant improvement allowances are amortized over the lease term. Changes in deferred rent and tenant improvement allowances are included as a component of operating activities in the Consolidated Statements of Cash Flows. See "Recently issued accounting standards" below.
Insurance obligations. We use a combination of insurance and self-insurance for a number of risk management activities, including workers’ compensation, general liability, and employee-related health care benefits. Our self-insurance and deductible liability is determined actuarially, based on claims filed and an estimate of claims incurred but not reported. Should a greater amount of claims occur compared to what is estimated or the costs of medical care increase beyond what was anticipated, our recorded reserves may not be sufficient and additional charges could be required.
Income taxes. We account for our uncertain tax positions in accordance with Accounting Standards Codification (“ASC”) 740. We are required to make assumptions and judgments regarding our income tax exposures. Our policy is to recognize interest and/or penalties related to all tax positions in income tax expense. To the extent that accrued interest and penalties do not ultimately become payable, amounts accrued will be reduced and reflected as a reduction of the overall income tax provision in the period that such determination is made.

Recently issued accounting standards. We consider the applicability and impact of all ASUs issued by the FASB. ASUs not listed below were assessed and determined to be either not applicable or are expected to have minimal impact on our consolidated financial results.

In February 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2016-02, Leases (Topic 842), as amended. The ASU requires balance sheet recognition for all leases with lease terms greater than one year including a lease liability, which is a lessee's obligation to make lease payments arising from a lease, measured on a discounted basis; and a right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term. We plan to adopt the new leases standard effective February 3, 2019 using the optional transition method on a modified retrospective basis by recognizing a cumulative-effect adjustment to the opening balance of retained earnings and do not plan to restate comparative periods. In addition, we do not plan to elect the transitional package of practical expedients or the use of hindsight upon adoption. Upon the adoption of the ASU, we do not expect to record a right-of-use asset and related lease liability for leases with an initial term of 12 months or less, and plan to account for lease and non-lease components as a single lease component.

We are finalizing the expected effect adoption of this new guidance will have on our consolidated financial statements. Our current estimate of lease liabilities based on the present value of the remaining minimum rental payments, using discount rates as of the effective date, and the corresponding right-of-use assets, is approximately $2.9 billion. The expected cumulative-effect adjustment to beginning retained earnings is a decrease of approximately $20 million primarily related to the write-off of previously capitalized initial direct costs that are no longer capitalized under the ASU, partially offset by the write-off of the deferred gain on a previous sale-leaseback transaction that meets the sale definition under the ASU. We do not believe adoption of this ASU will have a significant impact to our consolidated statements of earnings, stockholders’ equity, and cash flows.


30



Recently adopted accounting standards. In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Accounting Standards Codification "ASC" 606) which, along with subsequent amendments, supersedes the revenue recognition requirements in “Revenue Recognition (ASC 605).” This guidance provides a five-step analysis of transactions to determine when and how revenue is recognized and requires entities to recognize revenue when the customer obtains control of promised goods or services in an amount that reflects the consideration the entity expects to receive in exchange for those goods or services. We adopted ASC 606 as of February 4, 2018, using the modified retrospective method. Results for reporting periods beginning on or after February 4, 2018 are presented under ASC 606, while prior period amounts were not adjusted and continue to be reported in accordance with ASC 605. Upon adoption of ASC 606, we recorded a cumulative-effect adjustment to increase beginning retained earnings by $20 million as of February 4, 2018, primarily due to the change in the timing of the recognition of stored value card breakage. The impact of applying ASC 606 was not material to our consolidated financial statements for the year ended February 2, 2019.

In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash. ASU 2016-18 requires restricted cash and restricted cash equivalents be included with cash and cash equivalents when reconciling the total beginning and ending amounts on the statement of cash flows. The standard also requires companies who report cash and restricted cash separately on the balance sheet to reconcile those amounts to the statement of cash flows. We adopted ASU 2016-18 as of February 4, 2018, using the retrospective method.

In March 2016, the FASB issued ASU 2016-09, Compensation - Stock Compensation (Topic 718) - Improvements to Employee Share-Based Payment Accounting. ASU 2016-09 provides for changes to accounting for stock compensation including 1) excess tax benefits and tax deficiencies related to share based payment awards will be recognized as income tax benefit or expense in the reporting period in which they occur (previously such amounts were recognized in additional paid-in capital); 2) excess tax benefits will be classified as an operating activity in the statement of cash flows; and 3) the option to elect to estimate forfeitures or account for them when they occur. The impact of recording excess tax benefits in income taxes in our consolidated statement of earnings may be material, depending upon our future stock price on vest date in relation to the fair value of awards on grant date and our future grants of stock-based compensation.

We adopted ASU 2016-09 in the first quarter of fiscal 2017, and elected to apply this adoption prospectively, except for forfeitures which we adopted on a modified retrospective basis. Accordingly, prior periods have not been adjusted. As a result of adoption, for the fiscal year ended February 3, 2018, we recognized $16.3 million of excess tax benefits related to stock-based payments as a reduction to our provision for income taxes. These items were historically recorded in additional paid-in capital. We also presented cash flows related to excess tax benefits as an operating activity in the Consolidated Statement of Cash Flows and elected to account for forfeitures as incurred beginning on January 29, 2017. The impact of this accounting policy election for forfeitures was a cumulative-effect adjustment to decrease retained earnings by $1.1 million as of January 29, 2017.

Forward-Looking Statements

Our Annual Report on Form 10-K for fiscal 2018, and information we provide in our Annual Report to Stockholders, press releases, and other investor communications including those on our corporate website, may contain a number of forward-looking statements regarding, without limitation, planned store growth, new markets, expected sales, projected earnings levels, capital expenditures, and other matters. These forward-looking statements reflect our then current beliefs, projections, and estimates with respect to future events and our projected financial performance, operations, and competitive position. The words “plan,” “expect,” “target,” “anticipate,” “estimate,” “believe,” “forecast,” “projected,” “guidance,” “looking ahead,” and similar expressions identify forward-looking statements.

Future economic and industry trends that could potentially impact revenue, profitability, and growth remain difficult to predict. Our forward-looking statements are subject to risks and uncertainties which could cause our actual results to differ materially from those forward-looking statements and our previous expectations and projections. Refer to Item 1A in this Annual Report on Form 10-K for a more complete discussion of risk factors for Ross and dd’s DISCOUNTS. The factors underlying our forecasts are dynamic and subject to change. As a result, any forecasts or forward-looking statements speak only as of the date they are given and do not necessarily reflect our outlook at any other point in time. We disclaim any obligation to update or revise these forward-looking statements.


31



ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are exposed to market risks, which primarily include changes in interest rates. We do not engage in financial transactions for trading or speculative purposes.
We occasionally use forward contracts to hedge against fluctuations in foreign currency prices. We had no outstanding forward contracts as of February 2, 2019.
Interest that is payable on our revolving credit facility is based on variable interest rates and is, therefore, affected by changes in market interest rates. As of February 2, 2019, we had no borrowings outstanding under our revolving credit facility.
As of February 2, 2019, we have one outstanding series of unsecured 6.53% Series B Senior Notes due December 2021 with an aggregate principal amount of $65 million. We also have unsecured 3.375% Senior Notes due September 2024 with an aggregate principal amount of $250 million. Interest that is payable on our Senior Notes is based on fixed interest rates and is therefore unaffected by changes in market interest rates.
Interest is receivable on our short- and long-term investments. Changes in interest rates may impact interest income recognized in the future, or the fair value of our investment portfolio.
A hypothetical 100 basis point increase or decrease in prevailing market interest rates would not have a material impact on our consolidated financial position, results of operations, cash flows, or the fair values of our short- and long-term investments as of and for the year ended February 2, 2019. We do not consider the potential losses in future earnings and cash flows from reasonably possible, near-term changes in interest rates to be material.


32



ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Consolidated Statements of Earnings

 
 
Year Ended

 
Year Ended

 
Year Ended

($000, except per share data)
 
February 2, 2019

 
February 3, 2018

 
January 28, 2017

Sales
 
$
14,983,541

 
$
14,134,732

 
$
12,866,757

 
 
 
 
 
 
 
Costs and Expenses
 
 
 
 
 
 
Cost of goods sold
 
10,726,277

 
10,042,638

 
9,173,705

Selling, general and administrative
 
2,216,550

 
2,043,698

 
1,890,408

Interest (income) expense, net
 
(10,162
)
 
7,676

 
16,488

Total costs and expenses
 
12,932,665

 
12,094,012

 
11,080,601

 
 
 
 
 
 
 
Earnings before taxes
 
2,050,876

 
2,040,720

 
1,786,156

Provision for taxes on earnings
 
463,419

 
677,967

 
668,502

Net earnings
 
$
1,587,457

 
$
1,362,753

 
$
1,117,654

 
 
 
 
 
 
 
Earnings per share
 
 
 
 
 
 
Basic
 
$
4.30

 
$
3.58

 
$
2.85

Diluted
 
$
4.26

 
$
3.55

 
$
2.83

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Weighted average shares outstanding (000)
 
 
 
 
 
 
Basic
 
369,533

 
381,174

 
392,124

Diluted
 
372,678

 
384,329

 
394,958

 
 
 
 
 
 
 
The accompanying notes are an integral part of these consolidated financial statements.


33



Consolidated Statements of Comprehensive Income

 
 
Year Ended

 
Year Ended

 
Year Ended

($000)
 
February 2, 2019

 
February 3, 2018

 
January 28, 2017

Net earnings
 
$
1,587,457

 
$
1,362,753

 
$
1,117,654

 
 
 
 
 
 
 
Other comprehensive income (loss):
 
 
 
 
 
 
Change in unrealized loss on investments, net of tax
 
(27
)
 
(64
)
 
(91
)
Comprehensive income
 
$
1,587,430

 
$
1,362,689

 
$
1,117,563

The accompanying notes are an integral part of these consolidated financial statements.

34



Consolidated Balance Sheets
($000, except share data)
February 2, 2019

 
February 3, 2018

Assets
 
 
 
Current Assets
 
 
 
Cash and cash equivalents
$
1,412,912

 
$
1,290,294

Short-term investments

 
512

Accounts receivable
96,711

 
87,868

Merchandise inventory
1,750,442

 
1,641,735

Prepaid expenses and other
143,954

 
130,748

Total current assets
3,404,019

 
3,151,157

 
 
 
 
Property and Equipment
 
 
 
Land and buildings
1,126,051

 
1,109,173

Fixtures and equipment
2,783,198

 
2,603,318

Leasehold improvements
1,175,921

 
1,093,634

Construction-in-progress
171,538

 
102,054

 
5,256,708

 
4,908,179

Less accumulated depreciation and amortization
2,781,507

 
2,525,715

Property and equipment, net
2,475,201

 
2,382,464

 
 
 
 
Long-term investments
125

 
712

Other long-term assets
194,346

 
187,718

Total assets
$
6,073,691

 
$
5,722,051

 
 
 
 
Liabilities and Stockholders’ Equity
 
 
 
Current Liabilities
 
 
 
Accounts payable
$
1,177,104

 
$
1,059,844

Accrued expenses and other
431,596

 
431,706

Accrued payroll and benefits
363,035

 
349,879

Income taxes payable
37,749

 

Current portion of long-term debt

 
84,973

Total current liabilities
2,009,484

 
1,926,402

 
 
 
 
Long-term debt
312,440

 
311,994

Other long-term liabilities
321,713

 
348,541

Deferred income taxes
124,308

 
85,806

 
 
 
 
Commitments and contingencies


 


 
 
 
 
Stockholders’ Equity
 
 
 
Common stock, par value $.01 per share
3,682

 
3,796

Authorized 1,000,000,000 shares
 
 
 
Issued and outstanding 368,242,000 and
 
 
 
379,618,000 shares, respectively
 
 
 
Additional paid-in capital
1,375,965

 
1,292,364

Treasury stock
(372,663
)
 
(318,279
)
Accumulated other comprehensive income

 
27

Retained earnings
2,298,762

 
2,071,400

Total stockholders’ equity
3,305,746

 
3,049,308

Total liabilities and stockholders’ equity
$
6,073,691

 
$
5,722,051

The accompanying notes are an integral part of these consolidated financial statements.

35



Consolidated Statements of Stockholders’ Equity
 
 
 
 
 
 
Additional paid-in capital

 
 
 
Accumulated
other comprehensive income (loss)

 
 
 
 
 
 
Common stock
 
 
Treasury stock

 
 
Retained earnings

 
 
(000)
 
Shares  

 
Amount

 
 
 
 
 
Total

Balance at January 30, 2016
 
402,339

 
$
4,023

 
$
1,122,329

 
$
(229,525
)
 
$
182

 
$
1,574,982

 
$
2,471,991

Net earnings
 

 

 

 

 

 
1,117,654

 
1,117,654

Unrealized investment loss, net
 

 

 

 

 
(91
)
 

 
(91
)
Common stock issued under stock
 
 
 
 
 
 
 
 
 
 
 
 
 
 
plans, net of shares
 
 
 
 
 
 
 
 
 
 
 
 
 
 
used for tax withholding
 
1,192

 
12

 
18,527

 
(43,321
)
 

 

 
(24,782
)
Tax benefit from equity issuance
 

 

 
23,331

 

 

 

 
23,331

Stock-based compensation
 

 

 
74,554

 

 

 

 
74,554

Common stock repurchased
 
(11,638
)
 
(116
)
 
(23,026
)
 

 

 
(676,858
)
 
(700,000
)
Dividends declared ($0.540 per share)
 

 

 

 

 

 
(214,640
)
 
(214,640
)
Balance at January 28, 2017
 
391,893

 
$
3,919

 
$
1,215,715

 
$
(272,846
)
 
$
91

 
$
1,801,138

 
$
2,748,017

Net earnings
 

 

 

 

 

 
1,362,753

 
1,362,753

Cumulative effect of adoption of
 
 
 
 
 
 
 
 
 
 
 
 
 
 
accounting standard
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(stock-compensation), net
 

 

 
1,789

 

 

 
(1,113
)
 
676

Unrealized investment loss, net
 

 

 

 

 
(64
)
 

 
(64
)
Common stock issued under stock
 
 
 
 
 
 
 
 
 
 
 
 
 
 
plans, net of shares
 
 
 
 
 
 
 
 
 
 
 
 
 
 
used for tax withholding
 
1,214

 
12

 
18,456

 
(45,433
)
 

 

 
(26,965
)
Stock-based compensation
 

 

 
87,417

 

 

 

 
87,417

Common stock repurchased
 
(13,489
)
 
(135
)
 
(31,013
)
 

 

 
(843,852
)
 
(875,000
)
Dividends declared ($0.640 per share)
 

 

 

 

 

 
(247,526
)
 
(247,526
)
Balance at February 3, 2018
 
379,618

 
$
3,796

 
$
1,292,364

 
$
(318,279
)
 
$
27

 
$
2,071,400

 
$
3,049,308

Net earnings
 

 

 

 

 

 
1,587,457

 
1,587,457

Cumulative effect of adoption of
 
 
 
 
 
 
 
 
 
 
 
 
 
 
accounting standard
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(revenue recognition), net
 

 

 

 

 

 
19,884

 
19,884

Unrealized investment loss, net