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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q
(Mark one)
☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended October 29, 2022
☐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)
Delaware94-1390387
(State or other jurisdiction of incorporation or(I.R.S. Employer Identification No.)
organization)
 
 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 classTrading symbolName of each exchange on which registered
Common stock,par value $.01ROSTNASDAQ Global Select Market

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 ý No o
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files).
Yes ý    No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the 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 ý     Accelerated filer o Non-accelerated filer o 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. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes ☐ No ☒

The number of shares of Common Stock, with $.01 par value, outstanding on November 11, 2022 was 344,371,009.
1

Ross Stores, Inc.
Form 10-Q
Table of Contents
Page
Item 1.
Condensed Consolidated Statements of Earnings–Three and nine months ended October 29, 2022 and October 30, 2021
Condensed Consolidated Statements of Comprehensive Income–Three and nine months ended October 29, 2022 and October 30, 2021
Condensed Consolidated Balance Sheets–October 29, 2022, January 29, 2022, and October 30, 2021
Condensed Consolidated Statements of Cash Flows–Nine months ended October 29, 2022 and October 30, 2021
Item 2.
Item 3.
Item 4.
Item 1.
Item 1A.
Item 2.
Item 6.

2

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

Condensed Consolidated Statements of Earnings
Three Months EndedNine Months Ended
($000, except stores and per share data, unaudited)October 29, 2022October 30, 2021October 29, 2022October 30, 2021
Sales$4,565,489 $4,574,541 $13,481,598 $13,895,595 
Costs and Expenses
Cost of goods sold3,424,046 3,326,004 10,020,027 9,935,271 
Selling, general and administrative693,367 725,761 2,029,926 2,118,602 
Interest (income) expense, net(2,802)18,744 25,561 56,500 
Total costs and expenses4,114,611 4,070,509 12,075,514 12,110,373 
Earnings before taxes450,878 504,032 1,406,084 1,785,222 
Provision for taxes on earnings108,842 119,002 341,086 429,455 
Net earnings$342,036 $385,030 $1,064,998 $1,355,767 
Earnings per share
Basic$1.00 $1.10 $3.09 $3.85 
Diluted$1.00 $1.09 $3.08 $3.82 
Weighted-average shares outstanding (000)
Basic342,120 351,071 344,686 352,308 
Diluted343,720 353,081 346,212 354,477 
Store count at end of period2,019 1,924 2,019 1,924 
The accompanying notes are an integral part of these condensed consolidated financial statements.
3

Condensed Consolidated Statements of Comprehensive Income
Three Months EndedNine Months Ended
($000, unaudited)October 29, 2022October 30, 2021October 29, 2022October 30, 2021
Net earnings$342,036 $385,030 $1,064,998 $1,355,767 
Other comprehensive income— — — — 
Comprehensive income
$342,036 $385,030 $1,064,998 $1,355,767 
The accompanying notes are an integral part of these condensed consolidated financial statements.
4

Condensed Consolidated Balance Sheets
($000, except share data, unaudited)October 29, 2022January 29, 2022October 30, 2021
Assets
Current Assets
Cash and cash equivalents$3,906,490 $4,922,365 $5,259,595 
Accounts receivable168,483 119,247 158,765 
Merchandise inventory2,494,002 2,262,273 2,231,242 
Prepaid expenses and other192,214 169,291 195,309 
Total current assets6,761,189 7,473,176 7,844,911 
Property and Equipment
Land and buildings1,491,927 1,240,246 1,194,125 
Fixtures and equipment3,882,127 3,425,762 3,357,986 
Leasehold improvements1,402,653 1,332,687 1,317,979 
Construction-in-progress171,185 574,333 506,903 
  6,947,892 6,573,028 6,376,993 
Less accumulated depreciation and amortization3,939,154 3,674,501 3,592,707 
Property and equipment, net3,008,738 2,898,527 2,784,286 
Operating lease assets3,101,882 3,027,272 3,032,175 
Other long-term assets228,286 241,281 254,362 
Total assets$13,100,095 $13,640,256 $13,915,734 
Liabilities and Stockholders’ Equity
Current Liabilities
Accounts payable$1,927,757 $2,372,302 $2,652,881 
Accrued expenses and other616,753 613,089 625,426 
Current operating lease liabilities656,837 630,517 620,675 
Accrued payroll and benefits251,479 588,772 512,336 
Income taxes payable11,404 10,249 — 
Current portion of long-term debt— — 64,991 
Total current liabilities3,464,230 4,214,929 4,476,309 
Long-term debt2,455,460 2,452,325 2,451,283 
Non-current operating lease liabilities2,596,221 2,539,297 2,551,162 
Other long-term liabilities223,162 236,013 296,819 
Deferred income taxes214,022 137,642 156,944 
Commitments and contingencies
Stockholders’ Equity
Common stock, par value $.01 per share
   Authorized 1,000,000,000 shares
   Issued and outstanding 344,808,000, 351,720,000
   and 353,694,000 shares, respectively
3,448 3,517 3,537 
Additional paid-in capital1,793,265 1,717,530 1,681,802 
Treasury stock(581,267)(535,895)(535,642)
Retained earnings2,931,554 2,874,898 2,833,520 
Total stockholders’ equity4,147,000 4,060,050 3,983,217 
Total liabilities and stockholders’ equity$13,100,095 $13,640,256 $13,915,734 
The accompanying notes are an integral part of these condensed consolidated financial statements.
5

Condensed Consolidated Statements of Stockholders’ Equity
Nine Months Ended October 29, 2022
Common stockAdditional
paid-in
capital		Treasury
stock		Retained
earnings
(000)Shares  AmountTotal
Balance at January 29, 2022351,720 $3,517 $1,717,530 $(535,895)$2,874,898 $4,060,050 
Net earnings— — — — 338,445 338,445 
Common stock issued under stock
plans, net of shares
used for tax withholding1,131 11 5,906 (38,113)— (32,196)
Stock-based compensation— — 36,071 — — 36,071 
Common stock repurchased(2,524)(25)(10,266)— (229,274)(239,565)
Dividends declared ($0.310 per share)
— — — — (108,908)(108,908)
Balance at April 30, 2022350,327 $3,503 $1,749,241 $(574,008)$2,875,161 $4,053,897 
Net earnings— — — — 384,517 384,517 
Common stock issued under stock
plans, net of shares
used for tax withholding153 1 5,974 (521)— 5,454 
Stock-based compensation— — 26,803 — — 26,803 
Common stock repurchased(2,928)(29)(12,594)— (222,812)(235,435)
Dividends declared ($0.310 per share)
— — — — (108,285)(108,285)
Balance at July 30, 2022347,552 $3,475 $1,769,424 $(574,529)$2,928,581 $4,126,951 
Net earnings— — — — 342,036 342,036 
Common stock issued under stock
plans, net of shares
used for tax withholding47 1 6,405 (6,738)— (332)
Stock-based compensation— — 29,493 — — 29,493 
Common stock repurchased(2,791)(28)(12,057)— (231,608)(243,693)
Dividends declared ($0.310 per share)
— — — — (107,455)(107,455)
Balance at October 29, 2022344,808 $3,448 $1,793,265 $(581,267)$2,931,554 $4,147,000 
The accompanying notes are an integral part of these condensed consolidated financial statements.


6

Condensed Consolidated Statements of Stockholders’ Equity
Nine Months Ended October 30, 2021
Common stockAdditional
paid-in
capital		Treasury
stock		Retained
earnings
(000)Shares  AmountTotal
Balance at January 30, 2021356,503 $3,565 $1,579,824 $(478,550)$2,185,801 $3,290,640 
Net earnings— — — — 476,479 476,479 
Common stock issued under stock
plans, net of shares
used for tax withholding614 6 6,057 (47,378)— (41,315)
Stock-based compensation— — 28,674 — — 28,674 
Dividends declared ($0.285 per share)
— — — — (101,657)(101,657)
Balance at May 01, 2021357,117 $3,571 $1,614,555 $(525,928)$2,560,623 $3,652,821 
Net earnings— — — — 494,258 494,258 
Common stock issued under stock
plans, net of shares
used for tax withholding30 — 6,471 (1,637)— 4,834 
Stock-based compensation— — 29,584 — — 29,584 
Common stock repurchased(1,449)(14)(5,492)— (170,278)(175,784)
Dividends declared ($0.285 per share)
— — — — (101,727)(101,727)
Balance at July 31, 2021355,698 $3,557 $1,645,118 $(527,565)$2,782,876 $3,903,986 
Net earnings— — — — 385,030 385,030 
Common stock issued under stock
plans, net of shares
used for tax withholding97 1 6,091 (8,077)— (1,985)
Stock-based compensation— — 38,517 — — 38,517 
Common stock repurchased(2,101)(21)(7,924)— (233,250)(241,195)
Dividends declared ($0.285 per share)
— — — — (101,136)(101,136)
Balance at October 30, 2021353,694 $3,537 $1,681,802 $(535,642)$2,833,520 $3,983,217 
The accompanying notes are an integral part of these condensed consolidated financial statements.




7

Condensed Consolidated Statements of Cash Flows
Nine Months Ended
($000, unaudited)October 29, 2022October 30, 2021
Cash Flows From Operating Activities
Net earnings$1,064,998 $1,355,767 
Adjustments to reconcile net earnings to net cash provided
by operating activities:
Depreciation and amortization290,565 262,139 
Stock-based compensation92,367 96,775 
Deferred income taxes76,380 35,077 
Change in assets and liabilities:
Merchandise inventory(231,729)(722,260)
Other current assets(72,079)(50,139)
Accounts payable(452,968)422,277 
Other current liabilities(308,202)160,984 
Income taxes3,397 (60,442)
Operating lease assets and liabilities, net8,634 4,767 
Other long-term, net1,304 (1,292)
Net cash provided by operating activities472,667 1,503,653 
Cash Flows From Investing Activities
Additions to property and equipment(417,901)(377,916)
Net cash used in investing activities(417,901)(377,916)
Cash Flows From Financing Activities
Issuance of common stock related to stock plans18,298 18,626 
Treasury stock purchased(45,372)(57,092)
Repurchase of common stock(718,693)(416,979)
Dividends paid(324,648)(304,520)
Net cash used in financing activities(1,070,415)(759,965)
Net (decrease) increase in cash, cash equivalents, and restricted cash and cash equivalents(1,015,649)365,772 
Cash, cash equivalents, and restricted cash and cash equivalents:
Beginning of period4,982,382 4,953,769 
End of period$3,966,733 $5,319,541 
Supplemental Cash Flow Disclosures
Interest paid$80,316 $82,209 
Income taxes paid $261,309 $454,821 
The accompanying notes are an integral part of these condensed consolidated financial statements.
8

Notes to Condensed Consolidated Financial Statements

Three and Nine Months Ended October 29, 2022 and October 30, 2021
(Unaudited)

Note A: Summary of Significant Accounting Policies

Basis of presentation. The accompanying unaudited interim condensed consolidated financial statements have been prepared from the records of Ross Stores, Inc. and subsidiaries (the “Company”) without audit and, in the opinion of management, include all adjustments (consisting of only normal, recurring adjustments) necessary to present fairly the Company’s financial position as of October 29, 2022 and October 30, 2021, the results of operations, comprehensive income, and stockholders’ equity for the three and nine month periods ended October 29, 2022 and October 30, 2021, and cash flows for the nine month periods ended October 29, 2022 and October 30, 2021. The Condensed Consolidated Balance Sheet as of January 29, 2022, presented herein, has been derived from the Company’s audited consolidated financial statements for the fiscal year then ended.

Certain information and disclosures normally included in the notes to annual consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) have been condensed or omitted for purposes of these interim condensed consolidated financial statements. The interim condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements, including notes thereto, contained in the Company’s Annual Report on Form 10-K for the year ended January 29, 2022.

The results of operations, comprehensive income, and stockholders’ equity for the three and nine month periods ended October 29, 2022 and October 30, 2021, and cash flows for the nine month periods ended October 29, 2022 and October 30, 2021 presented herein are not necessarily indicative of the results to be expected for the full fiscal year.

Use of accounting estimates. The preparation of financial statements in conformity with GAAP requires the Company to make estimates and assumptions that affect the reported amounts of assets, liabilities, and disclosures of contingent assets and liabilities at the date of the condensed consolidated financial statements, and the reported amounts of revenue and expenses during the reporting period. The Company’s significant accounting estimates include valuation reserves for inventory, packaway and other inventory carrying costs, useful lives of fixed assets, insurance reserves, reserves for uncertain tax positions, and legal claims. The uncertainties and potential impacts from inflation, the Russia-Ukraine conflict, and the ongoing COVID-19 pandemic increase the challenge of making these estimates; actual results could differ materially from the Company’s estimates.

Revenue recognition. The following sales mix table disaggregates revenue by merchandise category for the three and nine month periods ended October 29, 2022 and October 30, 2021:

Three Months EndedNine Months Ended
October 29, 2022

October 30, 2021October 29, 2022October 30, 2021
Ladies25 %26 %25 %26 %
Home Accents and Bed and Bath25 %25 %25 %25 %
Men’s15 %15 %15 %14 %
Accessories, Lingerie, Fine Jewelry, and Cosmetics13 %13 %13 %14 %
Shoes13 %11 %13 %12 %
Children’s9 %10 %9 %9 %
Total100 %100 %100 %100 %

Cash and cash equivalents. Cash equivalents consist of highly liquid, fixed income instruments purchased with an original maturity of three months or less.

9

Restricted cash, cash equivalents, and investments. Restricted cash, cash equivalents, and investments serve as collateral for certain insurance obligations. These restricted funds are invested in bank deposits, money market mutual funds, U.S. Government and agency securities, and corporate securities and cannot be withdrawn from the Company’s account without the prior written consent of the secured parties. The classification between current and long-term is based on the timing of expected payments of the obligations.

The following table provides a reconciliation of cash, cash equivalents, and restricted cash and cash equivalents in the Condensed Consolidated Balance Sheets that reconcile to the amounts shown on the Condensed Consolidated Statements of Cash Flows:
($000)October 29, 2022January 29, 2022October 30, 2021
Cash and cash equivalents$3,906,490 $4,922,365 $5,259,595 
Restricted cash and cash equivalents included in:
  Prepaid expenses and other11,446 11,403 10,790 
  Other long-term assets48,797 48,614 49,156 
Total restricted cash and cash equivalents60,243 60,017 59,946 
Total cash, cash equivalents, and restricted cash and cash equivalents$3,966,733 $4,982,382 $5,319,541 
Property and equipment. As of October 29, 2022 and October 30, 2021, the Company had $30.2 million and $14.4 million, respectively, of property and equipment purchased but not yet paid. These purchases are included in Property and equipment, Accounts payable, and Accrued expenses and other in the accompanying Condensed Consolidated Balance Sheets.

Operating leases. Supplemental cash flow disclosures related to operating lease assets obtained in exchange for operating lease liabilities (includes new leases and remeasurements or modifications of existing leases) were as follows:

Three Months EndedNine Months Ended
($000)October 29, 2022October 30, 2021October 29, 2022October 30, 2021
Operating lease assets obtained in exchange for operating lease liabilities
$235,186 $208,767 $549,267 $395,428 

Cash dividends. The Company’s Board of Directors declared a cash dividend of $0.310 per common share in March, May, and August 2022, and $0.285 per common share in March, May, August, and November 2021.

On November 16, 2022, the Company’s Board of Directors declared a quarterly cash dividend of $0.310 per common share, payable on December 30, 2022.

Stock repurchase program. In March 2022, the Company's Board of Directors approved a new two-year program to repurchase up to $1.9 billion of the Company's common stock through fiscal 2023. This new program replaced the previous $1.5 billion stock repurchase program, effective at the end of fiscal 2021 (at which time the Company had repurchased $650 million of stock under the $1.5 billion program). The Company repurchased 8.2 million shares of common stock for $718.7 million during the nine month period ended October 29, 2022. The Company repurchased 3.5 million shares of common stock for $417.0 million during the nine month period ended October 30, 2021.

Litigation, claims, and assessments. Like many retailers, the Company has been named in class/representative action lawsuits, primarily in California, alleging violation of wage and hour/employment laws and consumer protection laws. Class/representative action litigation remains pending as of October 29, 2022.

The Company is also party to various other legal and regulatory proceedings arising in the normal course of business. Actions filed against the Company may include commercial, product and product safety, consumer, intellectual property, environmental, and labor and employment-related claims, including lawsuits in which private plaintiffs or governmental agencies allege that the Company violated federal, state, and/or local laws. Actions against the Company are in various procedural stages. Many of these proceedings raise factual and legal issues and are subject to uncertainties.

10

In the opinion of management, the resolution of pending class/representative action litigation and other currently pending legal and regulatory proceedings will not have a material adverse effect on the Company’s financial condition, results of operations, or cash flows.

Recently issued accounting standards. In September 2022, the FASB issued Accounting Standards Update (ASU) 2022-04, Liabilities — Supplier Finance Programs (Subtopic 405-50): Disclosure of Supplier Finance Program Obligations, to enhance transparency about an entity's use of supplier finance programs. The ASU requires enhanced and additional disclosures about the key terms of supplier finance programs including a description of where in the financial statements any related amounts are presented. The initial guidance in the ASU will be effective for the Company for interim and annual reporting periods beginning after December 15, 2022, with early adoption permitted. The Company is currently evaluating the impact of this guidance on its disclosures in the consolidated financial statements.

In November 2021, the FASB issued ASU 2021-10, Government Assistance (Topic 832): Disclosures by Business Entities about Government Assistance, to increase the transparency of the effects of government assistance, including disclosure of the types of assistance an entity receives, an entity’s method of accounting for government assistance, and the effect of government assistance on an entity’s financial statements. The guidance in this ASU will be effective for the Company for its fiscal 2022 Form 10-K. The Company is currently evaluating the impact of this guidance on its disclosures in the consolidated financial statements.

Note B: Fair Value Measurements

Accounting standards pertaining to fair value measurements establish a three-tier fair value hierarchy which prioritizes the inputs used in measuring fair value. The inputs used to measure fair value include: Level 1, observable inputs such as quoted prices in active markets; Level 2, inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3, unobservable inputs in which little or no market data exists. This fair value hierarchy requires the Company to develop its own assumptions, maximize the use of observable inputs, and minimize the use of unobservable inputs when measuring fair value. Corporate, U.S. government and agency, and mortgage-backed securities are classified within Level 1 or Level 2 because these securities are valued using quoted market prices or alternative pricing sources and models utilizing market observable inputs.

The fair value of the Company’s financial instruments are as follows:

($000)October 29, 2022January 29, 2022October 30, 2021
Cash and cash equivalents (Level 1)
$3,906,490 $4,922,365 $5,259,595 
Restricted cash and cash equivalents (Level 1)
$60,243 $60,017 $59,946 

The underlying assets in the Company’s non-qualified deferred compensation program as of October 29, 2022, January 29, 2022, and October 30, 2021 (included in Other long-term assets and in Other long-term liabilities) primarily consist of participant-directed money market, stock, and bond funds. The fair value measurement for funds with quoted market prices in active markets (Level 1) are as follows:

($000)October 29, 2022January 29, 2022October 30, 2021
Level 1$148,849 $163,891 $178,966 

Note C: Management Incentive Plan and Stock-Based Compensation

The Company has incentive compensation programs which provide cash incentive bonuses and performance share awards to key management and employees based on Company and individual performance.

For fiscal 2022, the Compensation Committee of the Board of Directors established the performance measures for determining cash incentive bonuses and performance share awards based on profitability-based performance goals.

For fiscal 2021, the Compensation Committee of the Board of Directors established the performance measures for determining cash incentive bonuses and performance share awards based on profitability-based performance goals and the attainment of specific management priorities related to business challenges from the COVID-19 pandemic, as measured and approved by the Compensation Committee.
11


Stock-based compensation. For the three and nine month periods ended October 29, 2022 and October 30, 2021, the Company recognized stock-based compensation expense as follows:

Three Months EndedNine Months Ended
($000)October 29, 2022October 30, 2021October 29, 2022October 30, 2021
Restricted stock$22,177 $18,841 $63,337 $53,487 
Performance awards6,186 18,601 25,800 40,000 
Employee stock purchase plan1,130 1,075 3,230 3,288 
Total$29,493 $38,517 $92,367 $96,775 

Total stock-based compensation expense recognized in the Company’s Condensed Consolidated Statements of Earnings for the three and nine month periods ended October 29, 2022 and October 30, 2021, is as follows:

Three Months EndedNine Months Ended
Statements of Earnings Classification ($000)October 29, 2022October 30, 2021October 29, 2022October 30, 2021
Cost of goods sold$16,547 $18,594 $50,768 $48,354 
Selling, general and administrative12,946 19,923 41,599 48,421 
Total$29,493 $38,517 $92,367 $96,775 

The tax benefits related to stock-based compensation expense for the three and nine month periods ended October 29, 2022 were $6.1 million and $18.9 million, respectively. The tax benefits related to stock-based compensation expense for the three and nine month periods ended October 30, 2021 were $8.4 million and $19.4 million, respectively.

Restricted stock awards. The Company grants shares of restricted stock or restricted stock units to directors, officers, and key employees. The market value of shares of restricted stock and restricted stock units at the date of grant is amortized to expense over the vesting period of generally three to five years.

During the three and nine month periods ended October 29, 2022 and October 30, 2021, shares purchased by the Company for tax withholding totaled 74,844 and 490,060, and 70,488 and 471,081, respectively, and are considered treasury shares which are available for reissuance.

Performance share awards. The Company has a performance share award program for senior executives. A performance share award represents a right to receive shares of restricted stock on a specified settlement date based on the Company’s attainment of performance goals during the performance period, which is the Company’s fiscal year. If attained, the restricted stock then vests over a service period, generally two to three years from the date the performance award was granted.

As of October 29, 2022, shares related to unvested restricted stock, restricted stock units, and performance share awards totaled 4.5 million shares. A summary of restricted stock, restricted stock units, and performance share award activity for the nine month period ended October 29, 2022, is presented below:

(000, except per share data)Number of
shares		Weighted-average
grant date
fair value
Unvested at January 29, 20224,378 $99.58 
Awarded1,504 88.98 
Released(1,266)90.38 
Forfeited(101)101.39 
Unvested at October 29, 20224,515 $98.44 

12

The unamortized compensation expense at October 29, 2022 was $213.6 million, which is expected to be recognized over a weighted-average remaining period of 2.0 years. The unamortized compensation expense at October 30, 2021, was $193.8 million, which was expected to be recognized over a weighted-average remaining period of 2.1 years.

Employee stock purchase plan. Under the Employee Stock Purchase Plan (“ESPP”), eligible employees participating in the quarterly offering period can choose to have up to the lesser of 10% of their annual base earnings or the IRS annual share purchase limit of $25,000 in aggregate market value to purchase the Company’s common stock. The purchase price of the stock is 85% of the closing market price on the date of purchase. Purchases occur on a quarterly basis (on the last trading day of each calendar quarter). The Company recognizes expense for ESPP purchase rights equal to the value of the 15% discount given on the purchase date.

Note D: Earnings Per Share

The Company computes and reports both basic earnings per share (“EPS”) and diluted EPS. Basic EPS is computed by dividing net earnings by the weighted-average number of common shares outstanding for the period. Diluted EPS is computed by dividing net earnings by the sum of the weighted-average number of common shares and dilutive common stock equivalents outstanding during the period, except in cases where the effect of the common stock equivalents would be anti-dilutive. Diluted EPS reflects the total potential dilution that could occur from outstanding equity plan awards and unvested shares of both performance and non-performance based awards of restricted stock and restricted stock units.

For the three and nine month periods ended October 29, 2022, approximately 85,000 and 492,000 weighted-average shares were excluded from the calculation of diluted EPS, respectively, because their effect would have been anti-dilutive for the periods presented. For the three and nine month periods ended October 30, 2021, approximately 13,200 and 3,000 weighted-average shares were excluded from the calculation of diluted EPS, respectively, because their effect would have been anti-dilutive for the periods presented.

The following is a reconciliation of the number of shares (denominator) used in the basic and diluted EPS computations:

Three Months EndedNine Months Ended
Shares in (000s)Basic EPSEffect of
dilutive
common stock
equivalents		Diluted
EPS		Basic EPSEffect of
dilutive
common
stock
equivalents		Diluted
EPS
October 29, 2022
Shares342,120 1,600 343,720 344,686 1,526 346,212 
Amount$1.00 $— $1.00 $3.09 $(0.01)$3.08 
October 30, 2021 
     Shares
351,071 2,010 353,081 352,308 2,169 354,477 
     Amount
$1.10 $(0.01)$1.09 $3.85 $(0.03)$3.82 

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Note E: Debt

Long-term debt. Unsecured senior debt, net of unamortized discounts and debt issuance costs, consisted of the following:

($000)October 29, 2022January 29, 2022October 30, 2021
6.530% Series B Senior Notes due 2021
$— $— $64,991 
3.375% Senior Notes due 2024
249,144 248,808 248,697 
4.600% Senior Notes due 2025
696,841 695,888 695,571 
0.875% Senior Notes due 2026
495,732 494,814 494,508 
4.700% Senior Notes due 2027
239,791 239,470 239,364 
4.800% Senior Notes due 2030
132,559 132,431 132,388 
1.875% Senior Notes due 2031
495,113 494,691 494,551 
5.450% Senior Notes due 2050
146,280 146,223 146,204 
Total long-term debt$2,455,460 $2,452,325 $2,516,274 
Less: current portion— — 64,991 
Total due beyond one year$2,455,460 $2,452,325 $2,451,283 

As of October 29, 2022, January 29, 2022, and October 30, 2021, total unamortized discount and debt issuance costs were $19.5 million, $22.7 million, and $23.7 million, respectively, and were classified as a reduction of Long-term debt.

As of October 29, 2022 and January 29, 2022 the aggregate fair value of the seven outstanding series of Senior Notes was approximately $2.2 billion and $2.6 billion, respectively. As of October 30, 2021 the aggregate fair value of the then eight outstanding series of Senior Notes was approximately $2.6 billion. The fair value is estimated by obtaining comparable market quotes which are considered to be Level 1 inputs under the fair value measurements and disclosures guidance.

See Note D: Debt, in the Notes to Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended January 29, 2022, for additional information regarding the terms of the Company’s unsecured senior notes.

Revolving credit facilities. In February 2022, the Company entered into a new, $1.3 billion senior unsecured revolving Credit Agreement (the “2022 Credit Facility”), which replaced its previous $800 million unsecured revolving credit facility. The 2022 Credit Facility expires in February 2027, and may be extended, at the Company's request and with the consent of the lenders, for up to two additional one year periods, subject to customary conditions. The new facility contains a $300 million sublimit for issuance of standby letters of credit. It also contains an option allowing the Company to increase the size of its credit facility by up to an additional $700 million, with the agreement of the committing lenders. The interest rate on borrowings under the 2022 Credit Facility is a term rate based on the Secured Overnight Financing Rate (“Term SOFR”) (or an alternate benchmark rate, if Term SOFR is no longer available) plus an applicable margin, and is payable quarterly and upon maturity. The 2022 Credit Facility is subject to a quarterly Consolidated Adjusted Debt to Consolidated EBITDAR financial leverage ratio covenant. As of October 29, 2022, the Company was in compliance with this financial covenant.

As of October 29, 2022, the Company had no borrowings or standby letters of credit outstanding under the 2022 Credit Facility, and the $1.3 billion credit facility remains in place and available.

14

The table below shows the components of interest expense and income for the three and nine month periods ended October 29, 2022 and October 30, 2021:

Three Months EndedNine Months Ended
($000)October 29, 2022October 30, 2021October 29, 2022October 30, 2021
Interest expense on long-term debt$21,150 $22,227 63,429 $66,626 
Other interest expense448 391 1,242 1,012 
Capitalized interest(663)(3,682)(4,489)(10,511)
Interest income(23,737)(192)(34,621)(627)
Interest (income) expense, net$(2,802)$18,744 $25,561 $56,500 

Note F: Taxes on Earnings

The Company’s effective tax rate for the three and nine month periods ended October 29, 2022 and October 30, 2021, was approximately 24%. The Company's effective tax rate is impacted by changes in tax law and accounting guidance, location of new stores, level of earnings, tax effects associated with stock-based compensation, and uncertain tax positions.

As of October 29, 2022, January 29, 2022, and October 30, 2021, the reserves for unrecognized tax benefits were $70.7 million, $68.1 million, and $76.9 million, inclusive of $9.1 million, $7.6 million, and $9.8 million of related interest and penalties, respectively. The Company accounts for interest and penalties related to unrecognized tax benefits as a part of its provision for taxes on earnings. If recognized, $56.7 million would impact the Company’s effective tax rate. It is reasonably possible that certain state tax matters may be concluded or statutes of limitations may lapse during the next 12 months. Accordingly, the total amount of unrecognized tax benefits may decrease by up to $10.0 million. The difference between the total amount of unrecognized tax benefits and the amounts that would impact the effective tax rate relates to amounts attributable to deferred income tax assets and liabilities. These amounts are net of federal and state income taxes.

The Company is open to audit by the Internal Revenue Service under the statute of limitations for fiscal years 2018 through 2021. The Company’s state income tax returns are generally open to audit under the various statutes of limitations for fiscal years 2017 through 2021. Certain federal and state tax returns are currently under audit by various tax authorities. The Company does not expect the results of these audits to have a material impact on the condensed consolidated financial statements.
15

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders of Ross Stores, Inc.:

Results of Review of Interim Financial Information
We have reviewed the accompanying condensed consolidated balance sheets of Ross Stores, Inc. and subsidiaries (the “Company”) as of October 29, 2022 and October 30, 2021, the related condensed consolidated statements of earnings, comprehensive income, and stockholders’ equity, for the three and nine month periods ended October 29, 2022 and October 30, 2021, and cash flows for the nine month periods ended October 29, 2022 and October 30, 2021, and the related notes (collectively referred to as the “interim financial information”). Based on our reviews, we are not aware of any material modifications that should be made to the accompanying interim financial information for it to be in conformity with accounting principles generally accepted in the United States of America.
We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheet of the Company as of January 29, 2022, and the related consolidated statements of earnings, comprehensive income, stockholders’ equity, and cash flows for the year then ended (not presented herein); and in our report dated March 29, 2022, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of January 29, 2022 is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

Basis for Review Results
This interim financial information is the responsibility of the Company’s management. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our reviews in accordance with standards of the PCAOB. A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the PCAOB, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.


/s/ Deloitte & Touche LLP

San Francisco, California
December 6, 2022
16

ITEM 2.    MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS

This section and other parts of this Form 10-Q contain forward-looking statements that involve risks and uncertainties. Our actual results may differ materially from the results discussed in the forward-looking statements. Factors that might cause such differences include, but are not limited to, those discussed below under the caption “Forward-Looking Statements” and also those in Part I, Item 1A (Risk Factors) of our Annual Report on Form 10-K for 2021. The following discussion should be read in conjunction with the condensed consolidated financial statements and notes thereto included elsewhere in this Quarterly Report on Form 10-Q and in conjunction with the consolidated financial statements and notes thereto in our Annual Report on Form 10-K for 2021. All information is based on our fiscal calendar.

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 1,696 locations in 40 states, the District of Columbia, and Guam as of October 29, 2022. 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 323 dd’s DISCOUNTS stores in 21 states 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.

Results of Operations

Comparable store sales declined 3% in the third quarter of fiscal 2022, compared to a 14% gain in the third quarter of 2021 (versus 2019), reflecting the continued impact of inflationary pressures our customers are facing as well as an increasingly promotional retail environment. During the quarter, we experienced the deleveraging effects from the comparable store sales decline as well as higher merchandise markdowns, which were partially offset by lower incentive compensation costs. These factors resulted in diluted earnings per share of $1.00 in the third quarter of fiscal 2022, compared to $1.09 per share in the third quarter of fiscal 2021. We expect our customers and operations will continue to be impacted by ongoing inflationary headwinds.

There remains significant uncertainty in the current macro-economic environment, driven by inflation, increasing interest rates, the continuing impacts from the Russia-Ukraine conflict, and concerns of a possible recession. These factors impact both consumer demand and many of the costs in our business. In addition, there continues to be uncertainty surrounding the COVID-19 pandemic, including its unknown duration, the potential for future resurgences and new virus variants, its potential impact on consumer behavior and shopping patterns, and the potential adverse impact on our business.
17

The following table summarizes the financial results for the three and nine month periods ended October 29, 2022 and October 30, 2021:

Three Months EndedNine Months Ended
October 29, 2022October 30, 2021October 29, 2022October 30, 2021
Sales
Sales (millions)$4,566$4,575$13,482$13,896
Comparable store sales (decline) growth(3 %)
1
14 %
2
(5 %)
1
14 %
2
Costs and expenses (as a percent of sales)
Cost of goods sold75.0 %72.7 %74.3 %71.5 %
Selling, general and administrative15.2 %15.9 %15.1 %15.2 %
Interest (income) expense, net(0.1 %)0.4 %0.2 %0.4 %
Earnings before taxes (as a percent of sales)9.9 %11.0 %10.4 %12.9 %
Net earnings (as a percent of sales)7.5 %8.4 %7.9 %9.8 %
1 Amounts shown are for the three and nine month periods of fiscal 2022 compared to the same periods of fiscal 2021 for stores that have been open for more than 14 complete months.
2 Amounts shown are for the three and nine month periods of fiscal 2021 compared to the same periods of fiscal 2019. Comparable store sales for this purpose represents sales from stores that were open at the end of fiscal 2018, plus new stores opened in fiscal 2019, less stores closed in fiscal 2019 and fiscal 2020.

Stores. Our long-term 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.