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Ross Stores, Inc.
Ross Stores, Inc.
5130 Hacienda Drive
5130 Hacienda Drive
Dublin, CA 94568-7579
Dublin, CA 94568-7579
(925) 965-4400
(925) 965-4400
www.rossstores.com
www.rossstores.com
Sustainable Choice. Reduce, Reuse & Recycle.
Sustainable Choice. Reduce, Reuse & Recycle.
To minimize our environmental impact, the Ross Stores 2020 Annual Report
was printed on paper containing fibers from environmentally appropriate,
socially beneficial and economically viable forest resources.
Ross Stores, Inc. 2020 Annual Report
Always Delivering Bargains.
We launched our off-price business almost four
decades ago based on the premise that everyone
loves a bargain. Since then, we have consistently
met customer wants and needs year after year by
offering outstanding values on a wide array of fresh
name brand fashions in convenient and easy-to-
shop stores.
We accomplish this through our two off-price
apparel and home fashion chains, Ross Dress for
Less® (“Ross”) and dd’s DISCOUNTS®. The first
Ross Dress for Less locations opened in 1982,
and today, Ross is the largest off-price apparel and
home fashion chain in the U.S. with 1,585 stores
in 40 states, the District of Columbia, and Guam.
We launched dd’s DISCOUNTS in 2004 and it now
operates 274 locations in 21 states.
Ross offers name brand apparel, accessories,
footwear, and home fashions for the entire family
at savings of 20% to 60% off department store
and specialty store regular prices every day. dd’s
DISCOUNTS features more moderately-priced
assortments at savings of 20% to 70% off moderate
department and discount store prices every day.
With the careful execution of our proven off-price
strategies, we remain confident in our prospects for
ongoing profitable market share gains.
2020 Annual Report | 1
2 | Ross Stores Inc.
To Our Stockholders
Fiscal 2020 was an extremely difficult and
financial flexibility. These measures included drawing
challenging year. Like so many other retailers
down on our $800 million revolving credit facility,
and businesses, our operations and financial
issuing $2.0 billion in new senior notes, entering
results reflect the negative impact of the
a new $500 million credit facility, suspending our
COVID-19 pandemic.
stock repurchase and dividend programs, slowing
Effects of the COVID-19 Pandemic
on Our Fiscal 2020 Business
In early 2020, to prioritize the safety and well-being
of our customers and associates and help slow the
spread of COVID-19, we temporarily closed all store
locations, our distribution centers, and buying and
corporate offices. We also instituted “work from
home” capabilities for many of our associates.
Given the uncertainty surrounding the duration
and overall impact on consumer demand from the
spread of this virus, we also took decisive actions to
significantly increase our liquidity and strengthen our
new store growth, and aggressively cutting both
ongoing expenses and capital expenditures. We
have since repaid the $800 million under the
revolving credit facility, terminated the undrawn
$500 million credit facility, and refinanced a portion
of the senior notes.
In mid-May, based on local government and health
mandates, we began a phased reopening process,
and by the end of June, the vast majority of our
stores and all of our distribution centers were
operating again.
2020 Annual Report | 3
In support of the health and safety of our
Including the debt refinancing costs, operating
associates, customers, and the communities
margin in 2020 was 1.5%, down significantly
we serve, our stores reopened with significantly
from 13.4% in the prior year. This decline was
enhanced COVID-related safety measures.
also driven by significant markdowns taken
These included additional cleaning and sanitation
to clear aged inventory caused by the temporary
processes, changes in store layout, and signage to
store closures in the spring, combined with
facilitate social distancing, and providing personal
substantial COVID-related costs, and the
protective equipment for our associates.
deleveraging effect of lower sales on expenses
Once our stores reopened, we remained focused,
throughout the business.
once again, on providing the compelling bargains
Store Growth in 2020
our customers have come to expect.
Given the uncertainty on consumer demand
Fiscal 2020 Financial Results
and to preserve liquidity, we temporarily slowed
Total sales for the 2020 fiscal year ended
January 30, 2021 were $12.5 billion, down from
$16.0 billion in fiscal 2019. Earnings per share
were $0.24 on net income of $85 million, which
includes a one-time, pre-tax charge of $240
million or $0.54 per share for the year from the
our store growth in 2020 to 66 new stores,
consisting of 50 Ross Dress for Less and 16 dd’s
DISCOUNTS. This compares to our initial plans
for 100 new locations. We ended the year with a
total of 1,859 stores in 40 states, the District of
Columbia, and Guam.
refinancing of $775 million in senior notes during
Looking ahead, our long-term expansion goals
the third quarter.
remain unchanged. We are confident that we
can ultimately grow to about 2,400 Ross Dress
4 | Ross Stores Inc.
for Less and 600 dd’s DISCOUNTS locations.
crisis. These actions, combined with improved
That said, we made decisions to take a more
cash flow following our store reopenings,
conservative approach to our 2021 openings,
resulted in year-end cash and cash equivalents
especially in the spring, during the peak of
of approximately $4.8 billion.
the pandemic last year. For the full year, we
expect to add about 60 stores, consisting of
approximately 40 Ross Dress for Less and 20
dd’s DISCOUNTS locations and expect to return
to a more normal pace of openings next year.
Despite the adverse impacts on our sales and
earnings resulting from the pandemic, we funded
$405 million in critical capital projects during
the year, including approximately $270 million
for distribution, information technology, and
dd’s DISCOUNTS 2020 Performance
corporate projects, and about $135 million to
Like Ross, dd’s DISCOUNTS’ business was also
impacted by COVID-19 related issues, although
to a lesser degree than at Ross given its smaller
percentage of border and tourist locations,
where sales were disproportionately affected by
the pandemic.
Increased Liquidity Provides
Financial Flexibility
The decisive actions we took early in the
pandemic to enhance liquidity gave us the
financial flexibility to manage through the health
open new locations and update existing stores.
Before suspending our stock repurchase and
dividend programs in the first quarter of 2020,
we had repurchased $132 million of common
stock, or about 1.2 million shares, under the
two-year $2.55 billion stock repurchase program
announced in March 2019. We also had paid out
$101 million in dividend payments.
More recently, in early March 2021, we
announced that our Board of Directors had
approved the resumption of our quarterly
dividend program by declaring a quarterly cash
2020 Annual Report | 5
dividend of $0.285 per share payable on March
inclusion efforts.
31, 2021 to stockholders of record as of March
16, 2021. The resumption of the dividend payout
reflects our strong cash position and confidence
in the Company’s long-term prospects.
Despite the inability to hold in-person meetings
and trainings in 2020, we maintained our
commitment to associate development by
providing digital learning and engagement
Social Responsibility at Ross
opportunities. Other ongoing initiatives included
Over the past 38 years, our associates have
played an essential role in our ability to deliver
great values to our customers. As a Company,
we are committed to promoting an inclusive
culture that values and celebrates the diversity of
backgrounds, identities, and ideas of our almost
94,000 associates and those who shop with us.
We also recognize that ensuring an inclusive work
environment where all associates are treated with
dignity and respect is key to their ability to grow,
succeed, and contribute to the communities
where they live and work. To support this, we
delivering competitive wages and benefits in
each of our geographic markets, offering virtual
internships, as well as continuing education
opportunities for hundreds of our associates and
their dependents through the Stuart Moldaw
Scholarship program. Lastly, we continued to
support the communities where we operate
through local hiring and expanded philanthropic
efforts, including through our foundation that
furthers our charitable mission of helping to
create a brighter future for today’s youth.
Investing in a Sustainable Future
launched employee resource groups as forums
Improving the efficiency and sustainability of our
to help associates connect with one another
operations, while minimizing our impact on the
and further our ongoing diversity, equality, and
environment also remains a top priority. Our focus
Merchandise Mix
9%
Children’s
12%
Shoes
14%
Men’s
14%
Accessories,
Lingerie,
Fine Jewelry,
Fragrances
23%
Ladies
28%
Home Accents,
Bed and Bath
6 | Ross Stores Inc.
on identifying new opportunities to use less
We believe that our flexible and resilient business
energy and fewer natural resources dates back
model and the talented individuals throughout
more than 20 years, and we continue to make
our organization enabled us to navigate
improvements on these initiatives.
through the unprecedented impacts of the
Last year we advanced our commitment
COVID-19 pandemic.
to transparency by participating in the
Over the long term, we believe both Ross and
Carbon Disclosure Project Climate Change
dd’s remain well-positioned to gain market share
Questionnaire. We also published an
as consumers continue to favor retailers focused
Environmental Sustainability Report that
on delivering both value and convenience. This is
announced our goal to reduce greenhouse gas
especially true given the number of retail closures
emissions by 30% per square foot by 2025
and bankruptcies over the past several years.
versus a 2017 baseline. We remain committed
We are confident that our unwavering focus on
to take actions that drive environmental
the successful execution of our core strategy of
sustainability and invite our shareholders to
always delivering the best bargains possible will
learn more about our efforts on our website,
continue to be the key driver of our success.
www.rossstores.com, in the Corporate Social
Responsibility section.
In closing, we would like to thank all our
customers, associates, business partners, and
Flexible and Resilient Business
investors for their continued support and hope
Model Key to Long-Term Growth
for everyone’s continued health and safety.
Fiscal 2020 was an extremely difficult year.
Sincerely,
Michael Balmuth
Chairman of the Board
Barbara Rentler
Chief Executive Officer
2020 Annual Report | 7
Merchandise Mix
Store Growth
In 2020, Ross Dress for Less
expanded into its 40th state with a
new store in West Virginia. The other
49 new Ross locations opened in
both established regions as well as
newer markets including a total of
14 Ross stores in Illinois, Indiana,
Missouri, Ohio, and Wisconsin.
dd’s DISCOUNTS’ store growth
included the addition of 16 new
stores, including entry into the
chain’s 21st state, Arkansas.
We ended the year with 1,585 Ross
Dress for Less stores in 40 states,
the District of Columbia, and Guam,
and 274 dd’s DISCOUNTS in
21 states.
Ross Dress for Less
dd’s DISCOUNTS
8 | Ross Stores Inc.
1,859
stores
40
states
$12.5 billion
annual revenue
54
net new
stores in 2020
2020 Annual Report | 9
10 | Ross Stores Inc.
Form 10-K
Ross Stores, Inc. 2020 Annual Report
Table of Contents
Business
Selected Financial Data
Management’s Discussion and Analysis
Financial Statements and Supplementary Data
Notes to Consolidated Financial Statements
Report of Independent Registered Public Accounting Firm
Signatures
Index to Exhibits
Certifications
Index to Other Information
Directors and Officers
Corporate Data
14
32
34
46
50
68
74
75
80
83
84
12
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark one)
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended January 30, 2021
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
(State or other jurisdiction of incorporation or organization)
94-1390387
(I.R.S. Employer Identification No.)
5130 Hacienda Drive, Dublin, California
(Address of principal executive offices)
Registrant’s telephone number, including area code
94568-7579
(Zip Code)
(925) 965-4400
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading symbol
Name of each exchange on which registered
Common stock, par value $.01
ROST
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 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
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 No
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 No
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 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 has filed a report on and attestation to its management’s assessment of the effectiveness
of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public
accounting firm that prepared or issued its audit report.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes No
The aggregate market value of the voting common stock held by non-affiliates of the Registrant as of August 1, 2020 was
$31,310,449,079, 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 8, 2021 was 356,523,349.
Documents incorporated by reference:
Portions of the Proxy Statement for the Registrant’s 2021 Annual Meeting of Stockholders, which will be filed on or before June 1, 2021,
are incorporated herein by reference into Part III.
13
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 1,585 locations in 40 states, the District of
Columbia, and Guam, as of January 30, 2021. 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 274 dd’s DISCOUNTS stores in 21 states as of January 30, 2021. 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 operations for Ross and dd’s DISCOUNTS are separate. The two chains share certain
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 January 30, 2021, February 1, 2020, and February 2, 2019 as fiscal 2020, fiscal 2019, and
fiscal 2018, respectively, all of which were 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
14
include, but are not limited to, apparel (including footwear and accessories), small furniture, home accents, bed and bath, beauty,
toys, luggage, gourmet food, cookware, jewelry and watches.
Purchasing. We have a large network of 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 difficulty in sourcing 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, delivery is made to one of our 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 2020, we continued our emphasis on this important sourcing strategy in response to compelling opportunities available
in the marketplace. Packaway accounted for approximately 38% and 46% of total inventories as of January 30, 2021 and
February 1, 2020, 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. We also
operate a smaller buying office located in Boston. These strategic locations allow our buyers to be in the market frequently,
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 2020, we had over 900 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 eight years of experience, including merchandising
positions with other retailers. 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. We 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 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 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.
15
Stores
As of January 30, 2021, we operated a total of 1,859 stores comprised of 1,585 Ross stores and 274 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, and 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. Our stores have
shopping carts and/or baskets available at the entrance for customer convenience. Cash registers are primarily located at store
exits for customer ease and efficient staffing. In response to the health pandemic from the novel coronavirus (COVID-19), we
implemented enhanced safety protocols for our customers and associates, including social distancing measures and capacity
restrictions.
We accept a variety of payment methods. We provide refunds or store credit 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.
In response to COVID-19, we implemented additional processes and procedures to facilitate social distancing, to enhance
cleaning and sanitation activities, and to provide personal protective equipment to our associates, which has increased our
operating costs. We expect to incur higher operating costs during the COVID-19 pandemic.
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 collaboration, cybersecurity, merchandise planning, distribution, store,
and human resource systems. These initiatives support future growth, the execution and achievement of our plans, ongoing
stability and compliance, as well as our ability to work remotely during the COVID-19 pandemic.
Distribution
We operate distribution processing facilities where we receive and ship all of our merchandise to our stores. These distribution
centers are large, highly automated, and built to suit our specific off-price business model. An additional distribution center in
Brookshire, Texas is currently under construction and expected to open in 2022. We also operate warehouse facilities for
packaway storage.
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 and warehouses with their current expansion capabilities will provide adequate
processing and storage 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.
16
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 grow additional channels, including social and digital media, to communicate our brand position.
Advertising for dd’s DISCOUNTS is primarily focused on radio, both broadcast and digital, social media, 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.
Human Capital
As of January 30, 2021, we had approximately 93,700 total associates, which includes both full- and part-time associates.
Additionally, we hire temporary associates, especially during the peak seasons. Our associates are non-union. Management
considers the relationship between the Company and our associates to be good.
Our associates play essential roles in delivering great value to our customers. Throughout our organization, we recognize and
appreciate the importance of attracting, retaining, and developing our associates and we have a number of key programs to do
so.
Talent development. The professional growth of our associates is important to our success as a business. We identify and
enumerate key competencies we believe are critical to our ability to execute our business model and deliver the values our
customers expect. We utilize these competencies in the hiring, development, evaluation, and future planning of our teams. We
provide training opportunities to help associates grow and build their careers. Our associates, managers, and executives may
participate in technical and leadership development activities. We support associates interested in leadership roles by offering
opportunities to gain experience and build the skills necessary to advance within the Company. We are proud that many store
leaders started their careers with us as retail associates.
Diversity, equality, and inclusion. We care about our associates and the communities we serve. We are committed to building
diverse teams and an inclusive culture that respects, values, and celebrates the diversity of backgrounds, identities, and ideas of
those who work and shop with us. We are focused on executing strategies to support our commitment to diversity, equality, and
inclusion.
Community and social impact. We provide our associates the opportunity to give back to their communities and make a social
impact through various programs such as our matching gift program, volunteer time off for eligible associates, and a scholarship
program for our associates and their dependents.
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 operate in an
attractive sector of retail that will be facing much less brick and mortar competition given the significant number of retail closures
and bankruptcies. We believe that we remain well-positioned within the off-price retail apparel and home fashion industry to
compete based on 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 online 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.
17
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.
ITEM 1A. RISK FACTORS
Our Annual Report on Form 10-K for fiscal 2020, 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, including the rapidly developing challenges with and our plans and responses to the
COVID-19 pandemic and related economic disruptions, our future financial performance, operations, competitive position, and
our projected growth, that are all 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:
The COVID-19 pandemic continues to severely and adversely affect our sales and our operations, and we expect it to
continue to have serious adverse effects on our business and our financial performance.
The United States and other countries are experiencing a major, prolonged global COVID-19 pandemic, with related, significant
disruptions and restrictions to retail operations and supply chains and to general economic activities, as the affected regions
have taken dramatic actions, sometimes including mandatory capacity restrictions, reduced operating hours, and closure of retail
operations, in an effort to slow down the spread of the disease.
As the COVID-19 pandemic continues, many of our customers and associates are being impacted by recommendations and/or
mandates from federal, state, and local authorities to stay home (“shelter in place” or “safer at home”), to avoid non-essential
social contact and gatherings of people, and to self-quarantine. Following a chain-wide closure from late March 2020 to mid-May
2020, all of our distribution centers and substantially all of our store locations have been operating since the end of June 2020.
While vaccines have become available and a steadily increasing portion of the population is being vaccinated, it will take time for
those efforts to reach levels that permit a relaxation in the social restrictions. Additional outbreaks and spreading of the disease
have been occurring in many places across the United States, and while levels of spread have gone up and down in different
regions, health officials continue to warn of further potential disruptions and quarantine responses. State and local “work from
home” recommendations and mandates have been in effect for many of our corporate offices, and may continue for some time.
Store closures and distribution center closures may be required again nationally, regionally, or in specific locations.
The situation continues to be unprecedented and rapidly changing, and has unknown duration and severity. We have a
concentration of store locations in the States of California, Texas, and Florida; together those states include almost fifty percent
of our stores, and they have each reported regional “hot spots” and increasing numbers of cases in recent months, which have
already resulted in strict customer capacity limits, limits to our hours of operations and curfews, and in mandatory store closures,
in certain areas. “Stay at home” measures continue to discourage in-person shopping and to reduce traffic in our stores. More
than half of our distribution centers and warehouses are located in California. A required closure of these facilities would be very
disruptive to our ability to supply merchandise to our stores. The temporary closure of our stores and distribution centers early in
2020 resulted in a significant loss of sales and profits and had material adverse effects on our financial condition. In addition, the
COVID-19 pandemic may potentially adversely affect our ability to adequately staff our distribution centers, our stores, and our
merchant and other support operations. Further, the COVID-19 pandemic has severely impacted multiple countries, which may
also adversely affect our ability to access and ship products from the affected regions.
The prolonged, widespread pandemic has adversely impacted global economies, which has resulted in an economic downturn
that may reduce consumer demand for our products. The extent and duration of the impact from the COVID-19 pandemic on our
business and financial results will depend largely on future developments, including the duration and spread of the outbreak
within the U.S., regional surges in infection, the effectiveness of vaccines in controlling the virus or current or future variants of
the virus, the response by all levels of government in their efforts to contain the outbreak and to mitigate the economic
disruptions, and the related impact on consumer confidence and spending, all of which are highly uncertain and cannot be
predicted. Such impacts have and are expected to adversely affect our profitability, cash flows, financial results, and our capital
resources.
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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. The COVID-19 pandemic may have
prolonged and significant negative effects on consumer confidence, shopping behavior, and spending, which may
adversely affect our sales and gross margins.
Consumer spending habits for the merchandise we sell are affected by many factors. Currently, the repercussions from the
COVID-19 pandemic are unknown and present significant risks and uncertainty. There is significant uncertainty over potential
changes in consumer behavior and shopping patterns as the pandemic continues and as different regions experience surges.
Other factors include levels of unemployment, the size and timing of federal stimulus programs, salaries and wage rates,
prevailing economic conditions, recession and fears of recession, 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. The COVID-19
pandemic, and other potential, 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.
We need to successfully operate under the health and safety measures implemented in our stores and distribution
centers, and across all our operations, to comply with regulatory requirements and with the goal of keeping our
customers and associates safe from the spread of the COVID-19 virus without disruptions to our operations.
We have implemented a variety of measures in our stores locations, distribution centers, and other facilities, with the goal of
keeping our associates, customers, and the communities we serve safe from spreading the COVID-19 virus. These measures
include additional cleaning and sanitation of stores and workspaces, return merchandise quarantining, providing associates with
personal protective equipment based on CDC or other federal, state, or local health guidelines, and implementing physical
distancing practices, in our stores, distribution centers, and in our other operations. This is very challenging to do, and there is
significant risk, incremental costs, and uncertainty regarding requirements and their implementation. Not only are these
measures new and evolving, but they often require change to established habits and patterns of behavior by large groups of
people, who may not fully understand or agree with the requested changes. Whatever measures we adopt, there will also be
challenges in effecting consistent compliance by our customers and our associates. We will need to adapt and change these
measures over time and as we learn from experience. And despite our efforts and best intentions, incidents of infection will occur
at our stores, distribution centers, and/or in our other facilities, potentially resulting in serious illness for those affected, including
our associates. This may result in required temporary closure of specific stores, distribution centers, or other facilities, and in
temporary or longer term loss of key personnel during illness, and potential supply chain disruptions. We may also face claims
(with or without merit) that our retail stores or our other facilities and workplaces are operating in an unsafe manner or are not in
compliance with applicable laws and regulations. Any such incidents may adversely affect our operating results, increase our
costs, and damage our reputation and competitive position.
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 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 and its territories. 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.
19
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, as well as 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.
In order to achieve our planned gross margins, we must effectively manage our inventories, markdowns, and inventory
shortage. As a result of potential changes in shopping behaviors due to the COVID-19 pandemic and potential
disruptions to supply chains and store operations, we are at risk for inventory imbalances and the potential for higher
than normal levels of markdowns to sell through our inventory, which would negatively affect our gross margins and
our operating results.
We purchase the majority of our inventory based on our sales plans. If our actual demand is lower than our sales plans, we may
experience excess 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. The
COVID-19 pandemic may cause changes in shopping behavior and restrictions on our operations, so that our predictions and
sales plans are less accurate, and that may lead us to have higher than usual levels of slow-moving or non-salable inventory at
our prior planned price levels. We would need to aggressively and progressively reduce our selling prices in order to clear out
that inventory, which would result in decreased profit margins or losses on sales of that inventory, and adversely affect our
results of operations in future periods.
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, constraints on the availability of shipping capacity, changes in transportation costs or in U.S. tariffs, trade relationships,
or tax policies, and natural disasters, or public health issues such as the current COVID-19 pandemic (or other, future
pandemics), that reduce the supply or increase the relative cost of imported goods, could also result in disruptions to our existing
supply relationships. Shortages, delays, 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.
20
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. Cybercriminals 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 cybercriminals 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 (including laws relating to consumer data protection and privacy, and required notifications of data security breaches), 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: public health issues such as the current
COVID-19 pandemic (or other, future pandemics), 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 other factors beyond our control. Any such disruptions could
negatively impact our financial performance or financial condition.
21
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, and/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, harassment, wage and hour, and retaliation), securities, real estate, tort, commercial, consumer protection,
privacy, product compliance and safety, advertising, comparative pricing, product labeling, intellectual property, tax, escheat, and
whistle-blower claims. We continue to be involved in a number of employment-related lawsuits, including class/representative
actions which are primarily in California.
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 (including customer and associate data privacy, choice and notification rights),
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.
22
Significant judgment is required in evaluating and estimating our tax provisions and reserves 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.
Our inability to continually attract, train, and retain associates with the retail talent necessary to execute our off-price
retail strategies along with labor shortages, increased turnover, or increased labor costs could adversely affect our
operating results.
Like other retailers, we face challenges in recruiting and retaining sufficient talent in our buying organization, management,
stores, distribution centers, 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 and social media, 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.
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.
23
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, delay, or increase in the cost of imports, including the imposition of import or other restrictions, war, acts of
terrorism, natural disasters, or public health issues such as the current COVID-19 pandemic (or other, future pandemics) could
adversely affect our business. The flow of merchandise from our vendors could also be adversely affected by global shipping
capacity limitations, or 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 compliance with laws and regulations relating to doing business in foreign
markets and importing merchandise, and to monitor the compliance of 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 and expenses, increase our effective tax rates, and reduce our
profitability.
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 pandemic, 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, nine distribution centers/warehouses, and approximately 23% of our
stores are located in California. Natural or other disasters, such as the current COVID-19 pandemic (or other, future pandemics),
wildfires, earthquakes, hurricanes, tornadoes, floods, or other extreme weather and climate conditions, or fires, explosions, and
acts of war or terrorism, or public health issues, 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.
24
To support our continuing operations, our new store and distribution center growth plans, our quarterly dividends, and
any resumption of our stock repurchase program, we must maintain sufficient liquidity; the COVID-19 pandemic and
related economic disruption are adding significant uncertainty and challenges.
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. The COVID-19 pandemic resulted in a prolonged period during the first
half of 2020 in which we temporarily closed all store locations and distribution centers. Although our store and distribution center
operations have remained substantially open since June of 2020, there have been ongoing regional restrictions on store
operating capacity, ongoing adversity in general economic conditions, and adverse impact on consumer confidence and
shopping behavior. While the pandemic continues, further closures or disruptions to our operations may be required nationally,
regionally, or in specific locations. The situation is unprecedented and rapidly changing, and has unknown duration and severity.
If we are unable to generate sufficient cash flows from operations to support our activities, our growth plans and our financial
performance would be adversely affected.
We have borrowed on occasion to finance some of our activities. In March 2020, we borrowed $800 million from our revolving
credit facility (subsequently repaid in the third quarter of 2020). In April 2020, we completed a $2.0 billion senior notes offering
(subsequently we refinanced $775 million in aggregate principal amount of those senior notes with the issuance of $1.0 billion in
aggregate principal amount of lower interest rate senior notes). These actions were taken to add to our cash balances in order to
provide enhanced financial flexibility due to uncertain market conditions arising from the impact of the COVID-19 pandemic. 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.
We are subject to impacts from instances of damage to our stores and losses of merchandise accompanying protests
or demonstrations, which may result in temporary store closures.
There have been recent demonstrations and protests in cities throughout the United States. While they have generally been
peaceful, in some locations they have been accompanied by violence, damage to retail stores, and the loss of merchandise.
While generally subject to coverage by insurance, the repair of damage to our stores and replacement of lost merchandise may
also increase our costs and temporarily disrupt store operations, and we may incur increased operating costs for additional
security. Governmental authorities in affected cities and regions may take actions in an effort to protect people and property while
permitting lawful and non-violent protests, including curfews and restrictions on business operations, which may be disruptive to
our operations. These activities, governmental responses, and resulting media coverage may also harm consumer confidence
and perceptions of personal well-being and security, which may negatively affect shopping behavior and our sales.
ITEM 1B. UNRESOLVED STAFF COMMENTS
Not applicable.
ITEM 2. PROPERTIES
At January 30, 2021, we operated a total of 1,859 stores, of which 1,585 were Ross stores in 40 states, the District of Columbia,
and Guam, and 274 were dd’s DISCOUNTS stores in 21 states. All stores are leased, with the exception of two locations which
we own.
During fiscal 2020, we opened 50 new Ross stores and closed 11 existing stores. The average approximate Ross store size is
28,000 square feet.
During fiscal 2020, we opened 16 new dd’s DISCOUNTS stores, including reopening one store previously temporarily closed
due to a weather event, and closed one existing store. The average approximate dd’s DISCOUNTS store size is 23,000 square
feet.
During fiscal 2020, 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 2021 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 2021. Important considerations in evaluating a new store location in both
25
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.
The following table summarizes the locations of our stores by state/territory as of January 30, 2021 and February 1, 2020.
State/Territory
Alabama
Arizona
Arkansas
California
Colorado
Delaware
District of Columbia
Florida
Georgia
Guam
Hawaii
Idaho
Illinois
Indiana
Iowa
Kansas
Kentucky
Louisiana
Maryland
Mississippi
Missouri
Montana
Nebraska
Nevada
New Jersey
New Mexico
North Carolina
North Dakota
Ohio
Oklahoma
Oregon
Pennsylvania
South Carolina
South Dakota
Tennessee
Texas
Utah
Virginia
Washington
West Virginia
Wisconsin
Wyoming
Total
January 30, 2021
24
81
10
431
38
4
2
225
63
2
22
12
89
26
6
12
15
20
26
9
27
6
5
40
18
18
49
3
8
28
30
51
30
2
37
260
23
41
43
1
19
3
February 1, 2020
24
82
9
417
38
3
2
221
64
2
22
12
83
20
6
12
15
19
26
9
27
6
5
39
14
18
48
3
5
27
31
50
27
2
36
255
22
40
42
—
19
3
1,859
1,805
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 January 30, 2021, 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 approximately six years, or approximately 20 years if renewal options are
included. See Note E of Notes to Consolidated Financial Statements.
See additional discussion under “Stores” in Item 1.
26
The following table summarizes the location and approximate sizes of our distribution/warehouse facilities and office locations as
of January 30, 2021. Square footage information for the distribution and warehouse facilities 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
Distribution/Warehouse Facilities
Approximate Square Footage
Own/Lease
Moreno Valley, California
Moreno Valley, California1
Moreno Valley, California1
Perris, California
Perris, California
Riverside, California
Shafter, California
Shafter, California
Shafter, California1
Las Vegas, Nevada
Carlisle, Pennsylvania
Carlisle, Pennsylvania
Carlisle, Pennsylvania
Fort Mill, South Carolina
Fort Mill, South Carolina
Fort Mill, South Carolina
Fort Mill, South Carolina
Fort Mill, South Carolina
Rock Hill, South Carolina
Rock Hill, South Carolina
Brookshire, Texas2
Office Space
Dublin, California
Los Angeles, California
Boston, Massachusetts
New York City, New York
1,300,000
740,000
1,110,000
1,300,000
699,000
449,000
1,700,000
1,003,000
350,000
102,000
465,000
239,000
246,000
1,200,000
428,000
423,000
255,000
160,000
1,200,000
431,000
1,850,000
414,000
120,000
5,000
572,000
Own
Lease
Lease
Own
Own
Own
Own
Lease
Lease
Lease
Own
Lease
Lease
Own
Own
Own
Lease
Lease
Own
Lease
Own
Own
Lease
Lease
Own
1 Operated by a third party.
2 We are currently in the process of completing the construction of this distribution center with an estimated occupancy of
2022.
See additional discussion under “Distribution” in Item 1.
27
ITEM 3. LEGAL PROCEEDINGS
We have been named in class/representative action lawsuits, primarily in California, alleging violation of wage and hour laws and
consumer protection laws. Class/representative action litigation remains pending as of January 30, 2021.
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, environmental, 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.
Like many retailers and other businesses, we have filed a lawsuit as plaintiff against the insurance companies with respect to our
claims for insurance coverage for business interruption, property damage, and other losses that we have experienced as a result
of the COVID-19 pandemic. Our suit was filed in Alameda County, California in December 2020. The proceedings remain at an
early procedural stage, and are subject to significant uncertainties.
We believe that the resolution of our pending class/representative 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.
28
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
Barbara Rentler
Michael J. Hartshorn
Michael Kobayashi
Brian Morrow
Travis Marquette
70 Chairman of the Board and Senior Advisor
63 Chief Executive Officer
53 Group President and Chief Operating Officer
56 President, Operations and Technology
61 President and Chief Merchandising Officer, dd’s DISCOUNTS
49 Executive Vice President and Chief Financial Officer
Mr. Balmuth has served as Chairman of the Board and Senior Advisor since November 2019. From 2014 to November 2019, Mr.
Balmuth was Executive Chairman of the Board of Directors and 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. Hartshorn has served as Group President and Chief Operating Officer since August 2019 and a member of the Board of
Directors since March 2021. Previously, he was Group Executive Vice President, Finance and Legal, Chief Financial Officer in
2019; 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 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.
Mr. Kobayashi has served as President, Operations and Technology since August 2019. Prior to that, he served as Group
Executive Vice President, Supply Chain, Merchant Operations, and Technology since 2014. Previously, he was Executive Vice
President, Supply Chain, Allocation, and Chief Information Officer from 2010 to 2014; Group Senior Vice President, Supply Chain
and Chief Information Officer from 2008 to 2010; and Senior Vice President and Chief Information Officer from 2004 to 2008.
Before joining Ross in 2004, Mr. Kobayashi was a Partner with Accenture in their Retail and Consumer Goods practice where he
spent 18 years in a variety of management consulting roles.
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. Marquette has served as Executive Vice President and Chief Financial Officer since March 2021. Prior to that, he was Group
Senior Vice President and Chief Financial Officer from 2019 to 2021, Group Senior Vice President and Deputy Chief Financial
Officer from 2018 to 2019, and Senior Vice President, Finance from 2017 to 2018. He was also Senior Vice President, Store
Operations from 2015 to 2017, Group Vice President, Store Operations from 2013 to 2015, and Vice President, Store Operations
Finance from 2009 to 2013. Prior to joining Ross in 2008 as Director, Strategic Planning, Mr. Marquette held various consulting
and management roles over a 12-year period with Bain & Company, Carter’s Inc., and PricewaterhouseCoopers.
29
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 on Form 10-K, which is incorporated herein by
reference. Our stock is traded on The NASDAQ Global Select Market® under the symbol ROST. There were 1,014 stockholders
of record as of March 8, 2021 and the closing stock price on that date was $120.37 per share.
Cash dividends. On March 2, 2021, our Board of Directors declared a quarterly cash dividend of $0.285 per common share,
payable on March 31, 2021. Our Board of Directors declared a cash dividend of $0.285 per common share in March 2020. In
May 2020, we temporarily suspended our quarterly dividends, due to the economic uncertainty stemming from the COVID-19
pandemic. Our Board of Directors declared cash dividends of $0.255 per common share in March, May, August, and November
2019, and cash dividends of $0.225 per common share in March, May, August, and November 2018.
Issuer purchases of equity securities. Information regarding shares of common stock we repurchased during the fourth
quarter of fiscal 2020 is as follows:
Total number
of shares
(or units)
purchased¹
Average price
paid per share
(or unit)
1,381
$94.80
—
—
1,381
$0.00
$0.00
$94.80
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)
—
—
—
—
$1,142,533
$1,142,533
$1,142,533
$1,142,533
Period
November
(11/01/2020 - 11/28/2020)
December
(11/29/2020 - 01/02/2021)
January
(01/03/2021 - 01/30/2021)
Total
¹ We acquired 1,381 shares of treasury stock during the quarter ended January 30, 2021, which relates to shares acquired from
employees for tax withholding purposes related to vesting of restricted stock grants. No shares were repurchased under our
publicly announced stock repurchase program.
In March 2019, our Board of Directors approved a two-year $2.55 billion stock repurchase program through fiscal 2020. Due to
the economic uncertainty stemming from the COVID-19 pandemic and to manage liquidity, we suspended our stock repurchase
program as of March 2020. We did not purchase any additional shares for the remainder of the fiscal year.
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.
30
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 to the Standard & Poor’s 500
Index (“S&P 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.
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN
Among Ross Stores, Inc., the S&P 500 Index, and Dow Jones Apparel Retailers
Company/Index
Ross Stores, Inc.
S&P 500 Index
Dow Jones Apparel Retailers
Base Period
2015
100
100
100
2016
2017
2018
2019
117
120
99
143
152
112
168
148
122
207
180
136
2020
207
211
145
Indexed Returns for Years Ended
31
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)
2020
2019
2018
2017
1
2016
Operations
Sales
Cost of goods sold
Percent of sales
Selling, general and administrative
Percent of sales
Interest expense (income), net
Earnings before taxes
Percent of sales
Provision for taxes on earnings
Net earnings
Percent of sales
Basic earnings per share
Diluted earnings per share
Cash dividends declared
per common share²
11,536,187
71.9%
2,356,704
14.7%
(18,106)
2,164,288
13.5%
503,360
9,838,574
78.5%
2,503,281
20.0%
83,413
106,297
0.8%
20,915
85,382 $
$ 12,531,565 $ 16,039,073 $ 14,983,541 $ 14,134,732 $ 12,866,757
9,173,705
71.3%
1,890,408
14.7%
16,488
1,786,156
13.9%
668,502
1,117,654
8.7%
2.85
2.83
10,042,638
71.0%
2,043,698
14.5%
7,676
2,040,720
14.4%
677,967
10,726,277
71.6%
2,216,550
14.8%
(10,162)
2,050,876
13.7%
463,419
1,362,753 $
9.6%
3.58 2 $
3.55 2 $
0.7%
0.24 5 $
0.24 5 $
1,660,928 $
10.4%
1,587,457 $
10.6%
4.63 4 $
4.60 4 $
4.30 3 $
4.26 3 $
$
$
$
$
0.285 6 $
1.020 $
0.900 $
0.640 $
0.540
¹ Fiscal 2017 was a 53-week year; all other fiscal years presented were 52 weeks.
2 Includes a per share benefit of approximately $0.21 from tax reform legislation enacted in December 2017 and $0.10 from the 53rd
week.
3 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.
4 Includes a per share benefit of approximately $0.02 primarily related to the favorable resolution of a tax matter.
5 Includes a per share charge of approximately $0.54 primarily related to the long-term debt refinancing.
6 Represents first quarter fiscal 2020 dividends. In May 2020, we temporarily suspended our quarterly dividends, due to the economic
uncertainty stemming from the COVID-19 pandemic.
32
Selected Financial Data
($000, except per share data)
2020
2019
2018
2017
1
2016
Financial Position
Cash and cash equivalents
Merchandise inventory
Property and equipment, net
Total assets
Return on average assets
Working capital
Current ratio
Long-term debt
Long-term debt as a percent
of total capitalization
Stockholders’ equity
Return on average
stockholders’ equity
Book value per common share
$ 4,819,293 $ 1,351,205 $ 1,412,912 $ 1,290,294 $
1,508,982
2,710,496
12,717,867
1%
2,725,458
1.7:1
2,513,085
1,832,339
2,653,436
9,348,367 2
22% 2
730,894 2
1.3:1 2
312,891
1,750,442
2,475,201
6,073,691
27%
1,394,535
1.7:1
312,440
1,641,735
2,382,464
5,722,051
25%
1,224,755
1.6:1
396,967
1,111,599
1,512,886
2,328,048
5,309,351
22%
1,060,543
1.6:1
396,493
43%
3,290,640
9%
3,359,249
9%
3,305,746
12%
3,049,308
13%
2,748,017
3%
50%
50%
47%
43%
outstanding at year-end
$
9.23 $
9.42 $
8.98 $
8.03 $
7.01
Operating Statistics
Number of stores opened
Number of stores closed
Number of stores at year-end
Comparable store sales increase 5
66 4
12
1,859
98
10 3
1,805
99
4
1,717
96
7
1,622
93
6
1,533
(52-week basis)
n/a 6
3%
4%
4%
4%
Sales per average square foot of
selling space (52-week basis)
$
Square feet of selling space
at year-end (000)
Number of associates at year-end
Number of common stockholders
of record at year-end
327 $
432 $
422 $
409 $
395
38,800
93,700
1,015
37,900
92,500
36,300
88,100
34,700
82,700
33,300
78,600
976
902
880
848
¹ Fiscal 2017 was a 53-week year; all other fiscal years presented were 52 weeks.
2 Fiscal 2019 reflects the impact of adoption of ASU 2016-02, Leases (Accounting Standards Codification “ASC” 842) on a
modified retrospective basis; all other prior fiscal years presented were not restated.
3 Includes the temporary closure of a store impacted by a weather event.
4 Includes the reopening of a store previously temporarily closed due to a weather event.
5 Comparable stores are stores open for more than 14 complete months.
6 Given the temporary store closures resulting from the COVID-19 pandemic, the comparable store sales metric for fiscal 2020 is
not meaningful.
33
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 1,585 locations in 40
states, the District of Columbia, and Guam, as of January 30, 2021. 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 274 dd’s DISCOUNTS stores in 21 states as of January 30, 2021 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, and considering the pace and
magnitude of the economic recovery post the COVID-19 pandemic, we are closely monitoring market share trends for the off-
price industry and believe our share gains will continue to be driven mainly by continued focus on value and convenience by
consumers. 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 January 30, 2021, February 1, 2020, and February 2, 2019 as fiscal 2020, fiscal 2019, and
fiscal 2018, respectively.
Effects of the COVID-19 Pandemic on Our Business
The United States and other countries are experiencing an ongoing, major global health pandemic related to the outbreak of a
novel strain of coronavirus, COVID-19, that started at the beginning of 2020. Governmental authorities in affected regions have
taken, and continue to take, dramatic actions in an effort to slow down the spread of the disease. Like other retailers across the
country, we temporarily closed all our store locations, our distribution centers, and our buying and corporate offices for a
significant part of our first and second fiscal quarters. We also instituted “work from home” measures for many of our associates.
Our closures took effect March 20, 2020.
All our distribution centers were reopened by the end of May 2020. The vast majority of our store locations were open and
operating by the end of June 2020, and remained open throughout the remainder of fiscal 2020. While open, many of our stores
were operating on shorter hours and under mandated occupancy restrictions for periods of time as compared to the prior year.
The COVID-19 pandemic and the related economic disruption had a material adverse impact on our results of operations,
financial position, and cash flows for fiscal 2020. The consolidated results presented in this report reflect the significant revenue
decline and other impacts from our temporary store closures (for approximately half of the first quarter and 25 percent of the
second quarter), mandated occupancy restrictions, and reduced operating hours. Our core business results improved during the
second half of fiscal 2020; however, upsurges of COVID-19 in the fourth quarter, especially in California, our largest state,
resulted in reduced customer traffic and slowed the pace of recovery. While vaccines have become available and a steadily
increasing portion of the U.S. population is being vaccinated, it will take time for those efforts to reach levels that permit a
relaxation of the social distancing restrictions. We expect the material adverse effects from the pandemic to continue through
fiscal 2021 and potentially beyond.
The temporary closure of all our stores during much of the first two fiscal quarters significantly impacted our ability to sell the
seasonal inventory then on hand in a timely manner. As we reopened our stores and resumed operations in the middle of the
second quarter, a significant portion of the merchandise in our stores was aged and out of season. We took deep markdowns to
sell through this inventory. During the initial reopenings, sales were ahead of our conservative plans, as we benefited from pent-
up consumer demand and aggressive markdowns. In the weeks after reopening, sales trends were negatively affected by
depleted store inventory levels while we were ramping up our buying and distribution capabilities. During the third quarter, sales
improved substantially compared to the second quarter. This was driven by several factors, including an improvement in our
merchandise assortments, a later back-to-school season, stronger performance in our larger markets, and our return to more
normal store hours. Our fourth quarter sales remained suppressed due to the negative impact from the upsurge in the virus that
resulted in reduced customer traffic and more stringent occupancy and store operating hours restrictions.
34
The ongoing effect of the COVID-19 pandemic on consumer behavior and spending patterns remains highly uncertain. Despite
the initial surge in customer demand as our stores first reopened, we expect customer demand to be generally suppressed for an
extended period of time. In addition, there have been recent resurgences in the spread of COVID-19 and new virus variants
throughout the United States, which may also recur in the future, in one or more regions, and which have and could require our
stores and distribution centers to temporarily close again nationally, regionally, or in specific locations. These closures would
negatively impact our future revenue and operations.
In response to the COVID-19 pandemic, we incurred various costs to reopen our stores and distribution centers, and we incurred
additional operating costs for processes and procedures to facilitate social distancing, to enhance cleaning and sanitation
activities, and to provide personal protective equipment to our associates. These actions, combined with various other actions
taken to reduce costs, resulted in approximately $130 million of additional net costs in fiscal 2020. We expect our operating costs
to remain elevated related to our continuing response to the COVID-19 pandemic.
To preserve our financial liquidity and enhance our financial flexibility, we borrowed $800 million from our revolving credit facility
in March 2020, completed a $2.0 billion senior notes offering in April 2020, and entered into a new $500 million 364-day senior
revolving credit facility in May 2020. In the third quarter of fiscal 2020, we refinanced $775 million in aggregate principal amount
of higher interest senior notes with the issuance of $1.0 billion in aggregate principal amount of lower interest rate senior notes.
This action resulted in a refinancing charge of approximately $240 million in the third quarter, but will significantly reduce our
annual interest expense and total cash outlays over the life of the debt. In addition to refinancing the senior notes, we took
several other actions during the third quarter, to reduce our ongoing debt costs, including repayment of the $800 million revolving
credit facility and termination of the undrawn $500 million 364-day senior revolving credit facility.
We suspended our stock repurchase program in March 2020 and temporarily suspended quarterly dividends in May 2020, and
we took measures to reduce our expenses, inventory receipts, and capital expenditures. Beginning April 5, 2020, we
implemented temporary furloughs for a large portion of our hourly store and distribution center and other associates in our buying
and corporate offices who could not work productively while our stores and distribution centers were closed. Employee health
benefits for eligible associates continued during the temporary furlough at no cost to the impacted associates. We also reduced
payroll expenses through temporary salary reductions for senior executives and other personnel, which remained in effect until
May 24, 2020, when more than half of our stores had reopened. In conjunction with these payroll expense reduction measures,
effective April 1, 2020, the non-employee members of our Board of Directors suspended the cash elements of their director
compensation, which remained in effect until August 2020.
In May 2020, in connection with the phased reopening of our store and distribution center locations, we began recalling many of
our furloughed associates, as they were able to resume productive work. As of our third quarter, the majority of these associates
had returned to work.
Also in May 2020, we suspended rent payments associated with the leases for our temporarily closed stores. During fiscal 2020,
we negotiated rent deferrals and/or rent abatements for a significant number of our stores. The repayment of the deferrals will be
at later dates, primarily in fiscal 2021. We have recorded accruals for rent payment deferrals and have recorded rent abatements
as a reduction of variable lease costs.
Given the unprecedented impact the COVID-19 pandemic has had on our business, and the continued uncertainty surrounding
the COVID-19 pandemic, including its unknown duration and future severity, the potential for resurgences and new virus
variants, and the unknown overall impact on consumer demand and store productivity, we expect that impacts from the COVID-
19 pandemic and the related cost increases and economic disruption may have a material adverse impact on our consolidated
results of operations, financial condition, and cash flows in fiscal 2021 and potentially beyond.
35
Results of Operations
The following table summarizes the financial results for fiscal 2020, 2019, and 2018:
Sales
Sales (millions)
Sales (decline) growth
Comparable store sales growth
Costs and expenses (as a percent of sales)
Cost of goods sold
Selling, general and administrative
Interest expense (income), net
Earnings before taxes (as a percent of sales)
Net earnings (as a percent of sales)
2020
2019
2018
$
12,532
(21.9)%
n/a1
$ 16,039
7.0%
3%2
$
14,984
6.0%
4%2
78.5%
20.0%
0.7%
0.8%
0.7%
71.9%
14.7%
(0.1)%
13.5%
10.4%
71.6%
14.8%
(0.1)%
13.7%
10.6%
1 Given the temporary store closures resulting from the COVID-19 pandemic, the comparable store sales metric for fiscal 2020
is not meaningful.
2 Represents stores that have been open for more than 14 complete months.
Stores. Total stores open at the end of fiscal 2020, 2019, and 2018 were 1,859, 1,805, and 1,717, respectively. The number of
stores at the end of fiscal 2020, 2019, and 2018 increased by 3%, 5%, and 6% from the respective prior years. In response to
the impacts from the COVID-19 pandemic, we reduced our pace of new store openings for fiscal 2020. Our longer 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.
Store Count
Beginning of the period
Opened in the period
Closed in the period
End of the period
Selling square footage at the end of the period (000)
2020
1,805
66 1
(12)
1,859
38,800
2019
2018
1,717
98
(10) 2
1,805
37,900
1,622
99
(4)
1,717
36,300
1 Includes the reopening of a store previously temporarily closed due to a weather event.
2 Includes the temporary closure of a store impacted by a weather event.
Sales. Sales for fiscal 2020 decreased $3.5 billion, or 21.9%, compared to the prior year. This was primarily due to the negative
impact from store closures during the March 2020 to June 2020 period, the negative impact on customer demand from the
COVID-19 pandemic, mandated occupancy restrictions, and reduced store operating hours during the remainder of fiscal 2020.
We opened 54 net new stores during 2020. The sales from these new stores partially offset the overall sales decline.
Sales for fiscal 2019 increased $1.1 billion, or 7.0%, compared to the prior year due to the opening of 88 net new stores during
2019 and a 3% increase in sales from comparable stores.
36
Our sales mix is shown below for fiscal 2020, 2019, and 2018:
Home Accents and Bed and Bath
Ladies
Men’s
Accessories, Lingerie, Fine Jewelry, and Fragrances
Shoes
Children’s
Total
2020
2019
2018
28%
23%
14%
14%
12%
9%
25%
26%
14%
13%
13%
9%
26%
26%
14%
13%
13%
8%
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 merchant organization, diversify our merchandise mix, and more fully develop our
systems to improve our merchandise offerings.
Our historic strategies and store expansion program have contributed to our sales gains in the past. However, given the impacts
from the COVID-19 pandemic on our results for fiscal 2020, and the significant ongoing impacts and uncertainties, including the
unknown overall impact on consumer demand and shopping behavior, the unknown duration of the pandemic, and potential
responses to it (which may require stores and distribution centers to close again nationally, regionally, or in specific locations), we
cannot be sure that our strategies and resumption of our store expansion program will result in a continuation of our historical
sales growth or in a recovery of, or an increase in, net earnings.
Cost of goods sold. Cost of goods sold in fiscal 2020 decreased $1.7 billion compared to the prior year mainly due to the lower
sales from the temporary closure of all store locations (starting on March 20, 2020 through a portion of the second quarter of
fiscal 2020), and ensuing negative impact on customer demand from the COVID-19 pandemic after our store reopenings, as well
as lower costs from the temporary furlough of most hourly associates in our distribution centers and some associates in our
buying offices. These decreases were partially offset by higher markdowns used to clear aged and seasonal inventory, higher
distribution costs primarily due to increased wages and higher freight costs due to industry-wide supply chain congestion, added
expenditures for COVID-19 related measures, and higher occupancy costs from the opening of 54 net new stores during 2020.
As we enter 2021, we expect higher supply chain costs from the industry-wide congestion to continue through fiscal 2021, along
with higher costs from increases in wages we implemented in the second half of 2020.
Cost of goods sold in fiscal 2019 increased $809.9 million compared to the prior year, mainly due to increased sales from the
opening of 88 net new stores during the year and a 3% increase in sales from comparable stores.
Cost of goods sold as a percentage of sales for fiscal 2019 increased approximately 35 basis points from the prior year, primarily
due to a 35 basis point increase in distribution expenses and a 15 basis point increase in freight costs. These increases were
partially offset by a 10 basis point improvement in merchandise gross margin and a five basis point reduction in buying costs.
Selling, general and administrative expenses. For fiscal 2020, selling, general and administrative expenses (“SG&A”)
increased $146.6 million compared to the prior year, primarily due to approximately $240 million in long-term debt refinancing
costs, COVID-related expenses (including for supplies, cleaning, and payroll related to additional safety protocols), and
payments to associates while our stores were closed (net of employee retention credits under the Coronavirus Aid, Relief, and
Economic Security Act (the “CARES Act”)), partially offset by payroll-related cost reduction measures in response to the COVID-
19 pandemic (including the temporary furlough of most hourly associates in our stores during closure periods, and some
associates in our corporate offices), reductions in non-business critical operating expenses, and lower store operating expenses
on lower sales. As we enter 2021, we expect our operating costs to continue to reflect ongoing COVID-related expenses and
also higher wages.
For fiscal 2019, SG&A increased $140.2 million compared to the prior year, mainly due to increased store operating costs
reflecting the opening of 88 net new stores during the year. SG&A as a percentage of sales for fiscal 2019 decreased by
approximately 10 basis points compared to the prior year primarily due to leverage on higher sales.
37
Interest expense (income), net. In fiscal 2020, net interest expense increased by $101.5 million compared to 2019 primarily
due to higher interest expense on long-term debt due to the issuance of Senior Notes in April 2020 and October 2020 (net of
repurchase of Senior Notes), lower interest income due to lower interest rates, and higher interest expense on short-term debt
due to the draw down on our $800 million revolving credit facility in March 2020 (which was subsequently repaid in October
2020), partially offset by higher capitalized interest primarily related to the construction of our Brookshire, Texas distribution
center.
In fiscal 2019, net interest income improved by $7.9 million compared to 2018 primarily due to lower interest expense on long-
term debt due to the repayment of the Series A 6.38% unsecured Senior Notes in December 2018 and higher capitalized interest
primarily related to the construction of our Brookshire, Texas distribution center.
The table below shows the components of interest expense and income for fiscal 2020, 2019, and 2018:
($000)
Interest expense on long-term debt
Interest expense on short-term debt
Other interest expense
Capitalized interest
Interest income
Interest expense (income), net
$
2020
2019
88,544 $
7,863
3,908
(12,251)
(4,651)
13,139 $
—
968
(4,367)
(27,846)
2018
17,900
—
1,004
(2,497)
(26,569)
$
83,413 $
(18,106) $
(10,162)
Taxes on earnings. Our effective tax rates for fiscal 2020, 2019, and 2018 were approximately 20%, 23%, and 23%,
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 tax law and accounting
guidance, location of new stores, level of earnings, tax effects associated with share-based compensation, and the resolution of
tax positions with various tax authorities.
In fiscal 2019, we resolved uncertain tax positions with a state tax authority. As a result, we recognized a tax benefit of
approximately $10.0 million in the Consolidated Statement of Earnings. In fiscal 2018, we resolved uncertain tax positions
related to fiscal 2015 with the Internal Revenue Service. As a result, we recognized a tax benefit of approximately $26.0 million in
the Consolidated Statement of Earnings.
On March 27, 2020, the CARES Act was signed into law. The CARES Act made several significant changes to business tax
provisions including modifications for net operating losses, employee retention credits, and deferral of employer payroll tax
payments. On December 27, 2020, the Consolidated Appropriations Act of 2021 (“CAA”) was signed into law. The CAA made
several changes to business tax provisions including increasing and extending the employee retention credits through June 30,
2021 and extending certain employment-related tax credits through December 31, 2025.
Net earnings. Net earnings as a percentage of sales for fiscal 2020 were lower than in fiscal 2019, primarily due to higher cost
of goods sold, higher SG&A expenses, and higher interest expense. Net earnings as a percentage of sales for fiscal 2019 were
lower compared to fiscal 2018, primarily due to higher cost of goods sold, partially offset by lower SG&A expenses and higher
interest income.
Earnings per share. Diluted earnings per share in fiscal 2020 was $0.24, compared to $4.60 in the prior year. The lower diluted
earnings per share in fiscal 2020 was primarily attributable to lower sales due to the closing of all our store locations starting on
March 20, 2020 through a portion the second quarter of fiscal 2020 and the negative impact on customer demand from the
COVID-19 pandemic, higher markdowns to clear aged and seasonal inventory, long-term debt refinancing costs, payments to
associates while our stores were closed (net of employee retention credits under the CARES Act), and higher expenditures for
COVID-19 related measures.
Diluted earnings per share in fiscal 2019 was $4.60, which included a per share benefit of approximately $0.02 primarily related
to the favorable resolution of a tax matter, compared to $4.26 in the prior year, which included a per share benefit of
approximately $0.07 from the favorable resolution of a tax matter.
38
Financial Condition
Liquidity and Capital Resources
As previously noted, the United States and other countries are experiencing a major global health pandemic related to the
outbreak of a novel strain of coronavirus, COVID-19 that started at the beginning of 2020. Governmental authorities in affected
regions have taken, and continue to take, dramatic actions in an effort to slow down the spread of the disease. Similar to other
retailers across the country, we temporarily closed all store locations, our distribution centers, and our buying and corporate
offices, effective March 20, 2020 through May 14, 2020, when we began a phased process of resuming operations. All our
distribution centers were reopened by the end of May 2020. The vast majority of our store locations were open and operating by
the end of June 2020, and remained open throughout the remainder of fiscal 2020, though many of our stores were operating on
shorter hours and under mandated occupancy restrictions for periods of time, compared to the prior year.
To preserve our financial liquidity and enhance our financial flexibility, we borrowed $800 million from our revolving credit facility
in March 2020, completed a $2.0 billion senior notes offering in April 2020, and entered into a new $500 million 364-day senior
revolving credit facility in May 2020. In the third quarter of fiscal 2020, we refinanced $775 million in aggregate principal amount
of higher interest senior notes with the issuance of $1.0 billion in aggregate principal amount of lower interest rate senior notes.
This action resulted in a refinancing charge of approximately $240 million in the third quarter, but will significantly reduce our
annual interest expense and total cash outlays over the life of the debt. In addition to refinancing the senior notes refinancing, we
took several other actions during the third quarter, to reduce our ongoing debt costs, including repayment of the $800 million
revolving credit facility and termination of the undrawn $500 million 364-day senior revolving credit facility.
We suspended our stock repurchase program in March 2020 and temporarily suspended quarterly dividends in May 2020, and
we took measures to reduce our expenses, inventory receipts, and capital expenditures. Beginning April 5, 2020, we
implemented temporary furloughs for a large portion of our hourly store and distribution center and other associates in our buying
and corporate offices who could not work productively while our stores and distribution centers were closed. Employee health
benefits for eligible associates continued during the temporary furlough at no cost to the impacted associates. We also reduced
payroll expenses through temporary salary reductions for senior executives and other personnel, which remained in effect until
May 24, 2020, when more than half of our stores had reopened. In conjunction with these payroll expense reduction measures,
effective April 1, 2020, the non-employee members of our Board of Directors suspended the cash elements of their director
compensation, which remained in effect until August 2020.
Also in May 2020, we suspended rent payments associated with the leases for our temporarily closed stores. During fiscal 2020,
we negotiated rent deferrals and/or rent abatements for a significant number of our stores. The repayment of the deferrals will be
at later dates, primarily in fiscal 2021. We recorded accruals for rent payment deferrals and recorded rent abatements as a
reduction of variable lease costs.
We ended fiscal 2020 with over $5.6 billion in liquidity, which consists of $4.8 billion unrestricted cash balances and the $800
million available under our revolving credit facility.
Historically, our primary sources of funds for our business activities have been cash flows from operations and short-term trade
credit. Our primary ongoing cash requirements are for merchandise inventory purchases, payroll, operating and variable lease
costs, taxes, and for capital expenditures in connection with new and existing stores, and investments in distribution centers,
information systems, and buying and corporate offices. We also use cash to pay dividends, to repay debt as it becomes due, and
to repurchase stock under active stock repurchase programs.
Due to the COVID-19 pandemic and related economic disruptions, and with the possibility that some of our stores, distribution
centers, and other facilities may need to temporarily close again, or continue on reduced operating hours and/or capacity
restrictions, as a result of government mandates, we anticipate potential interruptions to our cash flows from operations. We
anticipate that we will be required to rely more on our cash reserves and we expect to carefully monitor and manage our cash
position in light of ongoing conditions and levels of operations.
($ millions)
Cash provided by operating activities
Cash used in investing activities
Cash provided by (used in) financing activities
2020
2019
2018
$ 2,245.9 $ 2,171.5 $
(405.4)
1,701.9
(555.0)
(1,683.2)
2,066.7
(410.4)
(1,531.5)
Net increase (decrease) in cash, cash equivalents, and restricted cash and
cash equivalents
$ 3,542.4
$
(66.7) $
124.8
39
Operating Activities
Net cash provided by operating activities was $2.2 billion in fiscal 2020. This was primarily driven by higher accounts payable
due to extended payment terms, lower merchandise receipts as we closely managed inventory levels and used packaway
inventory to replenish our stores, and net earnings excluding non-cash expenses for depreciation and amortization. This was
partially offset by the lower net earnings due to lower sales from the temporary closing of all store locations starting on March 20,
2020 through a portion of the second quarter, and the negative impact on customer demand from the COVID-19 pandemic. Net
cash provided by operating activities was $2.2 billion and $2.1 billion in fiscal 2019 and 2018, respectively, and was primarily
driven by net earnings excluding non-cash expenses for depreciation and amortization and for deferred taxes.
The increase in cash flow from operating activities in fiscal 2020 compared to fiscal 2019 was primarily driven by higher accounts
payable leverage. The increase in cash flow from operating activities in fiscal 2019 compared to fiscal 2018 was primarily driven
by higher earnings and the timing of merchandise receipts and related payments versus the prior year. Accounts payable
leverage (defined as accounts payable divided by merchandise inventory) was 150%, 71%, and 67% as of January 30, 2021,
February 1, 2020, and February 2, 2019, respectively. The increase in accounts payable leverage in fiscal 2020 compared to
fiscal 2019 was primarily driven by lower packaway and in-store inventory and extended payment terms. The increase in
accounts payable leverage in fiscal 2019 compared to fiscal 2018 was primarily driven by timing of merchandise receipts and
related payments versus the prior year.
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 and our decisions on the timing for release of that inventory. 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 in normal times and historically, 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 2020, packaway inventory was 38% of
total inventory compared to 46% at the end of both fiscal 2019 and 2018.
Investing Activities
Net cash used in investing activities was $405.4 million, $555.0 million, and $410.4 million in fiscal 2020, 2019, and 2018,
respectively. The decrease in cash used for investing activities in fiscal 2020 compared to fiscal 2019 was primarily due to a
reduction in our capital expenditures. The increase in cash used for investing activities in fiscal 2019 compared to fiscal 2018
was primarily due to an increase in our capital expenditures.
The decrease in capital expenditures in fiscal 2020 compared to fiscal 2019 was primarily due to our actions to preserve our
financial liquidity in response to the COVID-19 pandemic and related economic disruptions. The increase in capital expenditures
in fiscal 2019 compared to fiscal 2018 was primarily due to investments in our distribution centers, and information technology
infrastructure investments for our stores, buying, corporate offices, and transportation. We opened 66, 98, and 99 new stores in
fiscal 2020, 2019, and 2018, respectively.
In fiscal 2020, 2019, and 2018, our capital expenditures were $405.4 million, $555.5 million, and $413.9 million, respectively. Our
capital expenditures included costs to build, expand, and improve distribution centers (primarily related to the ongoing
construction of our Brookshire, Texas distribution center); open new stores and improve existing stores; and for various other
expenditures related to our information technology systems, buying, and corporate offices.
Our capital expenditures over the last three years are set forth in the table below:
($ millions)
New stores
Existing stores
Information systems, corporate, and other
Distribution and transportation
Total capital expenditures
40
$
2020
81.1 $
54.8
38.3
231.2
2019
137.4 $
125.3
91.8
201.0
$
405.4 $
555.5 $
2018
134.5
130.5
84.9
64.0
413.9
Capital expenditures for fiscal 2021 are projected to be approximately $700 million. Our planned capital expenditures for fiscal
2021 are expected to be used for continued construction of our Brookshire, Texas distribution center, costs for fixtures and
leasehold improvements to open planned new Ross and dd’s DISCOUNTS stores, investments in certain information technology
systems, and for various other needed expenditures related to our stores, distribution centers, buying, and corporate offices. We
expect to fund capital expenditures with available cash. The increase in our planned capital expenditures from fiscal 2020 are
primarily driven by the continued construction of our Brookshire, Texas distribution center and the resumption of certain projects
that were deferred from fiscal 2020.
Financing Activities
Net cash provided by financing activities was $1.7 billion in fiscal 2020. Net cash used in financing activities was $1.7 billion and
$1.5 billion in fiscal 2019 and 2018, respectively. The increase in cash provided by financing activities for fiscal 2020, compared
to fiscal 2019, was primarily due to the completion of our public debt offerings, net of repurchase and refinancing costs, and the
suspension of our share repurchases and dividends in the second quarter of 2020.
In July 2019, we entered into a new $800 million unsecured revolving credit facility, which replaced our previous $600 million
unsecured revolving credit facility. This current credit facility expires in July 2024, and contains a $300 million sublimit for
issuance of standby letters of credit. The facility also contains an option allowing us to increase the size of our revolving credit
facility by up to an additional $300 million, with the agreement of the lenders. Interest on borrowings under this facility is based
on LIBOR (or an alternate benchmark rate, if LIBOR is no longer available) plus an applicable margin and is payable quarterly
and upon maturity. The revolving credit facility may be extended, at our option, for up to two additional one-year periods, subject
to customary conditions.
In March 2020, we borrowed $800 million under our revolving credit facility. Interest on the loan was based on LIBOR plus
0.875% (or 1.76%).
In May 2020, we amended the $800 million revolving credit facility (the “Amended Credit Facility”) to temporarily suspend for the
second and third quarters of fiscal 2020 the Consolidated Adjusted Debt to EBITDAR ratio financial covenant, and to apply a
transitional modification to that ratio effective in the fourth quarter of fiscal 2020. The Amended Credit Facility also established a
new temporary minimum liquidity requirement effective for the first quarter of fiscal 2020 and through the end of April 2021. As of
January 30, 2021, we were in compliance with these amended covenants.
In October 2020, we repaid in full the $800 million we borrowed under the unsecured revolving credit facility. As a result, we
currently have no borrowings or standby letters of credit outstanding under this facility, and the $800 million credit facility remains
in place and available.
In May 2020, we also entered into an additional $500 million 364-day senior revolving credit facility which was scheduled to
expire in April 2021. In October 2020, we terminated this senior revolving credit facility. We had no borrowings under that credit
facility at any time.
In April 2020, we issued an aggregate of $2.0 billion in unsecured senior notes in four tenors as follows: $700 million of 4.600%
Senior Notes due April 2025, $400 million of 4.700% Senior Notes due April 2027, $400 million of 4.800% Senior Notes due April
2030, and $500 million of 5.450% Senior Notes due April 2050.
In October 2020, we accepted for purchase approximately $775 million in aggregate principal amount of senior notes pursuant to
cash tender offers as follows: $351 million of the 2050 Notes, $266 million of the 2030 Notes, and $158 million of the 2027
Notes. We paid approximately $1.003 billion in aggregate consideration (including transaction costs, and accrued and unpaid
interest) and recorded an approximately $240 million loss on the early extinguishment for the accepted notes.
In October 2020, we also issued an aggregate of $1.0 billion in unsecured senior notes in two tenors as follows: 0.875% Senior
Notes due April 2026 (the “2026 Notes”) with an aggregate principal amount of $500 million and 1.875% Senior Notes due April
2031 (the “2031 Notes”) with an aggregate principal amount of $500 million. Cash proceeds, net of discounts and other issuance
costs, were approximately $987.2 million. We used the net proceeds from the offering of the 2026 and 2031 Notes to fund the
purchase of the accepted notes from our tender offers.
In June 2020, we amended the covenants associated with the $65 million outstanding Series B unsecured senior notes. The
amended covenants are consistent with the corresponding covenants in our existing revolving credit facility. As of January 30,
2021, we were in compliance with these covenants.
41
On December 13, 2018, we repaid at maturity the $85 million principal amount of the Series A 6.38% unsecured Senior Notes.
In March 2019, our Board of Directors approved a two-year $2.55 billion stock repurchase program through fiscal 2020. Due to
the economic uncertainty stemming from the severe impact of the COVID-19 pandemic, we suspended our stock repurchase
program in March 2020, at which time we had repurchased $1.407 billion under the $2.55 billion stock repurchase program. We
do not plan on making additional purchases until further notice.
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 1.2 million, 12.3 million, and 12.5 million shares of common stock for aggregate purchase prices of
approximately $132 million, $1,275 million, and $1,075 million in fiscal 2020, 2019, and 2018, respectively. We also acquired 0.5
million, 0.6 million, and 0.7 million shares in fiscal 2020, 2019, and 2018, respectively, of treasury stock from our employee stock
equity compensation programs, for aggregate purchase prices of approximately $45.2 million, $60.7 million, and $54.4 million
during fiscal 2020, 2019, and 2018, respectively.
On March 2, 2021, our Board of Directors declared a quarterly cash dividend of $0.285 per common share, payable on
March 31, 2021, resuming our payment of quarterly dividends. Our most recent prior quarterly dividend was a cash dividend of
$0.285 per common share declared by our Board of Directors in March 2020. In May 2020, we temporarily suspended our
quarterly dividends, due to the economic uncertainty stemming from the COVID-19 pandemic. Our Board of Directors declared
cash dividends of $0.255 per common share in March, May, August, and November 2019, and cash dividends of $0.225 per
common share in March, May, August, and November 2018.
During fiscal 2020, 2019, and 2018, we paid dividends of $101.4 million, $369.8 million, and $337.2 million, respectively.
Short-term trade credit represents a significant source of financing for our 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. Due to the COVID-19 pandemic and related economic disruptions, we face added uncertainty about the levels of
trade credit we can maintain and liquidity available from sales of merchandise.
During fiscal 2020, our liquidity and capital requirements were provided by available cash and cash flows from operations, and
our long-term debt financing. During fiscal 2019 and 2018, our liquidity and capital requirements were provided by available cash
and cash flows from operations.
The COVID-19 pandemic and related economic disruptions, including the temporary closure of all of our store locations effective
March 20, 2020 through a portion of the second quarter, continue to create significant uncertainty and challenges. We believe
that existing cash balances, our bank credit facility, and trade credit are adequate to meet our operating, investing, and financing
needs for at least the next 12 months.
42
Contractual Obligations and Off-Balance Sheet Arrangements
The table below presents our significant contractual obligations as of January 30, 2021:
($000)
Recorded contractual obligations:
Senior notes
Operating leases
New York buying office ground lease²
Unrecorded contractual obligations:
Real estate obligations3
Interest payment obligations
Purchase obligations4
Total contractual obligations
Less than
1 year
1 - 3
years
3 - 5
years
After 5
years
Total¹
$
65,000 $
— $
628,613
5,883
1,220,165
13,898
950,000 $ 1,524,991 $ 2,539,991
3,273,895
611,178
813,939
974,397
940,438
14,178
6,420
84,369
3,048,513
188,737
680,135
3,063,646
$ 3,838,798 $ 1,441,171 $ 1,951,192 $ 3,489,640 $ 10,720,801
35,388
136,094
1,593
113,992
299,041
—
32,937
160,631
13,540
1 We have a $65.5 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.
² Our New York buying office building is subject to a 99-year ground lease.
3 Minimum lease payments for operating leases signed that have not yet commenced.
4 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.
Other than the unrecorded contractual obligations noted above, we do not have any material off-balance sheet arrangements as
of January 30, 2021.
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 some of our insurance obligations. We also use standby letters of credit outside of our revolving
credit facility to collateralize some of our trade payable obligations. As of January 30, 2021 and February 1, 2020, we had $15.3
million and $4.2 million, respectively, in standby letters of credit outstanding, and $56.1 million and $56.0 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 $16.3 million and $11.2 million in trade letters of credit outstanding at January 30, 2021 and
February 1, 2020, 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.
43
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 38%, 46%,
and 46% of total inventories as of January 30, 2021, February 1, 2020, and February 2, 2019, respectively. Merchandise
inventory includes acquisition, processing, and storage costs related to packaway inventory.
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.
Lease accounting. As our leases generally do not provide an implicit discount rate; we use the estimated collateralized
incremental borrowing rate based on information available at the lease commencement date in determining the present value of
lease payments for use in the calculation of the operating lease liabilities and right-of-use assets. This rate is determined using a
portfolio approach based on the risk-adjusted rate of interest and requires estimates and assumptions including credit rating,
credit spread, and adjustments for the impact of collateral. We believe that this is the rate we would have to pay to borrow an
amount equal to the lease payments on a collateralized basis over a similar lease term. Operating lease liabilities and
corresponding right-of-use assets include options to extend lease terms that are reasonably certain of being exercised. We do
not record a lease liability and corresponding right-of-use asset for leases with terms of 12 months or less, and account for lease
and non-lease components as a single lease component. Our lease portfolio is comprised of operating leases with the lease cost
recorded on a straight-line basis over the lease term.
Prior to our adoption of Accounting Standards Codification (“ASC”) 842 in the beginning of fiscal 2019, when a lease contained
“rent holidays” or required fixed escalations of the minimum lease payments, we recorded rental expense on a straight-line basis
over the term of the lease and the difference between the average rental amount was charged to expense and the amount
payable under the lease was recorded as deferred rent. We began recording rent expense on the lease possession date. Tenant
improvement allowances were amortized over the lease term. Changes in deferred rent and tenant improvement allowances
were included as a component of operating activities in the Consolidated Statements of Cash Flows.
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.
Recent Accounting Pronouncements
See Note A to the Consolidated Financial Statements - Summary of Significant Accounting Policies (Recently issued accounting
standards and Recently adopted accounting standards) for a discussion of recent accounting pronouncements and their impact
to our Consolidated Financial Statements.
Forward-Looking Statements
Our Annual Report on Form 10-K for fiscal 2020, 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, the rapidly developing challenges and our plans and responses to the COVID-19
pandemic and related economic disruptions, including adjustments to our operations, planned new store growth, new markets,
expected sales, projected earnings levels, capital expenditures, and other matters. These forward-looking statements reflect our
then current beliefs, plans, 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.
44
Future impact from the ongoing COVID-19 pandemic, and other economic and industry trends that could potentially impact
revenue, profitability, operating conditions, 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, plans, 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.
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 January 30, 2021.
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 January 30, 2021, we had no borrowings outstanding under our revolving credit facility.
As of January 30, 2021, we have outstanding eight series of unsecured Senior Notes. Interest that is payable on all series of our
Senior Notes is based on fixed interest rates, and is therefore unaffected by changes in market interest rates.
We receive interest 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 negative 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 January 30, 2021. 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.
45
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Consolidated Statements of Earnings
($000, except per share data)
Sales
Costs and Expenses
Cost of goods sold
Selling, general and administrative
Interest expense (income), net
Total costs and expenses
Earnings before taxes
Provision for taxes on earnings
Net earnings
Earnings per share
Basic
Diluted
Year Ended Year Ended
January 30, 2021 February 1, 2020
$
12,531,565 $
16,039,073 $
Year Ended
February 2, 2019
14,983,541
9,838,574
2,503,281
83,413
12,425,268
11,536,187
2,356,704
(18,106)
13,874,785
106,297
20,915
85,382 $
2,164,288
503,360
1,660,928 $
10,726,277
2,216,550
(10,162)
12,932,665
2,050,876
463,419
1,587,457
0.24 $
0.24 $
4.63 $
4.60 $
4.30
4.26
$
$
$
Weighted-average shares outstanding (000)
Basic
Diluted
352,392
354,619
358,462
361,182
369,533
372,678
The accompanying notes are an integral part of these consolidated financial statements.
Consolidated Statements of Comprehensive Income
($000)
Net earnings
Year Ended
January 30, 2021
Year Ended
February 1, 2020
Year Ended
February 2, 2019
$
85,382 $
1,660,928 $
1,587,457
—
(27)
1,587,430
1,660,928 $
Other comprehensive income (loss)
Change in unrealized gain (loss) on investments, net
of tax
Comprehensive income
$
—
85,382 $
The accompanying notes are an integral part of these consolidated financial statements.
46
Consolidated Balance Sheets
($000, except share data)
Assets
Current Assets
Cash and cash equivalents
Accounts receivable
Merchandise inventory
Prepaid expenses and other
Total current assets
Property and Equipment
Land and buildings
Fixtures and equipment
Leasehold improvements
Construction-in-progress
Less accumulated depreciation and amortization
Property and equipment, net
Operating lease assets
Other long-term assets
Total assets
Liabilities and Stockholders’ Equity
Current Liabilities
Accounts payable
Accrued expenses and other
Current operating lease liabilities
Accrued payroll and benefits
Income taxes payable
Current portion of long-term debt
Total current liabilities
Long-term debt
Non-current operating lease liabilities
Other long-term liabilities
Deferred income taxes
Commitments and contingencies
Stockholders’ Equity
Common stock, par value $0.01 per share
Authorized 1,000,000,000 shares
Issued and outstanding 356,503,000 and
356,775,000 shares, respectively
Additional paid-in capital
Treasury stock
Retained earnings
Total stockholders’ equity
January 30, 2021
February 1, 2020
$
$
$
4,819,293 $
115,067
1,508,982
249,149
6,692,491
1,187,045
3,243,206
1,278,134
376,076
6,084,461
3,373,965
2,710,496
3,084,819
230,061
12,717,867 $
2,256,928 $
592,122
598,120
400,273
54,680
64,910
3,967,033
2,448,175
2,621,594
268,558
121,867
1,351,205
102,236
1,832,339
147,048
3,432,828
1,177,262
3,115,003
1,219,736
189,536
5,701,537
3,048,101
2,653,436
3,053,782
208,321
9,348,367
1,296,482
462,111
564,481
364,435
14,425
—
2,701,934
312,891
2,610,528
214,086
149,679
3,565
3,568
1,579,824
(478,550)
2,185,801
3,290,640
1,458,307
(433,328)
2,330,702
3,359,249
9,348,367
47
Total liabilities and stockholders’ equity
$
12,717,867 $
The accompanying notes are an integral part of these consolidated financial statements.
Consolidated Statements of Stockholders’ Equity
Common stock
(000)
Shares Amount
Additional
paid-in
capital
Treasury
stock
Accumulated
other
comprehensive
income (loss)
Retained
earnings
Total
Balance at February 3, 2018
Net earnings
Cumulative effect of adoption of
379,618 $ 3,796 $ 1,292,364 $(318,279) $
—
—
—
—
27 $ 2,071,400 $3,049,308
1,587,457
— 1,587,457
accounting standard
(revenue recognition), net
Unrealized investment loss, net
Common stock issued under
—
—
—
—
—
—
—
—
—
(27)
19,884
—
19,884
(27)
stock plans, net of shares
used for tax withholding
Stock-based compensation
Common stock repurchased
Dividends declared ($0.900 per
1,097
—
(12,473)
11
—
(125)
20,101
95,585
(32,085)
(54,384)
—
—
—
—
—
—
— (1,042,790)
(34,272)
95,585
(1,075,000)
share)
—
—
—
—
—
(337,189)
(337,189)
Balance at February 2, 2019
Net earnings
Cumulative effect of adoption of
368,242 $ 3,682 $ 1,375,965 $(372,663) $
—
—
—
—
— $ 2,298,762 $3,305,746
1,660,928
— 1,660,928
accounting standard
(leases), net
Common stock issued under
stock plans, net of shares
used for tax withholding
Stock-based compensation
Common stock repurchased
Dividends declared ($1.020 per
—
—
—
—
—
(19,614)
(19,614)
793
—
(12,260)
8
—
(122)
22,201
95,438
(35,297)
(60,665)
—
—
—
—
—
—
— (1,239,581)
(38,456)
95,438
(1,275,000)
share)
—
—
—
—
—
(369,793)
(369,793)
Balance at February 1, 2020
Net earnings
Common stock issued under
stock plans, net of shares
used for tax withholding
Stock-based compensation
Common stock repurchased
Dividends declared ($0.285 per
356,775 $ 3,568 $ 1,458,307 $(433,328) $
—
—
—
—
— $ 2,330,702 $3,359,249
85,382
—
85,382
899
—
(1,171)
9
—
(12)
23,525
101,568
(3,576)
(45,222)
—
—
—
—
—
—
—
(128,879)
(21,688)
101,568
(132,467)
share)
—
—
—
—
—
(101,404)
(101,404)
Balance at January 30, 2021
356,503 $ 3,565 $ 1,579,824 $(478,550) $
— $ 2,185,801 $3,290,640
The accompanying notes are an integral part of these consolidated financial statements.
48
Consolidated Statements of Cash Flows
($000)
Cash Flows From Operating Activities
Net earnings
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation and amortization
Loss on early extinguishment of debt
Stock-based compensation
Deferred income taxes
Change in assets and liabilities:
Merchandise inventory
Other current assets
Accounts payable
Other current liabilities
Income taxes
Operating lease assets and liabilities, net
Other long-term, net
Year Ended
January 30, 2021
Year Ended
February 1, 2020
Year Ended
February 2, 2019
$
85,382 $
1,660,928 $
1,587,457
364,245
239,953
101,568
(27,812)
323,357
(39,406)
938,837
171,444
39,806
13,669
34,890
350,892
—
95,438
32,009
(81,897)
(10,315)
114,153
30,513
(35,239)
15,631
(567)
330,357
—
95,585
31,777
(108,707)
(30,789)
110,483
37,080
3,706
—
9,728
Net cash provided by operating activities
2,245,933
2,171,546
2,066,677
Cash Flows From Investing Activities
Additions to property and equipment
Proceeds from investments
Net cash used in investing activities
(405,433)
—
(405,433)
(555,483)
517
(554,966)
(413,898)
3,489
(410,409)
Cash Flows From Financing Activities
Net proceeds from issuance of short-term debt
Payments of short-term debt
Net proceeds from issuance of long-term debt
Payments of long-term debt
Payments of debt extinguishment and debt issuance costs
Issuance of common stock related to stock plans
Treasury stock purchased
Repurchase of common stock
Dividends paid
805,601
(805,601)
2,965,115
(775,009)
(232,688)
23,534
(45,222)
(132,467)
(101,404)
—
—
—
—
—
22,209
(60,665)
(1,275,000)
(369,793)
Net cash provided by (used in) financing activities
1,701,859
(1,683,249)
—
—
—
(85,000)
—
20,112
(54,384)
(1,075,000)
(337,189)
(1,531,461)
Net increase (decrease) in cash, cash equivalents, and
restricted cash and cash equivalents
Cash and cash equivalents, and restricted cash and cash
equivalents:
3,542,359
(66,669)
124,807
Beginning of year
End of year
1,411,410
1,478,079
1,353,272
$
4,953,769 $
1,411,410 $
1,478,079
Supplemental Cash Flow Disclosures
Interest paid
Income taxes paid
$
$
72,471 $
8,921 $
12,682 $
506,591 $
18,105
427,930
The accompanying notes are an integral part of these consolidated financial statements.
49
Notes to Consolidated Financial Statements
Note A: Summary of Significant Accounting Policies
Business. Ross Stores, Inc. and its subsidiaries (the “Company”) is an off-price retailer of first-quality, in-season, name brand
and designer apparel, accessories, footwear, and home fashions for the entire family. At the end of fiscal 2020, the Company
operated 1,585 Ross Dress for Less® (“Ross”) locations in 40 states, the District of Columbia, and Guam, and 274 dd’s
DISCOUNTS® stores in 21 states. The Ross and dd’s DISCOUNTS stores are supported by the Company’s headquarters,
buying offices, and its network of distribution centers/warehouses.
Segment reporting. The Company has one reportable segment. The Company’s operations include only activities related to off-
price retailing in stores throughout the United States.
Basis of presentation and fiscal year. The consolidated financial statements include the accounts of the Company and its
subsidiaries, all of which are wholly-owned. Intercompany transactions and accounts have been eliminated. The Company
follows the National Retail Federation fiscal calendar and utilizes a 52-53 week fiscal year whereby the fiscal year ends on the
Saturday nearest to January 31. The fiscal years ended January 30, 2021, February 1, 2020 and February 2, 2019 are referred
to as fiscal 2020, fiscal 2019, and fiscal 2018, respectively, and were 52-week years.
Use of accounting estimates. The preparation of consolidated financial statements in conformity with Generally Accepted
Accounting Principles in the United States of America (“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
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 inventory costs, useful lives of
fixed assets, insurance reserves, reserves for uncertain tax positions, employee retention credits under the Coronavirus Aid,
Relief, and Economic Security Act (the “CARES Act”), and legal claims. Given the global economic climate and additional, or
unforeseen effects, from the COVID-19 pandemic, these estimates are more challenging, and actual results could differ
materially from the Company’s estimates.
Purchase obligations. As of January 30, 2021, the Company had purchase obligations of approximately $3.1 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.
Cash and cash equivalents. Cash equivalents consist of highly liquid, fixed income instruments purchased with an original
maturity of three months or less.
Restricted cash, cash equivalents, and investments. Restricted cash, cash equivalents, and investments serve as collateral
for certain insurance and trade payable obligations of the Company. 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, restricted cash and cash equivalents in the Consolidated
Balance Sheets that reconcile to the amounts shown on the Consolidated Statements of Cash Flows:
($000)
Cash and cash equivalents
Restricted cash and cash equivalents included in:
Prepaid expenses and other
Other long-term assets
Total restricted cash and cash equivalents
2020
2019
2018
$ 4,819,293 $ 1,351,205 $ 1,412,912
85,711
48,765
134,476
10,235
49,970
60,205
11,402
53,765
65,167
Total cash and cash equivalents, and restricted cash and cash equivalents
$ 4,953,769 $ 1,411,410 $ 1,478,079
In addition to the restricted cash and cash equivalents in the table above, the Company had restricted investments of $0.4 million
as of February 2, 2019 included in Prepaid expenses and other in the Consolidated Balance Sheets. The Company had no
restricted investments as of January 30, 2021 and February 1, 2020.
50
Estimated fair value of financial instruments. The carrying value of cash and cash equivalents, short- and long-term
investments, restricted cash and cash equivalents, restricted investments, accounts receivable, other long-term assets, accounts
payable, and other long-term liabilities approximates their estimated fair value. See Note B and Note D for additional fair value
information.
Cash and cash equivalents were $4,819.3 million and $1,351.2 million, at January 30, 2021 and February 1, 2020, respectively,
and include bank deposits and money market funds for which the fair value was determined using quoted prices for identical
assets in active markets, which are considered to be Level 1 inputs under the fair value measurements and disclosures
guidance.
Investments. The Company’s investments are comprised of various debt securities. At January 30, 2021 and February 1, 2020,
these investments were classified as available-for-sale and are stated at fair value. Investments are classified as either short- or
long-term based on their maturity dates and the Company’s intent. Investments with a maturity of less than one year are
classified as short-term. See Note B for additional information.
Merchandise inventory. Merchandise inventory is stated at the lower of cost (determined using a weighted-average basis) or
net realizable value. The Company purchases 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 the 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. Merchandise inventory includes
acquisition, processing, and storage costs related to packaway inventory. The cost of the Company’s merchandise inventory is
reduced by valuation reserves for shortage based on historical shortage experience from the Company’s physical merchandise
inventory counts and cycle counts.
Cost of goods sold. In addition to product costs, the Company includes in cost of goods sold its buying, distribution, and freight
expenses as well as occupancy costs, and depreciation and amortization related to the Company’s retail stores, buying, and
distribution facilities. Buying expenses include costs to procure merchandise inventories. Distribution expenses include the cost
of operating the Company’s distribution centers, warehouses, and cross-dock facilities.
Property and equipment. Property and equipment are stated at cost, less accumulated depreciation and amortization.
Depreciation is calculated using the straight-line method over the estimated useful life of the asset, typically ranging from three to
12 years for equipment, 20 to 40 years for land improvements and buildings, and three to seven years for computer software
costs incurred in developing or obtaining software for internal use. The cost of leasehold improvements is amortized over the
useful life of the asset or the applicable lease term, whichever is less. Depreciation and amortization expense on property and
equipment was $364.2 million, $350.9 million, and $330.4 million for fiscal 2020, 2019, and 2018, respectively. The Company
capitalizes interest during the construction period of facilities and during the development and implementation phase of software
projects. Interest capitalized was $12.3 million, $4.4 million, and $2.5 million in fiscal 2020, 2019, and 2018, respectively. As of
January 30, 2021, February 1, 2020, and February 2, 2019 the Company had $56.2 million, $40.3 million, and $33.7 million,
respectively, of property and equipment purchased but not yet paid. These purchases are included in Property and Equipment
and in Accounts payable and Accrued expenses and other in the accompanying Consolidated Balance Sheets.
Other long-term assets. Other long-term assets as of January 30, 2021 and February 1, 2020 consisted of the following:
($000)
Deferred compensation (Note B)
Restricted cash and investments
Other
Total
2020
2019
$ 159,116 $ 141,443
49,970
16,908
48,765
22,180
$ 230,061 $ 208,321
Impairment of long-lived assets. Property and other long-term assets that are subject to depreciation and amortization are
reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be
recoverable based on estimated undiscounted future cash flows. For stores that are closed, the Company records an impairment
charge, if appropriate, or accelerates depreciation over the revised useful life of the asset. Intangible assets that are not subject
to amortization, including goodwill, are tested for impairment annually or more frequently if events or changes in circumstances
indicate that the asset may be impaired. Based on the Company’s evaluation during fiscal 2020, 2019, and 2018, no impairment
charges were recorded.
51
Accounts payable. Accounts payable represents amounts owed to third parties at the end of the period. Accounts payable
includes book cash overdrafts (checks issued under zero balance accounts not yet presented for payment) in excess of cash
balances in such accounts of approximately $63.5 million and $138.8 million at January 30, 2021 and February 1, 2020,
respectively. The Company includes the change in book cash overdrafts in operating cash flows.
Insurance obligations. The Company uses 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. The self-insurance and
deductible liability is determined actuarially, based on claims filed and an estimate of claims incurred but not yet reported. Self-
insurance and deductible reserves as of January 30, 2021 and February 1, 2020 consisted of the following:
($000)
Workers’ compensation
General liability
Medical plans
Total
$
2020
83,900 $
42,575
7,727
2019
87,063
44,371
6,430
$
134,202 $
137,864
Workers’ compensation and self-insured medical plan liabilities are included in Accrued payroll and benefits, and accruals for
general liability are included in Accrued expenses and other in the accompanying Consolidated Balance Sheets.
Other long-term liabilities. Other long-term liabilities as of January 30, 2021 and February 1, 2020 consisted of the following:
($000)
Income taxes (Note F)
Deferred compensation (Note G)
Deferred social security taxes
Other
Total
2020
$
65,507 $
159,116
36,701
7,234
2019
65,956
141,443
—
6,687
$
268,558 $
214,086
Lease accounting. As the Company’s leases generally do not provide an implicit discount rate, the Company uses the
estimated collateralized incremental borrowing rate based on information available at the lease commencement date in
determining the present value of lease payments for use in the calculation of the operating lease liabilities and right-of-use
assets. This rate is determined using a portfolio approach based on the risk-adjusted rate of interest and requires estimates and
assumptions including credit rating, credit spread, and adjustments for the impact of collateral. The Company believes that this is
the rate it would have to pay to borrow an amount equal to the lease payments on a collateralized basis over a similar lease
term. Operating lease liabilities and corresponding right-of-use assets include options to extend lease terms that are reasonably
certain of being exercised. The Company does not record a lease liability and corresponding right-of-use asset for leases with
terms of 12 months or less, and accounts for lease and non-lease components as a single lease component. The Company’s
lease portfolio is comprised of operating leases with the lease cost recorded on a straight-line basis over the lease term.
In response to the COVID-19 pandemic, the Financial Accounting Standards Board (“FASB”) provided relief under Accounting
Standards Update (“ASU”) 2016-02, Leases (Accounting Standards Codification “ASC” 842). Under this relief, companies can
make a policy election on how to treat lease concessions resulting directly from the COVID-19 pandemic, provided that the
modified contracts result in total cash flows that are substantially the same or less than the cash flows in the original contract.
The Company made the policy election to account for lease concessions that result from the COVID-19 pandemic as if they were
made under enforceable rights in the original contract. Additionally, the Company made the policy election to account for these
concessions outside of the lease modification framework described under ASC 842. The Company recorded accruals for
deferred rental payments and recognized rent abatements or concessions as variable lease costs in the periods incurred.
Accruals for rent payment deferrals are included in Accrued expenses and other in the accompanying Consolidated Balance
Sheets.
52
Prior to the adoption of Accounting Standards Codification “ASC” 842 in the beginning of fiscal 2019, when a lease contained
“rent holidays” or required fixed escalations of the minimum lease payments, the Company recorded rental expense on a
straight-line basis over the term of the lease and the difference between the average rental amount was charged to expense and
the amount payable under the lease was recorded as deferred rent. The Company began recording rent expense on the lease
possession date. Tenant improvement allowances were amortized over the lease term. Changes in deferred rent and tenant
improvement allowances were included as a component of operating activities in the Consolidated Statements of Cash Flows.
Revenue recognition. The Company recognizes revenue at the point of sale, net of sales taxes collected and an allowance for
estimated future returns as required by ASU No. 2014-09, Revenue from Contracts with Customers (ASC 606). The Company
recognizes allowances for estimated sales returns on a gross basis as a reduction to sales. The asset recorded for the expected
recovery of merchandise inventory was $10.7 million, $10.7 million, and $10.2 million and the liability recorded for the refund due
to the customer was $21.2 million, $20.9 million, and $19.8 million as of January 30, 2021, February 1, 2020, and February 2,
2019, respectively. Sales taxes collected that are outstanding and the allowance for estimated future returns are included in
Accrued expenses and other and the asset for expected recovery of merchandise is included in Prepaid expenses and other in
the Consolidated Balance Sheets.
Sales of stored value cards are deferred until they are redeemed for the purchase of Company merchandise. The Company’s
stored value cards do not have expiration dates. Based upon historical redemption rates, a small percentage of stored value
cards will never be redeemed, which represents breakage. As a result of adopting ASC 606, breakage is estimated and
recognized as revenue based upon the historical pattern of customer redemptions. Breakage was not material to the
consolidated financial statements in fiscal 2020, 2019, and 2018.
The following sales mix table disaggregates revenue by merchandise category for fiscal 2020, 2019, and 2018:
Home Accents and Bed and Bath
Ladies
Men’s
Accessories, Lingerie, Fine Jewelry, and Fragrances
Shoes
Children’s
Total
2020 1
28%
23%
14%
14%
12%
9%
100%
2019
2018
25%
26%
14%
13%
13%
9%
26%
26%
14%
13%
13%
8%
100%
100%
Store pre-opening. Store pre-opening costs are expensed in the period incurred.
Advertising. Advertising costs are expensed in the period incurred and are included in Selling, general and administrative
expenses. Advertising costs for fiscal 2020, 2019, and 2018 were $42.5 million, $74.0 million, and $79.9 million, respectively.
Stock-based compensation. The Company recognizes compensation expense based upon the grant date fair value of all
stock-based awards, typically over the vesting period. See Note C for more information on the Company’s stock-based
compensation plans.
Taxes on earnings. The Company accounts for income taxes in accordance with ASC 740, “Accounting for Income Taxes,”
which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have
been recognized in the Company’s consolidated financial statements or tax returns. In estimating future tax consequences, the
Company generally considers all expected future events other than changes in the tax law or tax rates. ASC 740 clarifies the
criteria that an individual tax position must satisfy for some or all of the benefits of that position to be recognized in a company’s
consolidated financial statements. ASC 740 prescribes a recognition threshold of more-likely-than-not, and a measurement
standard for all tax positions taken or expected to be taken on a tax return, in order for those tax positions to be recognized in the
consolidated financial statements. See Note F.
Treasury stock. The Company records treasury stock at cost. Treasury stock includes shares purchased from employees for tax
withholding purposes related to vesting of restricted stock grants.
53
Earnings per share (“EPS”). The Company computes and reports both basic 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. 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. For periods of net
loss, basic and diluted EPS are the same as the effect of the assumed vesting of restricted stock and performance share awards
are anti-dilutive.
In fiscal 2020, 2019, and 2018 there were 79,500, 27,400, and 23,700 weighted-average shares, respectively, that were
excluded from the calculation of diluted EPS because their effect would have been anti-dilutive for those years.
The following is a reconciliation of the number of shares (denominator) used in the basic and diluted EPS computations:
Shares in (000s)
2020
Shares
Amount
2019
Shares
Amount
2018
Shares
Amount
Effect of dilutive
common stock
equivalents
Diluted
EPS
Basic EPS
352,392
$
0.24 $
2,227
— $
354,619
0.24
358,462
$
4.63 $
2,720
(0.03) $
361,182
4.60
369,533
$
4.30 $
3,145
(0.04) $
372,678
4.26
Comprehensive income. Comprehensive income includes net earnings and components of other comprehensive income (loss),
net of tax, consisting of unrealized investment gains or losses.
Recently issued accounting standards. The Company considers the applicability and impact of all Accounting Standards
Updates (“ASU”) 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 the Company’s consolidated financial results.
Recently adopted accounting standards. In December 2019, the FASB issued ASU 2019-12, Simplifying the Accounting for
Income Taxes (ASC 740). ASU 2019-12 eliminates certain exceptions in ASC 740 related to the methodology for calculating
income taxes in an interim period. It also clarifies and simplifies other aspects of the accounting for income taxes. The
amendments in ASU 2019-12 are effective for fiscal years, and interim periods within those fiscal years, beginning after
December 15, 2020. Early adoption is permitted, including adoption in any interim period. The Company adopted ASU 2019-12
on a prospective basis in the first quarter of fiscal 2020. The most significant impact to the Company is the removal of a limit on
the tax benefit recognized on pre-tax losses in interim periods. The adoption of this standard did not have a material impact on
the Company’s fiscal 2020 results.
In February 2016, the FASB issued ASU 2016-02, Leases (ASC 842), which along with subsequent amendments, supersedes
the lease accounting requirements in ASC 840, Leases. The updated guidance 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.
54
The Company adopted ASC 842 as of February 3, 2019 (the “effective date”), using the optional transition method on a modified
retrospective basis. The Company did not elect the transitional package of practical expedients or the use of hindsight upon
adoption of the ASC. The Company elected to not record a lease liability and corresponding right-of-use asset for leases with
terms of 12 months or less, and to account for lease and non-lease components as a single lease component. Upon adoption,
the Company recorded lease liabilities based on the present value of the remaining minimum rental payments, using incremental
borrowing rates as of the effective date, of $2.9 billion, and the corresponding right-of-use assets of $2.9 billion. The Company
also recorded a cumulative-effect adjustment to decrease beginning retained earnings of $19.6 million, primarily related to the
write-off of previously capitalized initial direct costs that are no longer capitalized under ASC 842, partially offset by the write-off
of the deferred gain on a previous sale-leaseback transaction that meets the sale definition under ASC 842. Reporting periods
beginning on or after February 3, 2019 are presented under ASC 842, while prior period amounts and disclosures were not
adjusted and continue to be reported under ASC 840. Adoption of ASC 842 did not have a significant impact to the Company’s
consolidated statements of earnings or to the consolidated statements of cash flows.
In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (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. The Company 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, the Company 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 the Company’s 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. The Company
adopted ASU 2016-18 as of February 4, 2018, using the retrospective method.
Note B: Investments and Restricted Investments
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 and 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 as of January 30, 2021 and February 1, 2020 are as follows:
($000)
Cash and cash equivalents (Level 1)
Investments (Level 2)
Restricted cash and cash equivalents (Level 1)
2020
2019
$
4,819,293 $
1,351,205
$
$
8 $
8
134,476 $
60,205
55
The underlying assets in the Company’s non-qualified deferred compensation program as of January 30, 2021 and February 1,
2020 (included in Other long-term assets and in Other long-term liabilities) primarily consist of participant-directed money market,
stable value, stock, and bond funds. The fair value measurement for funds with quoted market prices in active markets (Level 1)
and for funds without quoted market prices in active markets (Level 2) are as follows:
($000)
Level 1
Level 2
Total
2020
2019
$
$
159,116 $
134,440
—
7,003
159,116 $
141,443
Note C: Management Incentive Plan and Stock-Based Compensation
The Company also has an Incentive Compensation Plan which provides cash and performance share awards to key
management and employees based on Company and individual performance.
Management incentive plan and performance share award modifications. In August 2020, the Compensation Committee of
the Board of Directors approved modifications to the performance measurement goals for the management incentive plan and
the performance share award program for fiscal 2020, to be based on the attainment of specific management priorities related to
their response to business challenges from COVID-19, as measured and approved by the Compensation Committee, as an
alternative to the previously established profitability-based performance goals. As of January 30, 2021, the Company has
established an accrual for this incentive compensation based on the Compensation Committee’s assessment of progress
towards achievement of these specific priorities.
For fiscal 2020, 2019, and 2018, the Company recognized stock-based compensation expense as follows:
($000)
Restricted stock
Performance awards
ESPP
Total
2020
2019
2018
$
66,908 $
54,975 $
48,585
30,506
4,154
36,542
3,921
43,450
3,550
$
101,568 $
95,438 $
95,585
Capitalized stock-based compensation cost was not significant in any year.
At January 30, 2021, the Company had one active stock-based compensation plan, which is further described in Note H. The
Company recognizes expense for ESPP purchase rights equal to the value of the 15% discount given on the purchase date.
Total stock-based compensation recognized in the Company’s Consolidated Statements of Earnings for fiscal 2020, 2019, and
2018 is as follows:
Statements of Earnings Classification ($000)
2020
2019
2018
Cost of goods sold
Selling, general and administrative
Total
$
52,267 $
54,265 $
45,052
49,301
41,173
50,533
$
101,568 $
95,438 $
95,585
The tax benefits related to stock-based compensation expense for fiscal 2020, 2019, and 2018 were $20.6 million, $18.5 million,
and $19.6 million, respectively.
56
Note D: Debt
Long-term debt. Unsecured senior debt, net of unamortized discounts and debt issuance costs, as of January 30, 2021 and
February 1, 2020 consisted of the following:
($000)
6.53% Series B Senior Notes due 2021
3.375% Senior Notes due 2024
4.600% Senior Notes due 2025
0.875% Senior Notes due 2026
4.700% Senior Notes due 2027
4.800% Senior Notes due 2030
1.875% Senior Notes due 2031
5.450% Senior Notes due 2050
Total long-term debt
Less: current portion
Total due beyond one year
2020
2019
$
64,910 $
248,365
694,624
493,595
239,049
132,262
494,132
146,148
$
2,513,085 $
64,963
247,928
—
—
—
—
—
—
312,891
64,910
—
$
2,448,175 $
312,891
As of January 30, 2021, the Company 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
6.530%. Borrowings under these Senior Notes are subject to certain financial covenants that were amended in June 2020, and
are consistent with the corresponding covenants in the Company’s existing revolving credit facility. As of January 30, 2021, the
Company was in compliance with these covenants.
As of January 30, 2021, the Company also had outstanding unsecured 3.375% Senior Notes due September 2024 (the “2024
Notes”) with an aggregate principal amount of $250 million. Interest on the 2024 Notes is payable semi-annually.
In April 2020, the Company issued an aggregate of $2.0 billion in unsecured senior notes in four tenors as follows: 4.600%
Senior Notes due April 2025 (the “2025 Notes”) with an aggregate principal amount of $700 million, 4.700% Senior Notes due
April 2027 (the “2027 Notes”) with an aggregate principal amount of $400 million, 4.800% Senior Notes due April 2030 (the “2030
Notes”) with an aggregate principal amount of $400 million, and 5.450% Senior Notes due April 2050 (the “2050 Notes”) with an
aggregate principal amount of $500 million. Cash proceeds, net of discounts and other issuance costs, were approximately
$1.973 billion. Interest on the 2025, 2027, 2030, and 2050 Notes is payable semi-annually beginning October 2020.
In October 2020, the Company accepted for purchase approximately $775 million in aggregate principal amount of senior notes
pursuant to cash tender offers as follows: $351 million of the 2050 Notes, $266 million of the 2030 Notes, and $158 million of the
2027 Notes. The Company paid approximately $1.003 billion in aggregate consideration (including transaction costs, and
accrued and unpaid interest) and recorded an approximately $240 million loss on the early extinguishment for the accepted
notes.
In October 2020, the Company issued an aggregate of $1.0 billion in unsecured senior notes in two tenors as follows: 0.875%
Senior Notes due April 2026 (the “2026 Notes”) with an aggregate principal amount of $500 million and 1.875% Senior Notes
due April 2031 (the “2031 Notes”) with an aggregate principal amount of $500 million. Cash proceeds, net of discounts and other
issuance costs, were approximately $987.2 million. Interest on the 2026 and 2031 Notes is payable semi-annually beginning
April 2021. The Company used the net proceeds from the offering of the 2026 and 2031 Notes to fund the purchase of the
accepted notes from its tender offers.
As of January 30, 2021 and February 1, 2020, total unamortized discount and debt issuance costs were $26.9 million and $2.1
million, respectively, and were classified as a reduction of long-term debt.
The Series B and all of the Senior Notes are subject to prepayment penalties for early payment of principal.
As of January 30, 2021, the aggregate fair value of the eight outstanding series of Senior Notes was approximately $2.8 billion.
As of February 1, 2020, the aggregate fair value of the two then outstanding series of Senior Notes was approximately $335
57
million. 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.
On December 13, 2018, the Company repaid at maturity the $85 million principal amount of the Series A 6.38% unsecured
Senior Notes.
The following table shows scheduled annual principal payments on long-term debt:
($000)
2021
2022
2023
2024
2025
Thereafter
65,000
$
—
$
$
—
$ 250,000
$ 700,000
$ 1,524,991
The table below shows the components of interest expense and income for fiscal 2020, 2019, and 2018:
($000)
Interest expense on long-term debt
Interest expense on short-term debt
Other interest expense
Capitalized interest
Interest income
2020
2019
2018
$
88,544 $
7,863
3,908
(12,251)
(4,651)
13,139 $
—
968
(4,367)
(27,846)
17,900
—
1,004
(2,497)
(26,569)
(10,162)
Interest expense (income), net
$
83,413 $
(18,106) $
Revolving credit facilities. In July 2019, the Company entered into a new $800 million unsecured revolving credit facility, which
replaced the Company’s previous $600 million unsecured revolving credit facility. This new credit facility expires in July 2024,
and contains a $300 million sublimit for issuance of standby letters of credit. The facility also contains an option allowing the
Company to increase the size of its credit facility by up to an additional $300 million, with the agreement of the lenders. Interest
on borrowings under this facility is based on LIBOR (or an alternate benchmark rate, if LIBOR is no longer available) plus an
applicable margin and is payable quarterly and upon maturity. The revolving credit facility may be extended, at the Company's
option, for up to two additional one year periods, subject to customary conditions.
In March 2020, the Company borrowed $800 million available under its revolving credit facility. Interest on the loan was based on
LIBOR plus 0.875% (or 1.76%).
In May 2020, the Company amended its $800 million unsecured revolving credit facility (the “Amended Credit Facility”) to
temporarily suspend, for the second and third quarters of fiscal 2020, the Consolidated Adjusted Debt to EBITDAR ratio financial
covenant, and to apply a transitional modification to that ratio effective in the fourth quarter of fiscal 2020. The Amended Credit
Facility also established a new temporary minimum liquidity requirement, effective for the first quarter of fiscal 2020 and through
the end of April 2021. As of January 30, 2021, the Company was in compliance with these amended covenants.
In October 2020, the Company repaid in full the $800 million it borrowed under the unsecured revolving credit facility. As a result,
the Company currently has no borrowings or standby letters of credit outstanding under this facility as of January 30, 2021, and
the $800 million credit facility remains in place and available.
In May 2020, the Company also entered into an additional $500 million 364-day senior revolving credit facility which was
scheduled to expire in April 2021. In October 2020, the Company terminated this senior revolving credit facility. The Company
had no borrowings under that credit facility at any time.
Standby letters of credit and collateral trust. The Company uses standby letters of credit outside of its revolving credit facility
in addition to a funded trust to collateralize some of its insurance obligations. The Company also uses standby letters of credit
outside of its revolving credit facility to collateralize some of its trade payable obligations. As of January 30, 2021 and February 1,
2020, the Company had $15.3 million and $4.2 million, respectively, in standby letters of credit and $56.1 million and $56.0
58
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. The Company had $16.3 million and $11.2 million in trade letters of credit outstanding at January 30,
2021 and February 1, 2020, respectively.
Note E: Leases
The Company currently leases all but two of its store locations with original, non-cancelable terms that in general range from
three to ten years. Store leases typically contain provisions for three to four renewal options of five years each. The exercise of
lease renewal options is at the sole discretion of the Company. Most store leases also provide for minimum annual rentals and
for payment of variable lease costs. In addition, some store leases also have provisions for additional rent based on a
percentage of sales (“percentage rent”) and others include rental payments adjusted periodically for inflation. The Company’s
lease agreements do not contain any material residual guarantees or material restrictive covenants. The Company does not
have any financing leases.
The Company leases ten distribution/warehouse facilities. All of these contain renewal provisions, except for the third-party
warehouse in Shafter, California. The following table summarizes the location and expiration date of the Company’s leased
warehouses:
Location
Leased Distribution/Warehouse Facilities
Lease Expiration Date
Moreno Valley, California1
Moreno Valley, California1
Shafter, California
Shafter, California1
Las Vegas, Nevada
Carlisle, Pennsylvania
Carlisle, Pennsylvania
Fort Mill, South Carolina
Fort Mill, South Carolina
Rock Hill, South Carolina
1 Operated by a third party.
2023
2029
2029
2021
2025
2022
2021
2024
2023
2028
The Company leases approximately 120,000 and 5,000 square feet of office space for its Los Angeles and Boston buying offices,
respectively. The lease term for both of these facilities expire in 2022, and contain renewal provisions. In addition, the Company
has a ground lease related to its New York buying office.
The following table presents net operating lease costs included in the Consolidated Statement of Earnings for fiscal 2020 and
2019:
($000)
Operating lease cost1
Variable lease costs2
Net lease cost3
2020
2019
$
$
669,339 $
172,036
841,375 $
639,545
174,438
813,983
1 Net of sublease income which was immaterial.
2
Includes property and rent taxes, insurance, common area maintenance, and percentage rent. Fiscal 2020 also includes rent
abatements negotiated due to the COVID-19 pandemic.
3 Excludes short-term lease costs which were immaterial.
59
The maturity of operating lease liabilities, including the ground lease related to the New York buying office as of January 30,
2021, are as follows:
($000)
2021
2022
2023
2024
2025
Thereafter
Total lease payments
Less: interest
Present value of lease liabilities
Less: current operating lease liabilities
Non-current operating lease liabilities
Operating Leases1
634,496
659,045
575,018
466,458
361,659
1,551,616
4,248,292
1,028,578
3,219,714
598,120
2,621,594
$
$
$
$
1 Operating leases exclude $188.7 million of minimum lease payments for leases signed that have not yet commenced.
The weighted-average remaining lease term and the weighted-average discount rate for operating leases as of January 30, 2021
and February 1, 2020 are as follows:
Weighted-average remaining lease term (years):
Including the long-term ground lease related to the New York buying office
Excluding the long-term ground lease related to the New York buying office
Weighted-average discount rate:
Including the long-term ground lease related to the New York buying office
Excluding the long-term ground lease related to the New York buying office
2020
10.4
5.9
3.4%
3.0%
2019
10.7
6.1
3.5%
3.1%
The following table presents cash paid for amounts included in the measurement of operating lease liabilities and operating
lease assets obtained in exchange for new operating lease liabilities (includes new leases and remeasurements or modifications
of existing leases) for fiscal 2020 and 2019:
($000)
Cash paid for amounts included in the measurement of operating lease liabilities
Operating lease assets obtained in exchange for new operating lease liabilities1
2020
2019
$
$
554,620 $
608,565
610,552 $
739,326
1 Includes new leases and remeasurements or modifications of existing leases.
Rent expense under ASC 840, including contingent rent and net of sublease income, was $569.8 million in fiscal 2018.
Contingent rent and sublease income was not significant in fiscal 2018.
60
Note F: Taxes on Earnings
The provision for income taxes consisted of the following:
($000)
Current
Federal
State
Deferred
Federal
State
Total
2020
2019
2018
$
44,164 $
4,563
48,727
414,823 $
56,528
471,351
357,170
74,472
431,642
(27,487)
(325)
(27,812)
20,915 $
28,244
3,765
32,009
503,360 $
33,913
(2,136)
31,777
463,419
$
The provision for taxes for financial reporting purposes is different from the tax provision computed by applying the statutory
federal income tax rate. The differences are reconciled below:
Federal income taxes at the statutory rate
State income taxes (net of federal benefit)
Hiring tax credits
Tax audit settlements
Other, net
Total
2020
21.0 %
4.1 %
(5.4) %
— %
— %
19.7 %
2019
21.0%
3.2%
(0.4)%
(0.5)%
— %
23.3%
2018
21.0 %
3.5 %
(0.5) %
(1.3) %
(0.1) %
22.6 %
Certain items in the prior years have been reclassified to conform to current year’s presentation.
In fiscal 2019, the Company resolved uncertain tax positions with a state tax authority. As a result, the Company recognized a
tax benefit of approximately $10.0 million in the Consolidated Statement of Earnings. In fiscal 2018, the Company resolved
uncertain tax positions related to fiscal 2015 with the Internal Revenue Service. As a result, the Company recognized a tax
benefit of approximately $26.0 million in the Consolidated Statement of Earnings.
61
The components of deferred taxes at January 30, 2021 and February 1, 2020 are as follows:
($000)
Deferred Tax Assets
Accrued liabilities
Deferred compensation
Stock-based compensation
State taxes and credits
Employee benefits
Operating lease liabilities
Other
Gross Deferred Tax Assets
Less: Valuation allowance
Deferred Tax Assets
Deferred Tax Liabilities
Depreciation
Merchandise inventory
Supplies
Operating lease assets
Other
Deferred Tax Liabilities
Net Deferred Tax Liabilities
2020
2019
$
30,415 $
34,545
39,302
10,926
37,779
829,946
6,239
989,152
(4,089)
985,063
35,242
33,108
35,290
20,178
18,425
797,467
3,353
943,063
(4,590)
938,473
(285,161)
(25,434)
(11,589)
(775,183)
(9,563)
(1,106,930)
(273,255)
(26,376)
(10,972)
(766,874)
(10,675)
(1,088,152)
$
(121,867) $
(149,679)
At the end of fiscal 2020 and 2019, the Company’s state tax credit carryforwards for income tax purposes were approximately
$13.7 million and $12.8 million, respectively. The state tax credit carryforwards will begin to expire in fiscal 2021. The Company
has provided a valuation allowance of $4.1 million as of the end of fiscal 2020 for deferred tax assets related to state tax credits
that are not expected to be realized.
The changes in amounts of unrecognized tax benefits (gross of federal tax benefits and excluding interest and penalties) at fiscal
2020, 2019, and 2018 are as follows:
($000)
2020
2019
2018
Unrecognized tax benefits - beginning of year
$
59,887 $
65,787 $
98,666
Gross increases:
Tax positions in current period
Tax positions in prior period
Gross decreases:
Tax positions in prior periods
Lapse of statutes of limitations
Settlements
12,310
2,860
13,864
2,672
14,722
1,843
(2,624)
(9,861)
(2,332)
(9,559)
(8,653)
(4,224)
(40,600)
(8,584)
(260)
Unrecognized tax benefits - end of year
$
60,240 $
59,887 $
65,787
62
At the end of fiscal 2020, 2019, and 2018, the reserves for unrecognized tax benefits were $67.9 million, $67.1 million, and $78.8
million inclusive of $7.7 million, $7.2 million, and $13.0 million of related reserves for interest and penalties, respectively. In fiscal
2019, the Company resolved uncertain tax positions with a state tax authority. As a result, the Company recognized a decrease
in reserves for tax positions in prior periods of $16.2 million, inclusive of $6.6 million of related reserves for interest and penalties.
In fiscal 2018, the Company resolved uncertain tax positions related to fiscal 2015 with the Internal Revenue Service. As a result,
the Company recognized a decrease in reserves for tax positions in prior periods of $52.4 million, inclusive of $12.6 million of
related reserves for interest and penalties. The Company accounts for interest and penalties related to unrecognized tax benefits
as a part of its provision for taxes on earnings. If recognized, $54.2 million would impact the Company’s effective tax rate. 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 tax assets and liabilities. These amounts are net of federal and state income taxes.
It is reasonably possible that certain federal and state tax matters may be concluded or statutes of limitations may lapse during
the next twelve months. Accordingly, the total amount of unrecognized tax benefits may decrease by up to $10.6 million.
The Company is open to audit by the Internal Revenue Service under the statute of limitations for fiscal years 2017 through
2020. The Company’s state income tax returns are generally open to audit under the various statutes of limitations for fiscal
years 2016 through 2020. Certain 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 consolidated financial statements.
Note G: Employee Benefit Plans
The Company has a defined contribution plan that is available to certain employees. Under the plan, employee and Company
contributions and accumulated plan earnings qualify for favorable tax treatment under Section 401(k) of the Internal Revenue
Code. This plan permits employees to make contributions up to the maximum limits allowable under the Internal Revenue Code.
The Company matches up to 4% of the employee’s salary up to the plan limits. Company matching contributions to the 401(k)
plan were $20.8 million, $19.2 million, and $17.1 million in fiscal 2020, 2019, and 2018, respectively.
The Company also makes available to management a Non-qualified Deferred Compensation Plan which allows management to
make payroll contributions on a pre-tax basis in addition to the 401(k) plan. Other long-term assets include $159.1 million and
$141.4 million at January 30, 2021 and February 1, 2020, respectively, of long-term plan investments, at market value, set aside
or designated for the Non-qualified Deferred Compensation Plan (See Note B). Plan investments are designated by the
participants, and investment returns are not guaranteed by the Company. The Company has a corresponding liability to
participants of $159.1 million and $141.4 million at January 30, 2021 and February 1, 2020, respectively, included in Other long-
term liabilities in the Consolidated Balance Sheets.
In addition, the Company has certain individuals who receive or will receive post-employment medical benefits. The estimated
liability for these benefits of $8.9 million and $8.2 million is included in Accrued expenses and other in the accompanying
Consolidated Balance Sheets as of January 30, 2021 and February 1, 2020, respectively.
63
Note H: Stockholders’ Equity
Common stock. In March 2019, the Company’s Board of Directors approved a two-year $2.55 billion stock repurchase program
through fiscal 2020. Due to the economic uncertainty stemming from the severe impact of the COVID-19 pandemic, the
Company suspended its stock repurchase program as of March 2020, at which time the Company had repurchased
$1.407 billion under the $2.55 billion stock repurchase program. In February 2017, the Company’s Board of Directors approved a
two-year $1.75 billion stock repurchase program through fiscal 2018. In March 2018, the Company’s 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.
The following table summarizes the Company’s stock repurchase activity in fiscal 2020, 2019, and 2018:
Fiscal Year
2020
2019
2018
Shares repurchased
(in millions)
Average repurchase
price
Repurchased
(in millions)
1.2
12.3
12.5
$113.10
$103.99
$86.19
$132
$1,275
$1,075
Preferred stock. The Company has 4.0 million shares of preferred stock authorized, with a par value of $.01 per share. No
preferred stock is issued or outstanding.
Dividends. On March 2, 2021, the Company’s Board of Directors declared a quarterly cash dividend of $0.285 per common
share, payable on March 31, 2021, resuming the payment of quarterly dividends. The Company’s Board of Directors declared a
cash dividend of $0.285 per common share in March 2020. In May 2020, the Company temporarily suspended its quarterly
dividends, due to the economic uncertainty stemming from the COVID-19 pandemic. The Company’s Board of Directors declared
cash dividends of $0.255 per common share in March, May, August, and November 2019, and cash dividends of $0.225 per
common share in March, May, August, and November 2018.
2017 Equity Incentive Plan. On May 17, 2017, the Company’s stockholders approved the Ross Stores, Inc. 2017 Equity
Incentive Plan (the “2017 Plan”) which replaced the Company’s 2008 Equity Incentive Plan (“Predecessor Plan”). The 2017 Plan,
which was authorized to issue a maximum of 12.0 million shares, was immediately effective upon approval and no further
awards were granted under the Predecessor Plan, which was terminated.
The 2017 Plan has an initial share reserve of 12.0 million shares of the Company’s common stock which can be increased by a
maximum of 5.5 million shares from certain expired, withheld, or forfeited shares from the 2017 Plan or the Predecessor Plan.
The 2017 Plan provides for various types of incentive awards, which may potentially include the grant of stock options, stock
appreciation rights, restricted stock purchase rights, restricted stock bonuses, restricted stock units, performance shares,
performance units, and deferred compensation awards. As of January 30, 2021, there were 10.2 million shares available for
grant under the 2017 Plan.
A summary of restricted stock and performance share award activity for fiscal 2020 is presented below:
Unvested at February 1, 2020
Awarded
Released
Forfeited
Number of
shares (000)
4,394
1,157
(1,233)
(88)
Weighted-average
grant date
fair value
$76.20
98.00
65.74
77.77
Unvested at January 30, 2021
4,230
$85.15
64
The market value of shares of restricted stock and performance shares at the date of grant is amortized to expense over the
vesting period of generally three to five years. The unamortized compensation expense at January 30, 2021 and February 1,
2020 was $161.3 million and $158.4 million, respectively, which is expected to be recognized over a weighted-average remaining
period of 1.9 years. Intrinsic value for restricted stock, defined as the closing market value on the last business day of fiscal year
2020 (or $111.29), was $470.8 million. A total of 10.2 million, 10.7 million, and 11.2 million shares were available for new
restricted stock awards at the end of fiscal 2020, 2019, and 2018, respectively. During fiscal 2020, 2019, and 2018, shares
purchased by the Company for tax withholding totaled 0.5 million, 0.6 million, and 0.7 million shares, respectively, and are
considered treasury shares which are available for reissuance. As of January 30, 2021 and February 1, 2020, the Company held
14.3 million and 13.8 million shares of treasury stock, respectively.
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 a performance goal 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. The
Company issued approximately 380,000, 414,000, and 556,000 shares in settlement of the fiscal 2020, 2019, and 2018 awards.
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.
During fiscal 2020, 2019, and 2018, employees purchased approximately 0.3 million, 0.3 million, and 0.3 million shares,
respectively, of the Company’s common stock under the plan at weighted-average per share prices of $81.45, $88.45, and
$72.89, respectively. Through January 30, 2021, approximately 40.5 million shares had been issued under this plan and 4.5
million shares remained available for future issuance.
Note I: Related Party Transactions
The Company has a consulting agreement with Norman Ferber, its Chairman Emeritus of the Board of Directors, under which
the Company paid him $2.1 million, $2.1 million, and $1.9 million in fiscal 2020, 2019, and 2018, respectively. In addition, the
agreement provides for administrative support and health and other benefits for him and his dependents, which totaled
approximately $0.4 million, $0.4 million, and $0.4 million in fiscal 2020, 2019, and 2018, respectively, along with amounts to
cover premiums through May 2022 on a life insurance policy with a death benefit of $2.0 million. Mr. Ferber’s current consulting
agreement pays him an annual consulting fee of $2.3 million through May 2021 and $1.6 million through May 2022. On
termination of Mr. Ferber’s consultancy with the Company, the Company will pay Mr. Ferber $75,000 per year for a period of 10
years.
Robert Ferber, the son of Norman Ferber, is a Vice President, Divisional Merchandise Manager with the Company. The
Company paid Robert Ferber compensation including salary and bonus of approximately $248,000, $209,000, and $180,000 in
fiscal 2020, 2019, and 2018, respectively.
Note J: 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 laws and consumer protection laws. Class/representative action litigation remains pending as of
January 30, 2021.
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.
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.
65
Note K: Quarterly Financial Data (Unaudited)
Summarized quarterly financial information for fiscal 2020 and 2019 is presented in the tables below.
Year ended January 30, 2021:
__________________________________________________________________________________________________
Quarter Ended
($000, except per share data)
May 2, 2020
August 1, 2020
October 31, 2020
January 30, 2021
Sales
$
1,842,673 $
2,684,712 $
3,754,509 $
4,249,671
Cost of goods sold
Selling, general and administrative
Interest expense, net
Total costs and expenses
(Loss) earnings before taxes
(Benefit) provision for taxes on (loss)
earnings
1,889,991
415,305
6,666
2,311,962
(469,289)
2,080,120
519,495
28,855
2,628,470
56,242
2,711,419
877,857
28,740
3,618,016
136,493
(163,447)
34,195
5,296
Net (loss) earnings
$
(305,842) $
22,047 $
131,197 $
3,157,044
690,624
19,152
3,866,820
382,851
144,871
237,980
(Loss) earnings per share – basic1
(Loss) earnings per share – diluted1
Cash dividends declared per share
on common stock2
$
$
$
(0.87) $
(0.87) $
0.06 $
0.06 $
0.37 3 $
0.37 3 $
0.67
0.67
0.285 $
— $
— $
—
¹ EPS is computed independently for each of the quarters presented. The sum of the quarters may not equal the total year
amount due to the impact of changes in average quarterly shares outstanding.
2 In May 2020, the Company temporarily suspended its quarterly dividends, due to the economic uncertainty stemming from the
COVID-19 pandemic.
3 Includes a per share charge of approximately $0.65 primarily related to the long-term debt refinancing.
66
Year ended February 1, 2020:
($000, except per share data)
May 4, 2019
August 3, 2019
November 2, 2019 February 1, 2020
Sales
$
3,796,642 $
3,979,869 $
3,849,117 $
4,413,445
Quarter Ended
Cost of goods sold
Selling, general and administrative
Interest income, net
Total costs and expenses
Earnings before taxes
Provision for taxes on earnings
Net earnings
Earnings per share – basic1
Earnings per share – diluted1
Cash dividends declared per share
on common stock
$
$
$
$
2,701,668
558,250
(5,635)
3,254,283
542,359
2,843,850
591,970
(4,782)
3,431,038
548,831
2,766,432
604,605
(4,402)
3,366,635
482,482
3,224,237
601,879
(3,287)
3,822,829
590,616
121,217
421,142 $
136,110
412,721 $
111,550
370,932 $
134,483
456,133
1.16 $
1.15 $
1.15 $
1.14 $
1.04 $
1.03 $
1.29 ²
1.28 ²
0.255 $
0.255 $
0.255 $
0.255
¹ EPS is computed independently for each of the quarters presented. The sum of the quarters may not equal the total year
amount due to the impact of changes in average quarterly shares outstanding.
² Includes a per share benefit of approximately $0.02 from the favorable resolution of a tax matter.
67
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders and the Board of Directors of Ross Stores, Inc.:
Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying consolidated balance sheets of Ross Stores, Inc. and subsidiaries (the “Company”) as of
January 30, 2021 and February 1, 2020, and the related consolidated statements of earnings, comprehensive income,
stockholders’ equity, and cash flows for each of the fiscal years ended January 30, 2021, February 1, 2020, and February 2,
2019 and the related notes (collectively referred to as the “financial statements”). We also have audited the Company’s internal
control over financial reporting as of January 30, 2021, based on criteria established in Internal Control - Integrated Framework
(2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the
Company as of January 30, 2021 and February 1, 2020, and the results of its operations and its cash flows for each of the fiscal
years ended January 30, 2021, February 1, 2020, and February 2, 2019, in conformity with accounting principles generally
accepted in the United States of America. Also, in our opinion, the Company maintained, in all material respects, effective
internal control over financial reporting as of January 30, 2021, based on the criteria established in Internal Control - Integrated
Framework (2013) issued by COSO.
Change in Accounting Principle
As discussed in Note A to the financial statements, effective February 3, 2019, the Company adopted FASB ASC 842, Leases,
using the modified retrospective basis.
Basis for Opinions
The Company’s management is responsible for these financial statements, for maintaining effective internal control over financial
reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying
“Management’s Annual Report on Internal Control over Financial Reporting.” Our responsibility is to express an opinion on the
Company’s financial statements and an opinion on the Company’s internal control over financial reporting based on our audits.
We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (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 audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to
error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.
Our audits of the financial statements included performing procedures to assess the risks of material misstatement of the
financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures
included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also
included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the
overall presentation of the financial statements. Our audit of internal control over financial reporting included obtaining an
understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and
evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included
performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a
reasonable basis for our opinions.
68
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that
(1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions
of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance with authorizations of management and directors of the
company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or
disposition of the company’s assets that could have material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of the effectiveness to future periods are subject to the risk that the controls may become
inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Critical Audit Matter
Critical audit matters are matters arising from the current-period audit of the financial statements that were communicated or
required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the
financial statements and (2) involved our especially challenging, subjective, or complex judgments. We determined that there are
no critical audit matters.
/s/DELOITTE & TOUCHE LLP
San Francisco, California
March 30, 2021
We have served as the Company’s auditor since 1982.
69
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None
ITEM 9A. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, conducted an evaluation of the
effectiveness of our “disclosure controls and procedures,” (as defined in Exchange Act Rule 13a-15(e)), as of the end of the
period covered by this report. Our disclosure controls and procedures are designed to provide reasonable assurance of
achieving their objectives. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our
disclosure controls and procedures were effective at that reasonable assurance level as of the end of the period covered by this
report.
It should be noted that any system of controls, however well designed and operated, can provide only reasonable, and not
absolute, assurance that the objectives of the system will be met. In addition, the design of any control system is based in part
upon certain assumptions about the likelihood of future events.
Management’s Annual Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in
Exchange Act Rule 13a-15(f). Our internal control over financial reporting is designed to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of consolidated financial statements for external purposes in accordance
with generally accepted accounting principles.
Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial
Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework
established by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) as set forth in Internal Control
— Integrated Framework (2013). Based on our evaluation under the framework in Internal Control — Integrated Framework
(2013), our management concluded that our internal control over financial reporting was effective as of January 30, 2021.
Our internal control over financial reporting as of January 30, 2021 has also been audited by Deloitte & Touche LLP, an
independent registered public accounting firm, and their opinion as to the effectiveness of our internal control over financial
reporting is stated in their report, dated March 30, 2021, which is included in Item 8 in this Annual Report on Form 10-K.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. It should be
noted that any system of controls, however well designed and operated, can provide only reasonable, and not absolute,
assurance that the objectives of the system will be met. In addition, the design of any control system is based in part upon
certain assumptions about the likelihood of future events. Also, projections of any evaluation of effectiveness to future periods
are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.
Quarterly Evaluation of Changes in Internal Control Over Financial Reporting
Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, also conducted an evaluation
of our internal control over financial reporting to determine whether any change occurred during the fourth fiscal quarter of 2020
that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. Based on that
evaluation, our management concluded that there was no such change during the fourth fiscal quarter.
ITEM 9B. OTHER INFORMATION
None
70
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Information required by Item 401 of Regulation S-K is incorporated herein by reference to the sections entitled “Executive
Officers of the Registrant” at the end of Part I of this report; and to the sections of the Ross Stores, Inc. Proxy Statement for the
Annual Meeting of Stockholders to be held on Wednesday, May 19, 2021 (the “Proxy Statement”) entitled “Information Regarding
Nominees and Incumbent Directors.” Information required by Item 405 of Regulation S-K is incorporated by reference to the
Proxy Statement under the section titled “Section 16(a) Beneficial Ownership Reporting Compliance.” Since our last Annual
Report on Form 10-K, we have not made any material changes to the procedures by which our stockholders may recommend
nominees to the Board of Directors. Information required by Item 407(d)(4) and (d)(5) of Regulation S-K is incorporated by
reference to the Proxy Statement under the section entitled “Information Regarding Nominees and Incumbent Directors” under
the caption “Audit Committee.”
Our Board of Directors has adopted a Code of Ethics for Senior Financial Officers that applies to our Chief Executive Officer and
our Chief Financial Officer (who is also our principal accounting officer), along with other of our senior operating and financial
executives. This Code of Ethics is posted on our corporate website (www.rossstores.com) under Corporate Governance in the
Investors Section. We intend to satisfy the disclosure requirements of Item 5.05 of Form 8-K regarding any future amendments
to, or waivers from, our Code of Ethics for Senior Financial Officers by posting any changed version on the same corporate
website.
ITEM 11. EXECUTIVE COMPENSATION
The information required by Item 402 of Regulation S-K is incorporated herein by reference to the sections of the Proxy
Statement entitled “Compensation of Directors” and “Executive Compensation” under the captions “Compensation Discussion
and Analysis,” “Summary Compensation Table,” “All Other Compensation,” “Perquisites,” “Discussion of Summary
Compensation,” “Grants of Plan-Based Awards During Fiscal Year,” “Outstanding Equity Awards at Fiscal Year-End,” “Option
Exercises and Stock Vested,” “Non-Qualified Deferred Compensation,” and “Potential Payments Upon Termination or Change in
Control.”
The information required by Items 407(e)(4) and (e)(5) of Regulation S-K are incorporated herein by reference to the sections of
the Proxy Statement entitled “Compensation Committee Interlocks and Insider Participation” and “Compensation Committee
Report.”
71
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS
Equity compensation plan information. The following table summarizes the equity compensation plans under which the
Company’s common stock may be issued as of January 30, 2021:
Shares in (000s)
Equity compensation plans approved by security holders
Equity compensation plans not approved by security holders
Total
(a)
Number of
securities
to be
issued
upon
exercise of
outstanding
options and
rights
(b)
Weighted-
average
exercise
price
per share of
outstanding
options and
rights
377²
—
377
—
—
—
(c)
Number of
securities
remaining
available for
future
issuance
(excluding
securities
reflected in
column (a))1
14,6813
—
14,681
1 After approval by stockholders of the 2017 Equity Incentive Plan in May 2017, any shares remaining available for grant in the share reserves
of the 2008 Equity Incentive Plan were automatically canceled.
2 Securities include shares underlying outstanding performance share awards where the performance measurement has occurred but that
remain unsettled and unissued as of January 30, 2021. The weighted-average exercise price in column (b) does not take these awards into
account.
3 Includes 4.5 million shares reserved for issuance under the Employee Stock Purchase Plan and 10.2 million shares reserved for issuance
under the 2017 Equity Incentive Plan.
The information required by Item 403 of Regulation S-K is incorporated herein by reference to the section of the Proxy Statement
entitled “Stock Ownership of Certain Beneficial Owners and Management.”
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE
The information required by Items 404 and 407(a) of Regulation S-K is incorporated herein by reference to the section of the
Proxy Statement entitled “Information Regarding Nominees and Incumbent Directors” including the captions “Audit Committee,”
“Compensation Committee,” and “Nominating and Corporate Governance Committee,” and the section of the Proxy Statement
entitled “Certain Transactions.”
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
Information concerning principal accountant fees and services will appear in the Proxy Statement in the Ross Stores, Inc. Board
of Directors Audit Committee Report under the caption “Summary of Audit, Audit-Related, Tax and All Other Fees.” Such
information is incorporated herein by reference.
72
PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
(a) The following consolidated financial statements, schedules, and exhibits are filed as part of this report or are incorporated
herein as indicated:
1.
List of Consolidated Financial Statements.
The following consolidated financial statements are included herein under Item 8:
Consolidated Statements of Earnings for the years ended January 30, 2021, February 1, 2020, and
February 2, 2019.
Consolidated Statements of Comprehensive Income for the years ended January 30, 2021,
February 1, 2020, and February 2, 2019.
Consolidated Balance Sheets at January 30, 2021 and February 1, 2020.
Consolidated Statements of Stockholders’ Equity for the years ended January 30, 2021, February 1,
2020, and February 2, 2019.
Consolidated Statements of Cash Flows for the years ended January 30, 2021, February 1, 2020,
and February 2, 2019.
Notes to Consolidated Financial Statements.
Report of Independent Registered Public Accounting Firm.
2.
List of Consolidated Financial Statement Schedules.
Schedules are omitted because they are not required, not applicable, or such information is
included in the consolidated financial statements or notes thereto which are included in this Report.
3.
List of Exhibits (in accordance with Item 601 of Regulation S-K).
Incorporated herein by reference to the list of Exhibits contained in the Exhibit Index within this
Report.
73
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange Act of 1934, the Registrant has duly caused this
Report to be signed on its behalf by the undersigned, thereunto duly authorized.
Date: March 30, 2021
ROSS STORES, INC.
(Registrant)
By:
/s/Barbara Rentler
Barbara Rentler
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons
on behalf of the Registrant and in the capacities and on the dates indicated.
Signature
Title
Date
/s/Barbara Rentler
Barbara Rentler
/s/Travis R. Marquette
Travis R. Marquette
/s/Michael Balmuth
Michael Balmuth
/s/K. Gunnar Bjorklund
K. Gunnar Bjorklund
/s/Michael J. Bush
Michael J. Bush
/s/Norman A. Ferber
Norman A. Ferber
/s/Sharon D. Garrett
Sharon D. Garrett
/s/Michael J. Hartshorn
Michael J. Hartshorn
/s/Stephen D. Milligan
Stephen D. Milligan
/s/Patricia H. Mueller
Patricia H. Mueller
/s/George P. Orban
George P. Orban
/s/Gregory L. Quesnel
Gregory L. Quesnel
/s/Larree M. Renda
Larree M. Renda
74
Chief Executive Officer, Director
March 30, 2021
Executive Vice President and Chief Financial
Officer, and Principal Accounting Officer
March 30, 2021
Chairman of the Board and Senior Advisor, Director
March 30, 2021
Director
Director
March 30, 2021
March 30, 2021
Chairman Emeritus of the Board, Director
March 30, 2021
Director
March 30, 2021
Group President and Chief Operating Officer, Director
March 30, 2021
Director
Director
Director
Director
Director
March 30, 2021
March 30, 2021
March 30, 2021
March 30, 2021
March 30, 2021
INDEX TO EXHIBITS
Exhibit
Number Exhibit
3.1
3.2
4.1
4.2
4.3
4.4
4.5
4.6
4.7
4.8
4.9
4.10
4.11
4.12
4.13
4.14
10.1
10.2
10.3
10.4
Certificate of Incorporation of Ross Stores, Inc. as amended (Corrected First Restated Certificate of
Incorporation, dated March 17, 1999, together with amendments thereto through Amendment of Certificate of
Incorporation dated May 29, 2015) incorporated by reference to Exhibit 3.1 to the Form 10-Q filed by Ross
Stores, Inc. for its quarter ended August 1, 2015.
Amended and Restated Bylaws of Ross Stores, Inc. (as amended March 8, 2017), incorporated by reference
to Exhibit 3.2 to the Form 10-K filed by Ross Stores, Inc. for its fiscal year ended January 28, 2017.
Description of Common Stock of Ross Stores, Inc., incorporated by reference to Exhibit 4.5 to the Form 10-K
filed by Ross Stores, Inc. for its year ended February 1, 2020.
Note Purchase Agreement dated October 17, 2006, incorporated by reference to Exhibit 10.2 to the Form 10-Q
filed by Ross Stores, Inc. for its quarter ended October 28, 2006.
First Amendment to Note Purchase Agreement dated as of June 30, 2020, incorporated by reference to Exhibit
10.1 to the Form 10-Q filed by Ross Stores, Inc. for its quarter ended August, 1 2020.
Indenture, dated as of September 18, 2014, between Ross Stores, Inc. and U.S. Bank National Association,
incorporated by reference to Exhibit 4.1 to the Form 8-K filed by Ross Stores on September 18, 2014.
Officers’ Certificate, dated as of September 18, 2014, establishing the terms and form of the Notes,
incorporated by reference to Exhibit 4.2 to the Form 8-K filed by Ross Stores on September 18, 2014.
Form of the 3.375% Senior Notes Due 2024, included in and incorporated by reference to Exhibit 4.2 to the
Form 8-K filed by Ross Stores on September 18, 2014.
Officers’ Certificate, dated as of April 6, 2020, establishing the aggregate amounts, terms and form of the
Notes, incorporated by reference to Exhibit 4.2 to the Form 8-K filed by Ross Stores, Inc. on April 7, 2020.
Form of 4.600% Senior Notes Due 2025, included in and incorporated by reference to Exhibit 4.2 to the Form
8-K filed by Ross Stores, Inc. on April 7, 2020.
Form of 4.700% Senior Notes Due 2027, included in and incorporated by reference to Exhibit 4.2 to the Form
8-K filed by Ross Stores, Inc. on April 7, 2020.
Form of 4.800% Senior Notes Due 2030, included in and incorporated by reference to Exhibit 4.2 to the Form
8-K filed by Ross Stores, Inc. on April 7, 2020.
Form of 5.450% Senior Notes Due 2050, included in and incorporated by reference to Exhibit 4.2 to the Form
8-K filed by Ross Stores, Inc. on April 7, 2020.
Officers’ Certificate, dated as of October 21, 2020 establishing the aggregate amounts, terms and forms of the
Notes., incorporated by reference to Exhibit 4.2 to the Form 8-K filed by Ross Stores, Inc. on October 22,
2020.
Form of the 0.875% Senior Notes Due 2026, included in and incorporated by reference to Exhibit 4.2 to the
Form 8-K filed by Ross Stores, Inc. on October 22, 2020.
Form of the 1.875% Senior Notes Due 2031, included in and incorporated by reference to Exhibit 4.2 to the
Form 8-K filed by Ross Stores, Inc. on October 22, 2020.
Amended and Restated Credit Agreement dated July 1, 2019 among Ross Stores, Inc., various lenders and
Bank of America, N.A., as Administrative Agent, incorporated by reference to Exhibit 10.3 to the Form 10-Q
filed by Ross Stores, Inc. for its quarter ended August 3, 2019.
First Amendment to Amended and Restated Credit Agreement dated as of May 1, 2020 among Ross Stores,
Inc., various lenders, and Bank of America, N.A., as Administrative Agent, incorporated by reference to Exhibit
10.2 to the Form 10-Q filed by Ross Stores, Inc. for its quarter ended May 2, 2020.
Underwriting Agreement, dated as of April 2, 2020, by and among Ross Stores, Inc., BofA Securities, Inc. and
J.P. Morgan Securities LLC, as representatives of the underwriters named therein, incorporated by reference
to Exhibit 1.1 to the Form 8-K filed by Ross Stores on April 7, 2020.
Underwriting Agreement, dated as of October 19, 2020, by and among Ross Stores, Inc., J.P. Morgan
Securities LLC and BofA Securities, Inc., as representatives of the several underwriters named therein,
incorporated by reference to Exhibit 1.1 to the Form 8-K filed by Ross Stores on October 22, 2020.
75
MANAGEMENT CONTRACTS AND COMPENSATORY PLANS (EXHIBITS 10.5 - 10.45)
10.5
10.6
10.7
10.8
10.9
10.10
10.11
10.12
10.13
10.14
10.15
10.16
10.17
10.18
10.19
10.20
10.21
10.22
10.23
10.24
10.25
10.26
10.27
10.28
Third Amended and Restated Ross Stores, Inc. Non-Qualified Deferred Compensation Plan effective
December 31, 2008 (as amended effective January 1, 2015 and October 1, 2017), incorporated by reference
to Exhibit 10.3 filed by Ross Stores, Inc. for its fiscal year ended February 3, 2018.
Second Amended and Restated Ross Stores, Inc. Incentive Compensation Plan, incorporated by reference to
Exhibit 10.2 to the Form 10-Q filed by Ross Stores, Inc. for its quarter ended October 31, 2020.
Ross Stores, Inc. 2008 Equity Incentive Plan (as amended through May 21, 2014), incorporated by reference
to Exhibit 10.18 to the Form 10-K filed by Ross Stores, Inc. for its fiscal year ended January 30, 2016.
Ross Stores, Inc. 2017 Equity Incentive Plan, incorporated by reference to Exhibit 99 to the Registration
Statement on Form S-8 filed by Ross Stores, Inc. on May 17, 2017 (Registration No. 333-218052).
Amended Ross Stores, Inc. 2017 Equity Incentive Plan, incorporated by reference to Exhibit 10.3 to the Form
10-Q filed by Ross Stores, Inc. for its quarter ended October 31, 2020.
Form of Restricted Stock Agreement, incorporated by reference to Exhibit 10.2 to the Form 10-Q filed by Ross
Stores, Inc. for its quarter ended May 3, 2014.
Form of Restricted Stock Agreement, incorporated by reference to Exhibit 10.4 to the Form 10-Q filed by Ross
Stores, Inc. for its quarter ended July 29, 2017.
Form of Restricted Stock Agreement, incorporated by reference to Exhibit 10.1 to the Form 10-Q filed by Ross
Stores, Inc. for its quarter ended May 5, 2018.
Form of Restricted Stock Agreement for Nonemployee Director, incorporated by reference to Exhibit 10.5 to
the Form 10-Q filed by Ross Stores, Inc. for its quarter ended July 29, 2017.
Form of Performance Share Agreement, incorporated by reference to Exhibit 10.6 to the Form 10-Q filed by
Ross Stores, Inc. for its quarter ended July 29, 2017.
Form of Performance Shares Grant Agreement, incorporated by reference to Exhibit 10.2 to the Form 10-Q
filed by Ross Stores, Inc. for its quarter ended May 5, 2018.
Form of Indemnity Agreement for Directors and Executive Officers, incorporated by reference to Exhibit 10.26
to the Form 10-K filed by Ross Stores, Inc. for its fiscal year ended February 2, 2013.
Forms of Executive Employment Agreement for Executive Officers, incorporated by reference to Exhibit 10.3 to
the Form 10-Q filed by Ross Stores, Inc. for its quarter ended May 5, 2018.
Forms of Executive Employment Agreement for Executive Officers, incorporated by reference to Exhibit 10.1 to
the Form 10-Q filed by Ross Stores, Inc. for its quarter ended May 4, 2019.
Form of Executive Employment Agreement for Executive Officers (CA), incorporated by reference to Exhibit
10.4 to the Form 10-Q filed by Ross Stores, Inc. for its quarter ended May 2, 2020.
Form of Executive Employment Agreement for Executive Officers (NON-CA), incorporated by reference to
Exhibit 10.5 to the Form 10-Q filed by Ross Stores, Inc. for its quarter ended May 2, 2020.
Amended and Restated Independent Contractor Consultancy Agreement effective January 6, 2010 between
Norman A. Ferber and Ross Stores, Inc., incorporated by reference to Exhibit 10.47 to the Form 10-K filed by
Ross Stores, Inc. for its fiscal year ended January 30, 2010.
Amended Independent Contractor Consultancy Agreement effective January 30, 2012 between Norman A.
Ferber and Ross Stores, Inc., incorporated by reference to Exhibit 10.52 to the Form 10-K filed by Ross
Stores, Inc. for its fiscal year ended January 28, 2012.
Amendment to Independent Contractor Consultancy Agreement effective February 17, 2015 between Norman
A. Ferber and Ross Stores, Inc., incorporated by reference to Exhibit 10.3 to the Form 10-Q filed by Ross
Stores, Inc. for its quarter ended May 2, 2015.
Amended and Restated Retirement Benefit Package Agreement effective January 6, 2010 between Norman A.
Ferber and Ross Stores, Inc., incorporated by reference to Exhibit 10.48 to the Form 10-Q filed by Ross
Stores, Inc. for its quarter ended May 1, 2010.
Amended Retirement Benefits Package Agreement effective January 30, 2012 between Norman A. Ferber and
Ross Stores, Inc., incorporated by reference to Exhibit 10.53 to the Form 10-K filed by Ross Stores, Inc. for its
fiscal year ended January 28, 2012.
Amendment to Retirement Benefit Package Agreement effective February 17, 2015 between Norman A.
Ferber and Ross Stores, Inc., incorporated by reference to Exhibit 10.4 to the Form 10-Q filed by Ross Stores,
Inc. for its quarter ended May 2, 2015.
Third Amendment to Retirement Benefit Package Agreement effective January 1, 2016 between Norman A.
Ferber and Ross Stores, Inc., incorporated by reference to Exhibit 10.39 to the Form 10-K filed by Ross
Stores, Inc. for its fiscal year ended January 30, 2016.
Amendment to Independent Contractor Consultancy Agreement effective March 1, 2017 between Norman A.
Ferber and Ross Stores, Inc., incorporated by reference to Exhibit 10.2 to the Form 10-Q filed by Ross Stores,
Inc. for its quarter ended July 29, 2017.
76
10.29
10.30
10.31
10.32
10.33
10.34
10.35
10.36
10.37
10.38
10.39
10.40
10.41
10.42
10.43
10.44
10.45
21
23
31.1
31.2
32.1
32.2
Amendment to Independent Contractor Consultancy Agreement effective February 1, 2018 between Norman
A. Ferber and Ross Stores, Inc., incorporated by reference to Exhibit 10.28 to the Form 10-K filed by Ross
Stores, Inc. for its fiscal year ended February 2, 2019.
Amendment to Independent Contractor Consultancy Agreement effective July 30, 2019 between Norman A.
Ferber and Ross Stores, Inc., incorporated by reference to Exhibit 10.2 to the Form 10-Q filed by Ross Stores,
Inc. for its quarter ended August 3, 2019.
Amendment to Independent Contractor Consultancy Agreement effective September 24, 2020 between
Norman A. Ferber and Ross Stores, Inc., incorporated by reference to Exhibit 10.4 to the Form 10-Q filed by
Ross Stores, Inc. for its quarter ended October 31, 2020.
Employment Agreement effective June 1, 2012 between Michael Balmuth and Ross Stores, Inc., incorporated
by reference to Exhibit 10.1 to the Form 10-Q filed by Ross Stores, Inc. for its quarter ended October 27, 2012.
First Amendment to Employment Agreement between Michael Balmuth and Ross Stores, Inc. dated March 15,
2015, incorporated by reference to Exhibit 10.2 to the Form 10-Q filed by Ross Stores, Inc. for its quarter
ended August 1, 2015.
Second Amendment to Employment Agreement effective January 1, 2016 between Michael Balmuth and Ross
Stores, Inc., incorporated by reference to Exhibit 10.49 to the Form 10-K filed by Ross Stores, Inc. for its fiscal
year ended January 30, 2016.
Third Amendment to the Employment Agreement effective May 18, 2016 between Michael Balmuth and Ross
Stores, Inc., incorporated by reference to Exhibit 10.2 to the Form 10-Q filed by Ross Stores, Inc. for its
quarter ended July 30, 2016.
Fourth Amendment to the Employment Agreement effective April 15, 2017 between Michael Balmuth and Ross
Stores, Inc., incorporated by reference to Exhibit 10.4 to the Form 10-Q filed by Ross Stores, Inc. for its
quarter ended April 29, 2017.
Fifth Amendment to the Employment Agreement effective July 3, 2018 between Michael Balmuth and Ross
Stores, Inc., incorporated by reference to Exhibit 10.1 to the Form 10-Q filed by Ross Stores, Inc. for its
quarter ended August 4, 2018.
Sixth Amendment to the Employment Agreement effective November 23, 2018 between Michael Balmuth and
Ross Stores, Inc., incorporated by reference to Exhibit 10.35 to the Form 10-K filed by Ross Stores, Inc. for its
fiscal year ended February 2, 2019.
Seventh Amendment to the Employment Agreement effective July 13, 2019 between Michael Balmuth and
Ross Stores, Inc., incorporated by reference to Exhibit 10.1 to the Form 10-Q filed by Ross Stores, Inc. for its
quarter ended August 3, 2019.
Eighth Amendment to the Employment Agreement effective September 24, 2020 between Michael Balmuth
and Ross Stores, Inc., incorporated by reference to Exhibit 10.5 to the Form 10-Q filed by Ross Stores, Inc. for
its quarter ended October 31, 2020.
Employment Agreement effective March 16, 2019 between Barbara Rentler and Ross Stores, Inc.,
incorporated by reference to Exhibit 10.2 to the Form 10-Q filed by Ross Stores, Inc. for its quarter ended May
4, 2019.
Employment Agreement effective August 16, 2019 between Michael Hartshorn and Ross Stores, Inc.,
incorporated by reference to Exhibit 10.1 to the Form 10-Q filed by Ross Stores, Inc. for its quarter ended
November 2, 2019.
Employment Agreement effective March 16, 2020 between Brian Morrow and Ross Stores, Inc., incorporated
by reference to Exhibit 10.11 to the Form 10-Q filed by Ross Stores, Inc. for its quarter ended May 2, 2020.
Employment Agreement effective August 16, 2019 between Michael Kobayashi and Ross Stores, Inc.,
incorporated by reference to Exhibit 10.13 to the Form 10-Q filed by Ross Stores, Inc. for its quarter ended
May 2, 2020.
Employment Agreement effective August 16, 2019 between Travis Marquette and Ross Stores, Inc.,
incorporated by reference to Exhibit 10.2 to the Form 10-Q filed by Ross Stores, Inc. for its quarter ended
November 2, 2019.
Subsidiaries.
Consent of Independent Registered Public Accounting Firm.
Certification of Chief Executive Officer Pursuant to Sarbanes-Oxley Act Section 302(a).
Certification of Chief Financial Officer Pursuant to Sarbanes-Oxley Act Section 302(a).
Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350.
Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350.
77
101.INS XBRL Instance Document. (The instance document does not appear in the Interactive Data File because
101.SCH
101.CAL
101.DEF
101.LAB
101.PRE
its XBRL tags are embedded within the Inline XBRL document.)
Inline XBRL Taxonomy Extension Schema
Inline XBRL Taxonomy Extension Calculation Linkbase
Inline XBRL Taxonomy Extension Definition Linkbase
Inline XBRL Taxonomy Extension Label Linkbase
Inline XBRL Taxonomy Extension Presentation Linkbase
104 Cover Page Interactive Data File. (The cover page interactive data file does not appear in the Interactive
Data File because its XBRL tags are embedded within the Inline XBRL document.)
78
EXHIBIT 21
SUBSIDIARIES & AFFILIATES
Certain subsidiaries and affiliates of the Registrant and their subsidiaries are listed below. The names of certain subsidiaries,
which considered in the aggregate would not constitute a significant subsidiary, have been omitted.
Subsidiary Name
Ross Procurement Inc.
Ross Merchandising Inc.
Ross Dress For Less, Inc.
Retail Assurance Group, Inc.
Ross Distribution Company, LLC
EXHIBIT 23
Domiciled
Delaware
Delaware
Virginia
Hawaii
Delaware
Date of Incorporation
November 22, 2004
January 12, 2004
January 14, 2004
October 15, 1991
March 15, 2018
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the incorporation by reference in Registration Statements No. 333-06119, No. 333-34988, No. 333-51478, No.
333-56831, No. 333-115836, No. 333-151116, No. 333-210465, and No. 333-218052 on Form S-8, and No. 333-237546 on Form
S-3 of our report dated March 30, 2021, relating to the consolidated financial statements of Ross Stores, Inc. and subsidiaries
(the “Company”), and the effectiveness of the Company’s internal control over financial reporting, appearing in this Annual
Report on Form 10-K of the Company for the year ended January 30, 2021.
/s/DELOITTE & TOUCHE LLP
San Francisco, California
March 30, 2021
79
EXHIBIT 31.1
Ross Stores, Inc.
Certification of Chief Executive Officer
Pursuant to Sarbanes-Oxley Act Section 302(a)
I, Barbara Rentler, certify that:
1.
I have reviewed this annual report on Form 10-K of Ross Stores, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all
material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods
presented in this report;
4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as
defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed
under our supervision, to ensure that material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is
being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be
designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by
this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the
registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has
materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting;
and
5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over
financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons
performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial
reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report
financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the
registrant's internal control over financial reporting.
Date: March 30, 2021
/s/Barbara Rentler
Barbara Rentler
Chief Executive Officer
80
EXHIBIT 31.2
Ross Stores, Inc.
Certification of Chief Financial Officer
Pursuant to Sarbanes-Oxley Act Section 302(a)
I, Travis R. Marquette, certify that:
1.
I have reviewed this annual report on Form 10-K of Ross Stores, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all
material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods
presented in this report;
4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as
defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed
under our supervision, to ensure that material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is
being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be
designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by
this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the
registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has
materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting;
and
5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over
financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons
performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial
reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report
financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the
registrant's internal control over financial reporting.
Date: March 30, 2021
/s/Travis R. Marquette
Travis R. Marquette
Executive Vice President and Chief Financial Officer,
and Principal Accounting Officer
81
EXHIBIT 32.1
Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350,
As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
In connection with the annual report of Ross Stores, Inc. (the “Company”) on Form 10-K for the year ended January 30, 2021 as
filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Barbara Rentler, as Chief Executive
Officer of the Company, hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-
Oxley Act of 2002 (“Section 906”), that, to the best of my knowledge:
(1) The Report fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934 (15
U.S.C. 78m); and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and
results of operations of the Company.
Date: March 30, 2021
EXHIBIT 32.2
/s/Barbara Rentler
Barbara Rentler
Chief Executive Officer
Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350,
As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
In connection with the annual report of Ross Stores, Inc. (the “Company”) on Form 10-K for the year ended January 30, 2021 as
filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Travis R. Marquette, as Chief Financial
Officer of the Company, hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-
Oxley Act of 2002 (“Section 906”), that, to the best of my knowledge:
(1) The Report fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934 (15
U.S.C. 78m); and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and
results of operations of the Company.
Date: March 30, 2021
/s/Travis R. Marquette
Travis R. Marquette
Executive Vice President and Chief Financial Officer,
and Principal Accounting Officer
82
Larree M. Renda 1, 3
Former Executive Vice President,
Safeway, Inc.;
Board Member, Casey’s General
Stores, Inc.
Barbara Rentler
Chief Executive Officer,
Ross Stores, Inc.
Doniel N. Sutton 6
Chief People Officer, Fastly, Inc.;
Former Senior Vice President, People,
PayPal Holdings, Inc.
Directors and Officers
Board of Directors
Norman A. Ferber
Chairman Emeritus,
Ross Stores, Inc.
Michael Balmuth
Chairman of the Board and
Senior Advisor,
Ross Stores, Inc.
K. Gunnar Bjorklund 2, 3
Chairman,
Rev360 LLC
Michael J. Bush 1, 3
Managing Member,
B IV Investments, LLC;
Former Executive Chairman,
Trumaker, Inc.
Sharon D. Garrett 1, 3
Management Consultant;
Former Board Member,
Jerome’s Furniture and
Scott’s Liquid Gold-Inc.
Corporate Officers
Michael Balmuth
Chairman of the Board and
Senior Advisor
Barbara Rentler
Chief Executive Officer
Brian Morrow
President,
dd’s DISCOUNTS
Michael J. Hartshorn
Group President and
Chief Operating Officer
Michael J. Hartshorn
5
Chief Operating Officer,
Ross Stores, Inc.
Stephen D. Milligan 1, 3
Board Member, Autodesk;
Former Chief Executive Officer
and Board Member,
Western Digital Corporation
Patricia H. Mueller 2, 3
Management Consultant;
Board Member, Dave & Buster’s
Entertainment
George P. Orban 2, 3, 4
Managing Partner,
Orban Partners
Gregory L. Quesnel 1, 3
Former Chief Executive Officer,
CNF, Inc.;
Former Board Member,
SYNNEX Corporation and
Potlatch Corporation
Michael Kobayashi
President, Operations and
Technology
Travis Marquette
Executive Vice President and
Chief Financial Officer
1 Audit Committee
2 Compensation Committee
3 Nominating & Corporate Governance Committee
4 Lead Independent Director
5 Joined the Board of Directors on 3/10/2021
6 Joined the Board of Directors on 3/11/2021
83
Corporate Data
Corporate Headquarters
Transfer Agent and Registrar
Computershare
P.O. Box 505000
Louisville, KY 40233-5000
or
Overnight Correspondence
426 South 4th Street, Suite 1600
Louisville, KY 40202
Inquiries by:
Website
www.computershare.com/investor
or
Online
https://www-us.computershare.com/investor/Contact
Telephone
1-866-455-3120 (domestic holders)
1-800-231-5469 (TDD#)
1-201-680-6578 (foreign holders)
1-201-680-6610 (foreign TDD#)
Ross Stores, Inc.
5130 Hacienda Drive
Dublin, CA 94568-7579
(925) 965-4400
Corporate Website
www.rossstores.com
New York Buying Office
Ross Stores, Inc.
1372 Broadway
New York, NY 10018-6141
Los Angeles Buying Office
Ross Stores, Inc.
110 East 9th Street, Suite A-979
Los Angeles, CA 90079-1711
Annual Report (Form 10-K)
A copy of the Company’s 2020
Annual Report on Form 10-K as
filed with the Securities and
Exchange Commission is available
on our corporate website, or
without charge, by contacting
the following:
Investor Relations Department
Ross Stores, Inc.
5130 Hacienda Drive
Dublin, CA 94568-7579
84
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Ross Stores, Inc.
Ross Stores, Inc.
5130 Hacienda Drive
5130 Hacienda Drive
Dublin, CA 94568-7579
Dublin, CA 94568-7579
(925) 965-4400
(925) 965-4400
www.rossstores.com
www.rossstores.com
Sustainable Choice. Reduce, Reuse & Recycle.
Sustainable Choice. Reduce, Reuse & Recycle.
To minimize our environmental impact, the Ross Stores 2020 Annual Report
was printed on paper containing fibers from environmentally appropriate,
socially beneficial and economically viable forest resources.
Ross Stores, Inc. 2020 Annual Report