Sales growth drives profits at Ross

NEWARK, CA — Pushing same-store sales higher at a double-digit pace, and at the same time boosting margins and slashing interest costs, Ross Stores Inc. boosted first-quarter profits by more than a third, up 37.5 percent, to $47.7 million from $34.7 million last year.

Sales climbed higher by 21.5 percent, to $819.6 million from $674.4 million the prior year, lifted by strong same-store sales and the rapid rollout of new units. The all-important gauge of same-store sales increased by 10.0 percent during the opening quarter. Ratcheting up an already aggressive expansion program, Ross opened 20 new stores in the period, with about 35 more to come later in the year.

Driving the bottom-line improvement, in addition to stronger sales, the retailer improved its average gross margin by 110 basis points, to 32.2 percent from 31.1 percent the preceding year. Gross margin dollars increased by 25.6 percent, to $263.6 million from $209.8 million a year ago. Stronger margins helped to offset a modest increase in costs, which rose by 40 basis points, to 21.0 percent from 20.6 percent a year ago.

Fueled by stronger sales and wider margins, operating profits shot up by 34.0 percent, to $78.5 million from $58.6 million. That generated a strong operating margin — operating profits measured as a percentage of sales — of 9.6 percent, up from 8.7 percent a year ago.

In another lift to the bottom line, Ross whittled down its debt and slashed its interest costs by more than 86 percent, to $224,000 from $1.7 million last year, generating a cash savings of $1.4 million. Long-term debt was reduced to a level of zero from $50 million the previous year.

Michael Balmuth, vice chairman and ceo, commented, "The combination of a double-digit increase in same-store sales, healthy new store productivity and 12 percent unit growth resulted in a 22 percent increase in total sales."

Balmuth added, "Our accelerated expansion program remains on schedule, as we opened a record of 20 new stores for the first quarter. These are the first of about 55 net new stores we plan to add in 2002. After closing two older locations, we ended the period with 470 stores in 22 states."

Ross Stores is the nation's 34th largest retailer of home textiles products, with an estimated $134 million in home fashions sales in 2001, according to the Home Textiles Today ranking of the 50 largest home textiles retailer.