Ross Stores Ramps Up Expansion Plans

Michael Balmuth, the vice chairman, president and CEO of Ross Stores, said in the conference call that the accelerated growth this year would be driven primarily by the acquisition in late 2006 of a number of former Albertsons sites by Ross. About 40 of the new Ross and dd's locations that will open in 2007 will occupy the former supermarket sites.

According to Balmuth's comments during the conference call, the new stores that the company opens in the former Albertsons locations will all be in "established top-performing markets in California, Florida, Texas, Arizona, Colorado and Oklahoma. About half of the former grocery stores will be turned into Ross Dress for Less locations and about half of them into dd's Discounts stores.

Balmuth outlined the store expansion plans as part of his comments about Ross Stores' fourth-quarter and full-year financial results, which included record full-year earnings. The company earned $93.1 million for the 14 weeks ended Feb. 3, or 66 cents per share, compared with earnings of $71 million, or 49 cents per share, in the comparable period last year, which was one week shorter. Sales for the 14-week quarter increased 14% to $1.6 billion, with comparable store sales growing 1% on top of a 6% increase in the previous year.

The record earnings for the full year, a 53-week period this year, grew to $241.6 million compared to $199.6 million for the 52 weeks ended Jan. 28, 2006. For the full year, earnings per share grew 25% to $1.70 from $1.36 for the 52 weeks ended Jan. 28 last year. Sales for the year increased 13% to $5.57 billion, with same store sales rising 4% on top of a 6% increase in the year before.

According to Balmuth, the earnings growth stemmed from "healthy top-line growth and a 40-basis-point increase in operating margin." Balmuth also cited strong sales during the holiday season and strength in the Mid Atlantic and Southwest regions, plus healthy gains in the chain's home and shoe businesses.

With its strong operating cash flows during 2006, the company was able to invest in new store growth that built 57 new Ross locations and six of the company's dd's Discounts stores as part of $224 million in capital expenditures. As of Feb. 3, Ross operated 771 Ross Dress for Less stores and 26 dd's Discounts locations.