Ross Stores 2002 Earnings Up 30% on 18% Sales Gain

Ross Stores, Inc. reported that earnings per share for the 13 weeks ended February 1, 2003 rose 19% to $.74, from $.62 for the 13 weeks ended February 2, 2002. Net earnings for the 13 weeks ended February 1, 2003 totaled $58.7 million, up 18% over net earnings of $50.0 million for the 13 weeks ended February 2, 2002. Sales for the fourth quarter of 2002 increased 14% to $965 million with comparable store sales up 3% over the prior year.

For the 52 weeks ended February 1, 2003, earnings per share grew 32% to $2.52, from $1.91 for the 52 weeks ended February 2, 2002. Net earnings for the 52 weeks ended February 1, 2003 increased 30% to a record $201.2 million, compared to $155.0 million for the 52 weeks ended February 2, 2002. Sales for the 2002 fiscal year rose 18% to $3.531 billion, with comparable store sales up 7% over the prior year.

Michael Balmuth, Vice Chairman and Chief Executive Officer, commented, “We are very pleased with the solid sales and earnings gains we posted during the fourth quarter and fiscal 2002, especially considering today’s challenging retail climate. Geographically, sales trends in the fourth quarter were relatively broadbased with positive comparable store sales gains in all major markets including California, where same store sales rose 3%. The strongest merchandise departments were Home and Shoes, with same store sales gains in the high single to low double digit range for the quarter.”

Mr. Balmuth continued, “Fourth quarter results benefited from a 31 basis point expansion in operating margin. A slight decline in gross margin due to the combination of a sharper pricing strategy and higher freight costs was partially offset by improved shortage results and lower markdowns and distribution costs as a percent of sales. Lower general, selling and administrative costs as a percentage of sales more than offset the slight decrease in gross margin, due to a relative reduction in benefit and incentive plan costs compared to the prior year fourth quarter.”

Mr. Balmuth continued, “I am pleased to report that the Company’s financial position and cash flows remain strong. During fiscal 2002, we repurchased 3.8 million shares of common stock for an aggregate purchase price of $150 million, ending the year with 77.5 million shares of common stock outstanding. This buyback was affected under a two-year, $300 million stock repurchase program announced in early 2002, which we expect to complete in 2003.”

“Our accelerated expansion program also remains on track. We added 55 net new stores during 2002, or unit growth of 12%. Expansion into new geographic markets continued, with 21 of these additions in our new Southeast markets of Georgia, North Carolina, South Carolina and Alabama. During 2003, we expect to continue to add new stores at the rate of 12% annually, with about 62 net new locations planned to open in both new and existing markets,” said Mr. Balmuth.

The Company’s operating statements for the fourth quarter and fiscal 2002 reflect a reclassification of buying and distribution costs into cost of goods sold. The reclassification only relates to the allocation of these costs on the Company’s operating statement and has no impact on reported sales, net earnings or earnings per share. “Cost of goods sold including related buying, distribution and occupancy costs” now includes: cost of goods sold, store occupancy and depreciation costs, and all distribution and buying costs, including related depreciation and occupancy expense. “General, selling and administrative” now includes store operating costs and general and administrative costs, including related depreciation and occupancy. Buying costs were previously included in general, selling and administrative expenses, while elements of distribution costs were reported in several line items: (i) depreciation and amortization; (ii) cost of goods sold and occupancy; and (iii) general, selling and administrative costs. Adjustments to reflect these new line item classifications have been made to the 2001 fourth quarter and fiscal year operating statements, as well as the previously-reported operating statements for the first, second and third quarters of 2002 and 2001, which are available on the press release page of the Company’s web site located at www.rossstores.com.

Mr. Balmuth stated: “This reclassification should result in improved trend data by collecting all distribution costs in the same line item for each reporting period. We also expect this change to afford more meaningful comparisons of gross margin and expense ratios versus our industry peers.”

ROSS STORES, INC. CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS

                                   Three Months Ended   Twelve Months Ended
                                     Feb. 1     Feb. 2    Feb. 1      Feb. 2
    ($000, except per share data,
     unaudited)                       2003      2002       2003       2002

    Sales                          $964,610  $848,374  $3,531,349  $2,986,596

    Costs and Expenses
           Cost of goods sold,
            including related
            buying,
               distribution and
                occupancy costs     720,284   633,104   2,628,412   2,243,384
           General, selling and
            administrative          148,081   133,218     572,316     485,455
           Interest (income)
            expense                    (214)      --          279       3,168
                                    868,151   766,322   3,201,007   2,732,007

    Earnings before taxes            96,459    82,052     330,342     254,589

    Provision for taxes on
     earnings                        37,716    32,082     129,164      99,544
    Net earnings                    $58,743   $49,970    $201,178    $155,045