Good afternoon, and welcome to the Ross Stores' First Quarter 2021 Earnings Release Conference Call. Before we get started, on behalf of Ross Stores, I would like to note that the comments made on this call will contain forward-looking statements regarding expectations about future growth and financial results, including sales and earnings forecasts, new store openings, COVID-related costs and other matters that are based on the company's current forecast of aspects of its future business. These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from historical performance or current expectations. Risk factors are included in today's press release and the company's fiscal 2020 Form 10-K and fiscal 2021 Form 8-Ks on file with the SEC. Now I'd like to turn the call over to Barbara Rentler, Chief Executive Officer.

Good afternoon. Joining me on our call today are Michael Hartshorn, Group President and Chief Operating Officer; Travis Marquette, Executive Vice President and Chief Financial Officer; and Connie Kao, Group Vice President, Investor Relations. We'll begin our call today with a review of our first quarter performance, followed by our outlook for the second quarter and fiscal year. Afterwards, we'll be happy to respond to any questions you may have. As noted in today's press release, first quarter sales significantly exceeded our expectations as we benefited considerably from a combination of government stimulus payments, ongoing vaccine rollout, easing of COVID restrictions and pent-up consumer demand. In addition, customers responded enthusiastically to the broad assortment of great bargains we offered throughout our stores. Earnings per share for the 13 weeks ended May 1, 2021, grew 17% to $1.34 on net income of $476 million. This compares to $1.15 per share or net earnings of $421 million for the 13 weeks ended May 4, 2019. Total sales for the quarter were $4.5 billion with comparable store sales up a robust 13% versus 2019. As previously announced, financial results and guidance throughout fiscal '21 will be compared against fiscal 2019. We believe the significant impact from the extended closure of our operations in the spring of 2020 and the disruptions caused by COVID-19 throughout last year make this a more relevant basis for comparison. For the first quarter, Home was the best-performing major merchandise area, while the Midwest was the strongest region. Similar to Ross, dd's DISCOUNTS business trends significantly improved during the quarter. Results were far above our expectations with outstanding sales gains and a rebound in operating profits for the period. At quarter end, consolidated inventories were down 6% versus 2019. Packaway levels ended at 34% of the total compared to 44% for the same period in 2019 as we use a substantial amount of packaway merchandise to support ahead of planned sales. Average selling store inventories were down 1% relative to 2019. As noted in today's release, our Board authorized a new program to repurchase $1.5 billion of our common stock through fiscal 2022, with plans to buy back $650 million this year and $850 million in 2022. The reinstatement of our share repurchase program reflects the current strength of our balance sheet, confidence in the company's ability to generate excess cash after funding growth and other capital needs of the business and our long-standing commitment to enhancing stockholder value and return. Turning to store growth. Our 2021 expansion program is unchanged with plans to open approximately 20 total locations comprised of 40 Ross and 20 dd's DISCOUNTS. As usual, these numbers do not reflect our plans to close or relocate about 10 stores. As a reminder, our conservative opening plans this year, especially for the spring season, were set in 2020 during the onset of the pandemic when it was impossible to predict when the health crisis would subside. Looking forward to 2022, we expect to return to our normal annual opening program of approximately 100 new stores.

Thank you, Barbara. As previously mentioned, comparable store sales increased 13% in the quarter, driven by a larger average basket. While traffic was down slightly compared to 2019, it accelerated significantly relative to the fourth quarter. Operating margin was well above plan at 14.2% compared to 14.1% for the same period in 2019. Cost of goods sold levered 35 basis points in the quarter. Merchandise margin was up 85 basis points and occupancy levered by 60. These improvements were partially offset by higher freight costs of 75 basis points, mainly driven by the ongoing industry-wide supply chain congestion. In addition, distribution expenses grew 25 basis points primarily due to higher wages, while buying costs increased by 10. SG&A for the quarter delevered by 25 basis points, mainly due to the operating expenses associated with the pandemic and higher incentive costs given our better-than-expected first quarter results. Total net COVID-related expenses for the period were approximately 35 basis points, the vast majority of which impacted SG&A. Now let's discuss our guidance. As Barbara just mentioned, our projections compared to the same period in 2019. For the 13 weeks ended July 31, 2021, we are forecasting comparable store sales to be up 5% to 7%. Earnings per share for the second quarter are projected to be in the range of $0.80 to $0.89. The operating statement assumptions that support our second quarter guidance include the following: total sales are projected to grow 9% to 12%. We are projecting operating margin to be 9.2% to 9.9% compared to 13.7% in 2019. This forecast reflects ongoing expense headwinds from increased freight costs and higher wages. In addition, COVID-related expenses are projected to negatively impact EBIT margins by approximately 100 basis points in the period as we return to pre-pandemic store operating standards, while still maintaining many of the extra cleaning routines. We expect to open 30 stores during the second quarter, consisting of 22 Ross and 8 dd's DISCOUNTS. Net interest expense is estimated to be about $19 million. Our tax rate is expected to be approximately 25% and weighted average diluted shares outstanding are projected to be about 355 million. For the full year, we are projecting annual comparable store sales gains of 7% to 9% versus 2019 and earnings per share of $3.93 to $4.20. Operating statement assumptions that support our fiscal 2021 guidance include the following: total sales are projected to grow 11% to 13%. We project that operating margin for 2021 will be in the range of 10.7% to 11.2% compared to 13.4% in 2019. The forecasted decline, again, reflects our expectations for continued freight, wage and COVID cost headwinds through the balance of the year. Net interest expense is estimated to be about $75 million. Our tax rate is projected to be approximately 24% to 25%, and we expect average diluted shares outstanding to be about 354 million. Now I'll turn the call back to Barbara for closing comments.

Thank you, Travis. To sum up, we're optimistic about our prospects for the balance of the year and hope to do better than our forecast. This confidence is based on our recent results and ongoing improvement in the macroeconomic environment bolstered by vaccine rollouts and the easing of pandemic-related restrictions. That said, it's difficult to predict the lasting impact from the factors that benefited our first quarter sales results, especially the recent government stimulus payments. As always, we'll remain nimble to address the dynamic consumer and retail landscape, while staying focused on delivering the great bargains our customers have come to expect from us. Longer term, we remain confident about our opportunity to gain market share as we expect to benefit significantly from a favorable competitive climate given the large number of retail store closures and bankruptcies in recent years. This, along with the consumers' heightened focus on value and convenience bodes well for our ability to achieve solid results into the future. At this point, we'd like to open up the call and respond to any questions you may have.

Your first question comes from Matthew Boss from JPMorgan.

Great. And congrats on the really strong improvement. So Barbara, maybe could you speak to the cadence of business and any notable changes in traffic or category demand as the quarter progressed? And then Travis, on gross margin. I guess maybe just how best to think about the puts and takes in the second quarter that you're embedding relative to 2019?

Sure, Matthew. So let's start with category demand. There was really broad-based acceleration across all merchandise areas, with obviously Home having very strong performance for Ross and for other retailers across the country. But what we did see is a major improvement in apparel. And we feel that as the economy starts to open up, that apparel will continue to strengthen as time goes on. With a lot of changes in trends, we're monitoring that. We're flexing and moving the business around based on what the customer is telling us. So we feel — in totality, we feel overall pretty good about the business going forward. In terms of traffic, Travis, do you want to take the traffic piece?

Yes. Yes, just let me break down comp a little bit. I mentioned comp was 13%. It was driven by larger average basket size. That was partially offset by lower number of transactions. Traffic was down slightly compared to 2019, but it accelerated significantly compared to the fourth quarter. The increase in the average basket was driven by items per transaction as average unit retail was up slightly. And then I think your next question was around just the guidance, the operating margin guidance for Q2?

Yes. Just any puts and takes on the second quarter.

Yes. I mean second quarter, again, we — the overall guidance reflects a couple of things. One, obviously, the comp store gain is expected to be lower than what we saw in the first quarter, and therefore, we'll get a little bit less leverage on the business. In addition, on COVID costs, we expect to also be higher, although that will primarily impact SG&A. We also expect to see continued significant pressure on freight. We saw that in the first quarter, both in ocean freight as well as overall freight, and we think that will — those pressures will continue.

Your next question comes from Mark Altschwager from Baird.

I appreciate all the detailed guidance. I guess, overall, if I have all the numbers down correctly, I think the guide implies EBIT margins down about 250 basis points this year versus 2019. Could you characterize that? I mean how much of the step down is related to the COVID cost, which are hopefully temporary versus some of the more kind of pressures on freight and wages that could persist moving forward? Just trying to think about how that EBIT margin might progress as we move beyond this year.

Mark, it's Michael Hartshorn. We're obviously optimistic about our prospects for the balance of the year, and we hope to do better than our sales and margin forecast. We do expect expense headwinds through the balance of the year. And if you break down the COVID cost at some point, those will not continue, but we expect them to be in place. Our guidance assumes that they're in place throughout the year. Wage cost, we would expect, to persist. And at some point, freight, we would expect to persist throughout the year, and we'll see how that balances out over the coming years. But overall, the recovery to 2019 margin levels, it's highly dependent on strong sales performance. And over time, and again, the persistence of the cost inflation we're seeing today, especially in things like freight.

Your next question comes from Adrienne Yih from Barclays.

Let me add my congratulations on the top line improvement. Barbara, my first question is for you on the merchandise margin of up 85 basis points. I just want to make sure that, that is separate and aside. So you don't have inbound freight in that number because obviously, we got a separate number for total freight. So that's number one. And then can you give us the components of AUR versus AUC on that? I'm imagining your AUR is up meaningfully. Are you getting a relative pricing umbrella from frontline, meaning that if you're 20% to 60% off frontline and frontline's clean, that you're able to maybe clear at a higher price? And lastly, was mix from Home versus apparel, did Home grow faster? And was that an impact on the merchandise margin?

Yes. This is Travis. Let me just take a couple of those that you mentioned. One, just in terms of what's included in merchandise margin, when we say inbound freight, ocean freight is included in that number. And so that's embedded. And we had mentioned previously that we expected meaningful headwinds from ocean freight, and we saw those and expect those to continue as we move through the year. And then I think you also had a question about apparel versus non-apparel and sort of the mix. We saw broad-based improvements across the store. But non-apparel Home continued to be the strongest category, but we definitely saw an improvement in apparel as well as we move through the quarter.

And then, Adrienne, on AUR. AUR was up slightly during the quarter.

Okay, great. Please go ahead.

The other part of your question relates to department stores. They promoted less than our average unit retail, which has affected the pricing structure. Our average unit retail has increased slightly. We are currently providing greater value compared to department store prices. The value proposition is central to our business, and at this moment, our pricing values are actually stronger than usual for department stores.

Okay. Great. And if I may, just on hourly payroll. I don't really know how to answer it because I know these are sensitive numbers. But if we were to look at freight as a percent of sales, and now I'm talking about the outbound freight because now I know that the inbound freight's inside the merch margin, that line, that deleveraged 75 basis points versus the line item that is wage or hourly payroll, what would be the sort of order of magnitude? Like is the payroll line 3x as much as the freight line or something like that? Just so mentally, I can understand like if one of them is moving materially higher than the other, which has the bigger impact on the P&L?

Adrienne, Michael Hartshorn again. We wouldn't give you specifics other than what we provided in the guidance other than to say both freight and wages, first on freight, given the robust overall economic rebound, there continues to be significant supply chain congestion and costs have increased versus our original expectations. And so our current guidance assumes additional escalation as we move through the year. On wages, that also remains very dynamic. We've made market-by-market adjustments in our stores as we always have to attract talent. Warehousing labor is very competitive, and we've made additional adjustments in all of our distribution centers, and that's also reflected in our guidance.

Your next question comes from Kimberly Greenberger from Morgan Stanley.

Okay. Great. Barbara, obviously, the prudent planning for sales going forward, a very conservative plan compared to the very robust first quarter, that seems very, very prudent to us. I'm wondering, are you seeing any slowdown so far here in the second quarter that's sort of underscoring your desire to plan more conservatively? Or are you just looking forward and say, okay, there were some really sort of one-time benefits as it were that happened here in the first quarter. So it's just naturally prudent for us to plan more conservatively?

Kimberly, I think we're thinking more about the first quarter and the lasting impact from some of those factors, the stimulus payments that were out there and what does that really mean as we go forward. So we're comfortable with the number of where we sit today. But that's really some of those pent-up demand, some of those things that we're not sure how that goes forward with completely at this point.

Yes. I understand that the future is quite uncertain. Michael, you mentioned that there is a plan in place for COVID-related costs to continue throughout the year. Could you clarify the COVID expenses based on your experience in the first quarter and your projections for the second, third, and fourth quarters? It would be helpful if you could provide a rough estimate of the budgeted COVID costs for this year. Additionally, can we expect these costs to diminish in the coming years?

Kimberly, this is Travis. Let me just kind of do a little bit of a reset remind folks kind of how we talk about COVID costs. We report COVID costs as net, which is to say that they include pandemic-related increases in cost for things like personal protective equipment, extra cleaning, but there are offsets within that number as well for cost savings that we took for things like travel and when we closed our fitting rooms. As the pandemic subsides, apparel is becoming more important, we think it's important to take some actions, including reopening our fitting rooms, which is going to eliminate some of the cost savings that we had before, and it drives up the overall COVID cost number. For Q1, as we reported, the COVID costs were about 35 basis points on the quarter. For Q2 and going forward, we're estimating those that they will be around 100 basis points for the balance of the year. Again, that assumes where we are today that we have not removed and we — not built in to the plan to remove any of the additional cleaning activities and protocols that we put into place. Having said that, we will continue to monitor guidance from the CDC and other health experts. We'll continue to prioritize the health and safety of our associates and our customers. But to the extent that, that guidance changes, then we'll — we could reevaluate some of those protocols and adjust those plans.

And Kimberly, to answer your question on how long they last, those costs are not permanent. So as the pandemic resides, those costs would come back out of the business.

Your next question comes from Chuck Grom from Gordon Haskett.

Great quarter. My question is just on the first quarter. You originally guided to comps down 1% to 5% and you far exceeded that up 13. Just curious if you guys could just unpack the outperformance, either by category, how much you think was stimulus? I just wanted to ask that question.

Yes. Probably...

Yes. There's — no go ahead, Barbara.

Okay. So if you're talking about by merchandise category? Is that what...

Oh, yes. If we could just continue.

So we'll start there. So it was very broad-based. Obviously, Home has accelerated for everyone, and we still feel very good about Home as we go forward. But the additional acceleration really came out of — really came out of apparel, and that was also very broad-based as the customer kind of came from just wearing activewear, moving into more real, what I would call, real apparel or even those casual, but still broader classifications of products. So — and that was broad-based. And so that's why we feel good about apparel as we go forward.

In the quarter, as Barbara noted in her opening remarks, several factors contributed to the increase. The federal stimulus, which includes around $400 billion directed at consumers, is ongoing. Additionally, various states are providing their own stimulus, which is expected to continue into the second quarter and possibly throughout the year with initiatives like child tax credits. The rollout of vaccines is also gaining momentum, leading to increased customer confidence in returning to physical stores. We anticipate this trend will persist as vaccination rates rise. Our regional analysis indicates that the Midwest emerged as the strongest performing area. Among our largest states, California showed significant improvement compared to the previous quarter as government restrictions were lifted, and its performance was in line with the average for the chain. Numerous factors contributed to the comparative performance in the first quarter.

Your next question comes from Lorraine Hutchinson from Bank of America.

Barbara, could you discuss the availability of product in the better trending categories? And then do you think there's sufficient availability for you to start rebuilding your packaway balances into the back half?

Sure. Availability in the better trending businesses, I would say, overall, the availability is there to chase. We have a large merchant team, and so they're out there looking for the goods constantly. I think there's 2 things about it. One is the trends are shifting. In front of us. So things are moving very, very quickly. So I should start with that. And the trends towards just say, like active apparel to other parts of sportswear are shifting quickly. And so far, I would say, yes, we have been able to chase the business, get what we need, get the availability if that's out there. It's more getting the combination of kind of getting ahead of the trend that as it's shifting in the outside world that we're shifting with it and that we get ahead of it. But yes, I feel comfortable that the availability is there in the businesses that the customer wants at this moment in time. And then say it again, Lorraine, what was the second question?

I just wondering how you expected packaway to evolve over the coming quarters if there's sufficient availability for you to be able to rebuild that?

We believe that we will gradually build packaway back to historical levels. However, this process will take time as we are actively pursuing the business. If this pursuit continues, it may take us a while because packaway can vary; it’s not just about having availability, but also ensuring that we have the right product, value, and metrics all aligned for packaway at the same time. Therefore, while I expect it will take some time, we do have enough availability to support our business and facilitate packaway efforts along with the overall picture.

Your next question comes from Ike Boruchow from Wells Fargo.

Just a quick one for Travis. Just on the freight headwind you gave us for Q1. Just curious, should we assume that, that should be run rated through the rest of the year? Or should that cost headwind that you have potentially moderate based on the contracts you guys have?

First, even the contracted rates were significantly higher than 2019 levels. In addition, like other retailers, we're incurring higher costs to move freight both internationally and domestically, and we have higher costs to land freight than expected. Given the robust overall economic rebound, as I mentioned earlier in the call, we anticipate that freight costs will continue to escalate for the remainder of the year, and this is included in our guidance.

Your next question comes from Michael Binetti from Credit Suisse.

I guess 2 quick ones. We see the sales guidance. I appreciate the conservatism. I think it's been the right move through the year here and with the visibility where it is. But if sales trends do remain strong, as strong as they were in 1Q relative to what you thought, a pretty significant upside sales scenario. Can you tell us how to think about sales flow through in the model relative to the framework you've told us about in the past? And then, Barb, just a comment you made earlier, why not extend the relative value back up to the normal rate relative to the department stores. Why hold it lower if they're moving higher just so we can think alongside you on that?

Sure. Department stores have not promoted as much lately, which is unusual. It will be interesting to see how this affects their promotional patterns, as they have been consistent with promotions for many years. We have only had one quarter where the average unit retail is likely higher without promotions, so we'll have to monitor future developments. It's crucial to provide great value to customers since price value is key for them. We will price our goods according to customer expectations. Adjusting the average unit retail and altering our value proposition is quite sensitive. After one quarter with significant financial stimulus affecting sales, it's hard to predict future performance. Offering price value is essential in the off-price sector and integral to our business model, as customers are highly knowledgeable and always shopping.

And this is Travis. In terms of the operating margin flow-through on above sales above plan, we continue to expect comp outperformance to drive increased operating margin flow-through compared to the guidance that we've provided. But I don't think we would necessarily expect it to be quite as strong as we saw in Q1, but we do expect operating margin improvements as comp exceeds our plans.

And then the flow-through on this guidance would look like it has historically.

Your next question comes from Marni Shapiro from Retail Tracker.

Congratulations. Barbara, regarding the department stores, we know they're returning to promotions. Can you provide some insight on your foot traffic during the quarter? What trends have you noticed with schools reopening or around the Easter holiday? Did you experience an increase in traffic when stimulus checks were distributed or around Mother's Day? I'm trying to understand the flow of traffic—whether it’s consistent daily or if events are influencing customers to visit the store.

Yes. This is Travis. I can talk a bit about just trends. Again, generally, we don't provide sort of detailed traffic trends by month. But given the timing of tax refunds and stimulus payments, you can imagine that sales were stronger later in the quarter than at the beginning. In terms of traffic trends, again, traffic for us is transactions; it mirrors pretty close to our sales trends.

Your next question comes from Laura Champine from Loop Capital.

To your earlier question, Travis, when setting the guidance for Q2 sales, did you base it on the trend prior to the stimulus and project that forward? What was the foundation for the Q2 sales guide?

The comp sales guide? No, again, I think Michael, we've talked about it, there are a number of factors that drove the Q1 performance, be it stimulus, pent-up demand, vaccine rollouts, etc. And it's difficult to precisely predict how long some of those will last. And so we took that into account and projected forward what we think is our current plan and best guess for Q2, and we certainly hope to do better.

Got it. In the back half related to that, is there anything in your expectations for the benefit from the enhanced child tax credit? And historically, when this sort of stimulus has come through, do you see it in your numbers?

Well, I would say it's hard to say at this point. We've not seen this type of stimulus even in the first quarter in a very long time. As Travis said, we set a baseline, and we clearly hope we can do better than these — the guidance that we put out.

Your next question comes from Jay Sole from UBS.

Great. My question is about the full year guidance, specifically about the fourth quarter. When we get to the fourth quarter and get to January, we'll be lapping the stimulus that happened in January. How are you thinking about what impact that might have on the business in the fourth quarter? And how might fourth quarter sales and gross margin compared to what we saw this past year?

Yes. I think we'll provide guidance as we move through the year. Right now, we typically provide guidance quarter-by-quarter. So we'll have more to say as we move through the year on the fourth quarter.

Would you think that January sales will be down year-over-year?

We wouldn't comment at this point.

Got it. Okay. Well, then maybe if I can ask one more. Are you still seeing right now the impacts of stimulus? Is there any way to measure whether whatever you're seeing in May is sort of still a tailwind from the stimulus that was distributed in March and April? Or is now some other factor become a bigger driver here in May?

Yes. We wouldn't — as Barbara said at the beginning, we don't comment on — it's our practice not to comment on intra-quarter trends. I can tell you, certainly in the first quarter, we think stimulus had a significant impact among other factors that we called out earlier.

Your next question comes from Paul Trussell from Deutsche Bank.

This is Krisztina Katai on for Paul. I just wanted to add my congrats on a great quarter. I wanted to circle back to merchandise margin and the strength that has been there for the last 3 quarters. How do you see the current environment evolving from just a buying perspective? And can you just speak to the sustainability of these trends to potentially drive pre-COVID gross profit margins if you essentially maintain these strong sales trends?

Yes. In terms of the merchandise margin, again, the buying environment remains very dynamic. Margins will vary significantly based on our overall sales performance. We've talked, over the last several quarters, that the buying environment has been quite strong, and we benefited from that. Obviously, in the first quarter, we also benefited from significant above-plan sales, which drove faster turns and fewer markdowns. So those were all positive. In terms of how long that sustains, we'll see. I mean we have our best guess built into the guidance, and we obviously hope to do better. And to the extent we do, we'd expect to see some further benefit.

Got it. That's helpful. And I was wondering if you could talk a little bit about more what you're seeing as it relates to just general consumer willingness to return to your stores. Do you have any data on this? What portion of your pre-pandemic shoppers have returned to shop with you regularly? And are you seeing any demographic changes, perhaps older consumers are returning to your stores as vaccines are being rolled out here relatively quickly?

On the consumer, what we are seeing is the consumer — we've seen our consumer shop less, but they are buying more during their shopping trips; the demographics of our customer base did skew younger during the peak of the pandemic given older customers' hesitancy to shop in brick-and-mortar stores. We believe customers of all ages are returning to stores with the increased vaccination rates, and that's especially true with older customers where the vaccination rates are much higher. Overall, we know that she continues to prioritize value and convenience when deciding where to shop. And with the large number of retail closures, she obviously has fewer places to stop now.

Your next question comes from Paul Lejuez from Citi.

It's Tracy Kogan filling in for Paul. I had 2 questions. I was hoping, first, you could talk about the marketing spend in the quarter and whether you've leveraged that spend and what your expectations are for the year? And then, secondly, can you talk about the rent deals that you saw, I guess, for the deals you signed last year for the openings this year, and how that's trended as you're signing new deals right now?

Sure. On the leases, the real estate market is good, both from a supply standpoint and what we're seeing in leases. I wouldn't say specifically on a call like this, but the significance of the rent favorability given the number of leases across the whole chain would not be significant on an overall leverage, for instance on sales. On marketing, for us, marketing continues to be a good reminder to our customers. Overall, our strategic investment here has been to move to more digital. I wouldn't provide more specifics on marketing on this call.

Just going back to the real estate, any changes from what you were seeing last year versus this year, in terms of favorability? Is it getting better or worse?

I'd say the story is still developing, Tracy. So we'll see how it develops over the next couple of years. Obviously, the availability is good, and we hope to take advantage of that given all the store closures.

Your next question comes from Dana Telsey from Telsey Advisory Group.

It's good to see the progress. There was a mention of dd's in the release, and I believe a little at the start, what are you observing in dd's? It seems like there's been an improvement in both sales and operating profits. Also, is there anything to note regarding store openings of dd's in comparison to Ross, particularly regarding lease favorability and productivity this year compared to last year?

Dana, I would say that the story is very similar for dd's. We did see strong gains in sales and operating profits for the period versus our expectations. I would also say that dd's has the similar wage, freight and COVID cost expense pressures that we're seeing in Ross. And I would say we feel really good about dd's performance.

In terms of new store productivity, we don't break out dd's specifically, but overall, new store productivity continues to be in the 60% to 65% range that we've talked about historically.

On the real estate rollout, we would expect to grow dd's at 20 to 25 stores per year.

Your next question comes from Priya Ohri-Gupta from Barclays.

I would like to hear your thoughts on the possibility of further reducing your debt balance in light of your current cash position. Additionally, do you have any thoughts on enhancing the balance sheet?

Sure. Our expectation is that we're going to pay down our existing debt. So we're not going to refinance it. The timing, if it's economically advantageous to pay off early, we would consider it. But if not, we would expect to pay off our existing debt at maturity.

That was our last question. I will turn the call over to Barbara Rentler for closing comments.

Thank you for joining us today and for your interest in Ross Stores. Have a good day.

This concludes today's conference call. Thank you for participating. You may now disconnect.