Ross Stores, Inc 10-K for FY2025
Ross Stores, Inc. (ROST)
10-K
2025-04-01
For: 2025-02-01
View Original
Added on
April 11, 2026
About this 10-K
Ross Stores, Inc filed this 10-K on April 1, 2025, covering the fiscal year ended February 1, 2025 (FY2025).
Headline figures
Fiscal year ended February 1, 2025, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $21.13B
- up 3.7% from $20.38B a year earlier
- Net income
- $2.09B
- up 11.5% from net income of $1.87B a year earlier
- Diluted EPS
- $6.32
- up 13.7% from $5.56 a year earlier
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 | |||||||||||
| 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
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | ||||||||||
| (Address of principal executive offices) | (Zip Code) | ||||||||||
| Registrant’s telephone number, including area code | |||||||||||
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading symbol | Name of each exchange on which registered | ||||||
Securities registered pursuant to Section 12(g) of the Act:
Title of 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 ý No o
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 o No ý
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 ý No o
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 ý No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Smaller reporting company o Emerging growth company o
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. o
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. ý
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. o
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to § 240.10D-1(b). o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o No ý
The aggregate market value of the voting common stock held by non-affiliates of the Registrant as of August 3, 2024 was $45,630,083,382 , 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, $.01 par value, outstanding on March 10, 2025 was 328,821,469 .
Documents incorporated by reference:
1
Ross Stores, Inc.
Form 10-K
Table of Contents
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PART I
ITEM 1. BUSINESS
Ross Stores, Inc. and its subsidiaries (“we”, “our”, 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 1,831 locations in 43 states, the District of Columbia, and Guam, as of February 1, 2025. 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 355 dd’s DISCOUNTS stores in 22 states as of February 1, 2025. 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 lower to more moderate incomes.
Both our Ross and dd’s DISCOUNTS brands target value-driven customers. 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 in-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.
Our fiscal years ended February 1, 2025, February 3, 2024, and January 28, 2023 are referred to as fiscal 2024, fiscal 2023, and fiscal 2022, respectively. Fiscal 2023 was a 53-week year. Fiscal 2024 and 2022 were each 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 aim to sell recognizable brand name merchandise that is on trend 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 buying opportunities in the market. Our merchandising strategy is reflected in our marketing, 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 merchandise with 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.
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We establish merchandise assortments that we believe are attractive to our target customers. We generally offer a large selection within each classification of our merchandise, with a wide assortment of vendors, labels, prices, colors, styles, and fabrics within each size or item. Our merchandise offerings include apparel, footwear, home accents and furniture, bed and bath, beauty, accessories, toys, gourmet food, luggage, electronics, pet accessories, jewelry and watches, and cookware.
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 majority of our merchandise directly from manufacturers.
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 to 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.
We typically do not require that vendors or manufacturers provide promotional allowances, co-op advertising allowances, return privileges, 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 merchandise that we offer in all of our stores is acquired through opportunistic purchases created by manufacturer and brand overruns and canceled orders, both during and at the end of a season (“close-out” purchases), and production direct from brands and factories (“upfront” purchases). We also source merchandise under in-house brands or vendor brands. Upon receipt, merchandise can be shipped to stores in-season or can be stored in our warehouses 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. 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 typically packaway remains in storage less than six months.
In fiscal 2024, we continued our emphasis on this important sourcing strategy in response to compelling opportunities available in the marketplace. As of February 1, 2025 and February 3, 2024, packaway accounted for approximately 41% and 40% of total inventories, respectively.
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 2024, we had over 800 merchants for Ross and dd’s DISCOUNTS combined. The Ross and dd’s DISCOUNTS buying organizations are separate and distinct, with each organization led by its own chief merchandising officer with a team of merchandise management, buyers, and assistant buyers. Ross and dd’s DISCOUNTS buyers have on average over seven years of experience, including merchandising positions with other retailers. We expect to make continued 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.
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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. Our buyers review their departments in our stores for possible markdowns based on the rate of sale on a weekly basis, as well as at the end of fashion seasons, to promote faster turnover of merchandise inventory and to accelerate the flow of fresh product to our stores. A similar pricing strategy is in place at dd’s DISCOUNTS where prices are compared to those in moderate department and discount stores.
Stores
As of February 1, 2025, we operated a total of 2,186 stores, comprised of 1,831 Ross stores and 355 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, our real estate strategy is to cluster Ross stores with the objective to increase our market penetration and to benefit from economies of scale in advertising, distribution, field management, and other costs. When evaluating a new store location, we consider factors such as 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. 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 and at reasonable costs in a given market. 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 and easy-to-shop in-store environment, which allows 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 styles 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.
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.
Information Systems
We continue to invest in new information systems and technology to provide a platform for growth over the next several years. Current initiatives include continued enhancements to our stores, supply chain, merchandising, and cybersecurity systems. These initiatives are intended to support future growth, the execution and achievement of our plans, efficiency improvement, ongoing stability, and compliance.
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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. We also operate warehouse facilities for packaway storage.
We utilize a combination of owned, leased, and third-party cross-dock facilities to distribute merchandise from distribution centers 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 near term store growth plans. Information on the size and locations of our distribution centers and warehouse facilities is found in ITEM 2. PROPERTIES.
Marketing and Advertising
We use a variety of marketing and advertising media to communicate our value proposition to customers—savings off the same brands carried at department or specialty stores every day. This includes a mix of traditional and streaming television, digital channels, and new store grand openings. We continue to shift our marketing and advertising towards digital channels, including social media, digital video, and digital audio, to reflect changes in media consumption. Our social media strategy includes influencer marketing and user generated content. We believe that a mix of channels and marketing strategies is important to effectively reach our customers.
Trademarks
Our principal trademarks are ROSS®, Ross Dress For Less®, and dd’s DISCOUNTS®, which are registered in the United States and in certain other countries. We expect our rights in these trademarks to endure in locations where we use them for as long as our use continues.
Human Capital
As of February 1, 2025, we had approximately 107,000 total associates, which includes both full- and part-time associates in our stores, distribution centers, and buying and corporate offices. Over 85% of these associates worked in our retail stores. Additionally, we hire temporary associates, especially during peak seasons. We have no associates who are covered by a collective bargaining agreement. Management considers the relationship between the Company and our associates to be strong.
Our associates play essential roles not only in delivering great values to our customers but also in evolving and strengthening the culture at Ross. We strive to have a workforce that reflects our values, supports our business growth, and strengthens our communities. 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.
Our culture. Values start with our people. At Ross, we value integrity, accountability, respect, learning, and humility. We strive to do what is right for our associates, customers, and the communities we serve. We are also committed to promoting an inclusive culture and work environment in which our associates are treated with dignity and respect.
Talent development. The professional growth and retention 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.
Compensation and benefits. We are dedicated to providing our associates with competitive pay and benefits, a safe working environment, recognition for achievements, channels to share opinions and ideas, opportunities to give back, support for educational advancement, and merchandise and other discounts. We are also continuing to invest in our associates with programs that assist with physical, emotional, and financial wellness.
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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 organization. We also continue to make improvements to our merchandising systems to strengthen our ability to plan, buy, and allocate product to our stores. We operate in an attractive sector of retail which offers both value and convenience. We believe that we are well-positioned within the off-price retail apparel and home fashion industry to compete based on these factors.
Nevertheless, the retail apparel and home fashion markets are highly fragmented and competitive. We face a challenging and rapidly changing macroeconomic and retail environment that creates intense competition for our 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 substantial resources. The retail apparel and home-related businesses may become even more competitive in the future.
Seasonality
Although our off-price business is subject to less seasonality than traditional retailers, sales are generally higher during the second half of the year, which includes the back-to-school and holiday seasons.
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. Our annual Corporate Social Responsibility Report is found in the Social Responsibility section of our corporate website. That report and the other information found on our corporate website are not part of this report or of any other report or regulatory filing we file with or furnish to the Securities and Exchange Commission.
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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 | 74 | Executive Chairman | ||||||||||||
| James G. Conroy | 55 | Chief Executive Officer | ||||||||||||
| Michael J. Hartshorn | 57 | Group President, Chief Operating Officer | ||||||||||||
| Michael Kobayashi | 60 | President, Chief Capability Officer | ||||||||||||
| Karen Fleming | 58 | President, Chief Merchandising Officer – Ross Dress for Less | ||||||||||||
| Karen Sykes | 64 | President, Chief Merchandising Officer – dd’s DISCOUNTS | ||||||||||||
| Stephen Brinkley | 52 | President, Operations | ||||||||||||
| Adam Orvos | 60 | Executive Vice President, Chief Financial Officer | ||||||||||||
Mr. Balmuth has served as Executive Chairman since September 2023 and also rejoined our Board of Directors at that time. Prior to rejoining the Board in 2023, Mr. Balmuth had served on the Board from 1996 to 2021. Previously, he served as Strategic Advisor of the Company from 2021 to 2023, Chairman of the Board and Senior Advisor from 2019 to 2021, and Executive Chairman from 2014 to 2019. He was also Vice Chairman of the Board of Directors and Chief Executive Officer for 18 years from 1996 to 2014, during which time he also served as President from 2005 to 2009. Prior to this, 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.
Mr. Conroy joined the Company in December 2024 as Chief Executive Officer – Elect and has served as Chief Executive Officer since February 2025. Previously, he served as President and Chief Executive Officer of Boot Barn Holdings, Inc. from 2012 to November 2024. Prior to this, Mr. Conroy was with Claire’s Stores, Inc. from 2007 to 2012, where he served as Chief Operating Officer and Interim Co-Chief Executive Officer in 2012, President from 2009 to 2012, and Executive Vice President from 2007 to 2009. From 2001 to 2007, Mr. Conroy served in various consulting roles, including with Kurt Salmon Associates and Deloitte Consulting. Previously, Mr. Conroy held several roles with consumer, entertainment, and consulting companies.
Mr. Hartshorn has served as Group President and Chief Operating Officer since 2019 and a member of the Board of Directors since 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 and Chief Capability Officer since 2022. He will leave his officer position on March 31, 2025, at which time he will transition to an advisor role. Prior to his current role, he served as President, Operations and Technology from 2019 to 2022; Group Executive Vice President, Supply Chain, Merchant Operations, and Technology from 2014 to 2019; and Executive Vice President, Supply Chain, Allocation, and Chief Information Officer from 2010 to 2014. Previously, he was 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. Prior to joining Ross, Mr. Kobayashi was a Partner with Accenture, providing consulting services to clients in Accenture’s Retail & Consumer Goods practice.
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Ms. Fleming has served as President and Chief Merchandising Officer – Ross Dress for Less since December 2024. She held the corresponding role at dd’s DISCOUNTS earlier in that year. Previously, she served as Group Executive Vice President, Merchandising at dd’s DISCOUNTS since 2023 and Executive Vice President, Merchandising at dd’s DISCOUNTS since 2022. Prior to this, Ms. Fleming served as Group Senior Vice President of Merchandising from 2018 to 2022 and Senior Vice President of Merchandising from 2015 to 2018. Prior to that, she held various merchandising positions since joining the Company in 1999.
Ms. Sykes has served as President and Chief Merchandising Officer – dd’s DISCOUNTS since December 2024. Previously, she served as Executive Vice President of Merchandising at Ross Dress for Less since 2022. From 2018 to 2022, Ms. Sykes served as Group Senior Vice President of Merchandising. She served as Senior Vice President of Merchandising from 2010 to 2018. Before this, she held various merchandising positions since joining the Company in 1992.
Mr. Brinkley has served as President, Operations since 2023. Prior to joining Ross, he served as President of SportChek, a subsidiary of Canadian Tire Corporation, since 2020 and as Senior Vice President, Stores from 2019 to 2020. Previously, he held roles at Save A Lot Food Stores Ltd. as Executive Vice President and Chief Operating Officer from 2017 to 2019 and before that as Senior Vice President, Corporate Store Operations since 2017. He also held several store and field management positions during his 14-year tenure at Target Corporation.
Mr. Orvos has served as Executive Vice President and Chief Financial Officer since 2021. He will leave his officer position at the end of September 2025 when he retires from the Company. Mr. Orvos joined Ross in 2021 as Group Senior Vice President, Supply Chain Administration. Prior to joining Ross, Mr. Orvos served as Senior Vice President, Retail Finance and Global Financial Planning and Analysis at Lowe’s from 2019 to 2020; Chief Financial Officer and Chief Operating Officer at Neiman Marcus from 2018 to 2019; and Executive Vice President, Retail and then Chief Executive Officer at Total Wine & More from 2016 to 2017. Mr. Orvos held several senior management positions at Belk Department Stores from 2006 to 2016, where he eventually became its Chief Financial Officer. For almost 20 years prior to this, Mr. Orvos held various financial roles at The May Department Stores Company, including Chief Financial Officer of their Foley’s division.
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ITEM 1A. RISK FACTORS
Our fiscal 2024 Annual Report on Form 10-K 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, our projected future financial performance, operations, competitive position, and our planned 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:
MACROECONOMIC AND RETAIL INDUSTRY BUSINESS RISKS
We are subject to impacts from changes in the macroeconomic environment, financial and credit markets, geopolitical conditions, and government regulation or policy. Continuing inflation, tariff increases (or threats of increases), potential supply chain disruptions, and other external events may have significant negative effects on our costs, and also on consumer confidence, shopping behavior, and spending, which may adversely affect our sales and profitability.
Elevated inflation, government policy and regulatory changes (including trade and tariff changes and threats of changes), geopolitical conflicts, bank failures, public health crises, and other potential, adverse developments and related uncertainties, could reduce demand for our merchandise, disrupt our buying patterns, increase our cost of goods, freight, and payroll, 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 and trade policy.
Consumer spending levels and shopping behaviors for the merchandise we sell are affected by many external macroeconomic factors. Elevated inflation, including increased fuel and energy costs, food prices, interest rates, and housing costs, wage rates, unemployment levels, availability of consumer credit, consumer debt levels, income tax rates and the timing of tax refunds, and various government policies and practices (including immigration), and the resulting effects on consumers’ disposable income and consumer confidence in future economic conditions all have an impact on consumer spending habits for our merchandise.
Changes and uncertainty in U.S. trade or tax 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 indicated a willingness to significantly change existing trade policies. 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 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 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 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 and market share.
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Competitive pressures in the apparel and home-related merchandise retailing industry are high.
The retail industry is highly competitive and the marketplace is fragmented, as many different retailers compete for market share by utilizing a variety of store and online formats and merchandising strategies. We expect competition to increase in the future. There are limited economic barriers for others to enter the off-price retail sector. We compete for customers, associates, store locations, and merchandise with other off-price retailers, traditional department stores, mass merchandisers, specialty stores, online and catalog businesses, and other local, regional, and national retailers. 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 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 online 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 sell merchandise that meets customer demand. We continually work 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.
Adverse 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 lower-than-expected sales and cause us to increase our markdowns, which may negatively affect our sales and margins.
We may experience volatility in sales and earnings.
Our business has slower and busier periods based on holiday and back-to-school seasons, weather, and other factors. We may experience unexpected decreases in sales from time to time, which could result in increased markdowns and reduced margins. If sales in a certain period are lower than our plans, we may not be able to adjust operating expenses concurrently, which could adversely affect our operating results.
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STRATEGIC RISKS
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 source and 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 our competitors 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 will 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 or tariff costs, trade relationships or tax policies, geopolitical conflicts, natural disasters, or public health issues, that reduce the supply or increase the relative cost of imported goods, could also result in disruptions to our supply relationships. Cost increases, shortages, delays, or disruptions in the availability to us of high quality, value-priced merchandise could have a material adverse effect on our sales and margins.
Our inability to continually attract, train, and retain associates with the retail talent necessary to execute our off-price retail strategies, as well as 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 elevated 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, potential labor organizing activities, 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 competitive 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 and successfully transition suitable successors for key roles 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 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 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.
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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 marketing, advertising, and promotional activity than we originally planned. We may find it more difficult in new markets to hire, motivate, and retain qualified associates.
We are subject to risks associated with importing and selling merchandise produced in other countries.
Risks in importing and selling such merchandise include tariffs and quotas, economic and supply chain uncertainties and adverse economic conditions (including shipping capacity limitations, cost increases, 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, geopolitical conflict (including wars and fears of war), political unrest, natural disasters, regulations to address climate change, and trade restrictions.
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, tariffs or other import duties, or 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 imposition of import or other restrictions such as product detention, war, acts of terrorism, natural disasters, or public health issues could adversely affect our business. The flow of merchandise from our vendors could also be adversely affected by global shipping capacity limitations, labor stoppages, 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.
Our ability to effectively advertise and market our business could impact customer traffic and demand for our merchandise.
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 a variety of marketing and advertising mediums to attract customers to our stores, particularly through a mix of traditional and streaming television, digital channels (including social media), and new store grand openings, 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.
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OPERATIONAL RISKS
In order to achieve our planned gross margins, we must effectively manage our inventories, markdowns, and inventory shortage.
We purchase the majority of our inventory based on our sales plans. If our actual demand is lower than our sales plans at our intended price points, 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.
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 is principally driven by the product mix and seasonality of the merchandise, and its relation to our store merchandise assortment plans, 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.
Information or data security breaches, including cyberattacks on our transaction processing and computer information systems (including malware intrusion, data exfiltration, identity theft, and other types of cybersecurity threats), could disrupt our operations, result in theft or unauthorized disclosure of our confidential and valuable business information or credit card and other customer information, and could adversely affect our business, disrupt our operations, damage our reputation, increase our costs, and create significant legal exposure.
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. Many 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 transaction processing information systems to misappropriate customer or business information, including but not limited to credit/debit card, personnel, or trade information.
Cybercriminals (including state-sponsored actors) may attempt to penetrate our information systems, including supply chain and logistics systems, to deprive us from access to necessary business information and to disrupt our operations, as part of so-called “ransomware” extortion activity or otherwise. 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.
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, ransomware attacks, and similar fraudulent attacks, or other similar events. It is also possible that an associate within our Company, or at a third party we do business with, may purposefully or inadvertently cause a security breach involving such information. The increasing sophistication of cybercriminals, the increased potential for cyberattacks, the advances in computer capabilities and artificial intelligence (“AI”), 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 system breach and 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.
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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, 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, cyberattacks, 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 associates 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 pandemics, cyberattacks, 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.
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 vendors (or their contractors or subcontractors), the landlords for our stores, or our associates outside of work, and may pertain to social or political issues or protests largely unrelated to our business. Similarly, our responses to events or crises and our position (or perceived lack of position) on environmental, social, and governance (“ESG”) matters, such as sustainability, corporate social responsibility, diversity, equality, and inclusion (“DE&I”), responsible sourcing, and any perceived lack of transparency about those matters could harm our reputation, receive negative feedback from stakeholders, including our customers and investors, and could adversely affect our sales.
The use of social media and other online platforms, including blogs, applications, 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 and other online platforms is virtually immediate, as is its impact. Many social media and other online 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.
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To support our continuing operations, our new store and distribution center growth plans and other capital investment plans, our stock repurchase program, our debt repayments, and our quarterly dividends, we must maintain sufficient liquidity.
We depend upon our operations to generate strong cash flows to support our general operating activities, and to finance our operations, make capital expenditures and acquisitions, manage our debt levels, and return value to our stockholders through stock repurchases and dividends. Disruptions to our operations may occur, nationally, regionally, or in specific locations. 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.
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 resources to maximize returns, our operations, cash flows, and returns to stockholders could be adversely affected.
A natural or man-made disaster in a region where we have a concentration of stores, offices, or a distribution center could harm our business.
We have a concentration of store locations in the states of California, Texas, and Florida; together those states include almost 50% of our stores. More than half of our distribution center and warehouse capacity, approximately 22% of our stores, and our corporate headquarters, are located in California. Natural or other disasters, such as 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.
COMPLIANCE, REGULATORY, AND LEGAL RISKS
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 strategies, we sometimes obtain merchandise in new categories or from new vendors we have not previously dealt with. 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, any 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.
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 promote 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 (or not allegedly violate) such laws and regulations or our policies. Significant or continuing non-compliance (or alleged non-compliance) 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.
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
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classification, employment rights, discrimination, harassment, wage and hour, and retaliation), workplace safety, securities, real estate, tort, commercial, consumer protection, privacy, product compliance and safety, advertising, environmental, 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.
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.
ITEM 1B. UNRESOLVED STAFF COMMENTS
Not applicable.
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ITEM 1C. CYBERSECURITY RISK
RISK MANAGEMENT AND STRATEGY
We have a cybersecurity program that is intended to assess, identify, and manage material risks from cybersecurity threats to our business. Our program includes policies and procedures for detection, assessment, response, mitigation, remediation, and reporting of cybersecurity incidents and threats. Overall, our cybersecurity program is a strategic component of our company-wide risk management framework and activities .
GOVERNANCE
Our Board of Directors exercises general oversight of our risk management activities, including our cybersecurity program. With respect to risks related to cybersecurity, our Board of Directors has delegated the primary oversight responsibility to the Audit Committee. The Audit Committee, along with management, reports to the full Board of Directors on these matters throughout the year.
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ITEM 2. PROPERTIES
At February 1, 2025, we operated a total of 2,186 stores, of which 1,831 were Ross stores in 43 states, the District of Columbia, and Guam, and 355 were dd’s DISCOUNTS stores in 22 states. See additional discussion under “Stores” in ITEM 1. BUSINESS.
The following table summarizes the locations of our stores by state/territory as of February 1, 2025 and February 3, 2024.
| State/Territory | February 1, 2025 | February 3, 2024 | ||||||||||||
| Alabama | 30 | 27 | ||||||||||||
| Arizona | 91 | 89 | ||||||||||||
| Arkansas | 11 | 10 | ||||||||||||
| California | 476 | 463 | ||||||||||||
| Colorado | 43 | 42 | ||||||||||||
| Delaware | 4 | 4 | ||||||||||||
| District of Columbia | 2 | 2 | ||||||||||||
| Florida | 248 | 244 | ||||||||||||
| Georgia | 70 | 70 | ||||||||||||
| Guam | 3 | 3 | ||||||||||||
| Hawaii | 19 | 21 | ||||||||||||
| Idaho | 12 | 12 | ||||||||||||
| Illinois | 104 | 102 | ||||||||||||
| Indiana | 36 | 33 | ||||||||||||
| Iowa | 9 | 9 | ||||||||||||
| Kansas | 15 | 15 | ||||||||||||
| Kentucky | 19 | 17 | ||||||||||||
| Louisiana | 24 | 24 | ||||||||||||
| Maryland | 35 | 32 | ||||||||||||
| Michigan | 16 | 8 | ||||||||||||
| Minnesota | 4 | 1 | ||||||||||||
| Mississippi | 12 | 12 | ||||||||||||
| Missouri | 32 | 31 | ||||||||||||
| Montana | 6 | 6 | ||||||||||||
| Nebraska | 10 | 8 | ||||||||||||
| Nevada | 43 | 43 | ||||||||||||
| New Jersey | 22 | 21 | ||||||||||||
| New Mexico | 23 | 22 | ||||||||||||
| New York | 7 | 4 | ||||||||||||
| North Carolina | 56 | 53 | ||||||||||||
| North Dakota | 4 | 3 | ||||||||||||
| Ohio | 27 | 25 | ||||||||||||
| Oklahoma | 31 | 30 | ||||||||||||
| Oregon | 31 | 32 | ||||||||||||
| Pennsylvania | 64 | 56 | ||||||||||||
| South Carolina | 32 | 31 | ||||||||||||
| South Dakota | 2 | 2 | ||||||||||||
| Tennessee | 45 | 45 | ||||||||||||
| Texas | 312 | 304 | ||||||||||||
| Utah | 27 | 27 | ||||||||||||
| Virginia | 44 | 43 | ||||||||||||
| Washington | 48 | 48 | ||||||||||||
| West Virginia | 4 | 4 | ||||||||||||
| Wisconsin | 29 | 28 | ||||||||||||
| Wyoming | 4 | 3 | ||||||||||||
| Total | 2,186 | 2,109 | ||||||||||||
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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 and at reasonable costs in a given market. Nearly all of our stores are leased. The majority of our new stores have unexpired original lease terms ranging from three years to ten years, with three to four renewal options of five years each.
The following table summarizes the location and approximate sizes of our distribution/warehouse facilities and office locations as of February 1, 2025. Square footage information for the distribution and warehouse facilities represents total ground floor area of the facility.
| Total Approximate Square Footage | ||||||||||||||||||||||||||
| Location | Number of Facilities | Owned | Leased | |||||||||||||||||||||||
| Distribution and Warehouse Facilities | ||||||||||||||||||||||||||
Buckeye, Arizona1 | 1 | 1,700,000 | — | |||||||||||||||||||||||
| Moreno Valley, California | 3 | 1,300,000 | 1,850,000 | |||||||||||||||||||||||
| Perris, California | 2 | 1,999,000 | — | |||||||||||||||||||||||
| Shafter, California | 3 | 1,700,000 | 1,353,000 | |||||||||||||||||||||||
| Statesville, North Carolina | 1 | — | 640,000 | |||||||||||||||||||||||
| Carlisle, Pennsylvania | 4 | 465,000 | 604,000 | |||||||||||||||||||||||
| Fort Mill, South Carolina | 5 | 2,051,000 | 415,000 | |||||||||||||||||||||||
| Rock Hill, South Carolina | 2 | 1,200,000 | 431,000 | |||||||||||||||||||||||
| Brookshire, Texas | 1 | 1,890,000 | — | |||||||||||||||||||||||
| Office Space | ||||||||||||||||||||||||||
| Dublin, California | 1 | 414,000 | — | |||||||||||||||||||||||
| Los Angeles, California | 1 | — | 120,000 | |||||||||||||||||||||||
| Boston, Massachusetts | 1 | — | 5,000 | |||||||||||||||||||||||
New York City, New York2 | 1 | 572,000 | — | |||||||||||||||||||||||
1 We are currently in the process of completing the construction of this distribution center. | ||||||||||||||||||||||||||
2 Our New York buying office building is subject to a 99-year ground lease. | ||||||||||||||||||||||||||
See additional discussion under “Distribution” in ITEM 1. BUSINESS.
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ITEM 3. LEGAL PROCEEDINGS
We have been named in class/representative action lawsuits, primarily in California, alleging violations by us of wage and hour laws. Class/representative action litigation remains pending as of February 1, 2025.
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 various insurance companies with respect to our claims for insurance coverage for business interruption and for 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 are ongoing and remain subject to significant uncertainties.
We believe that the resolution of our currently 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.
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PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS, AND ISSUER PURCHASES OF EQUITY SECURITIES
General information. Our stock is traded on The Nasdaq Global Select Market® under the symbol ROST. There were 1,146 stockholders of record as of March 10, 2025, and the closing stock price on that date was $132.12 per share.
Cash dividends. On March 4, 2025, our Board of Directors declared a quarterly cash dividend of $0.4050 per common share, payable on March 31, 2025. Our Board of Directors declared a cash dividend of $0.3675 per common share in March, May, August, and November 2024. Our Board of Directors declared a cash dividend of $0.3350 per common share in February, May, August, and November 2023.
Issuer purchases of equity securities. Information regarding shares of common stock we repurchased during the fourth quarter of fiscal 2024 is as follows:
| Period | Total number of shares (or units) purchased1 | Average price paid per share (or unit) | 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) | |||||||||||||||||||||||||||||||
| November | |||||||||||||||||||||||||||||||||||
| (11/03/2024 - 11/30/2024) | 452,426 | $145.05 | 452,426 | $1,246,900 | |||||||||||||||||||||||||||||||
| December | |||||||||||||||||||||||||||||||||||
| (12/01/2024 - 01/04/2025) | 704,593 | $153.01 | 704,593 | $1,139,090 | |||||||||||||||||||||||||||||||
| January | |||||||||||||||||||||||||||||||||||
| (01/05/2025 - 02/01/2025) | 592,070 | $150.43 | 592,070 | $1,050,020 | |||||||||||||||||||||||||||||||
| Total | 1,749,089 | $150.08 | 1,749,089 | $1,050,020 | |||||||||||||||||||||||||||||||
1 We did not acquire shares of treasury stock during the quarter ended February 1, 2025. Treasury stock includes shares acquired from employees for tax withholding purposes related to vesting of restricted stock grants. | ||
In March 2024, our Board of Directors approved a two-year program to repurchase up to $2.1 billion of the Company’s common stock through January 31, 2026. This program followed the previous two-year $1.9 billion stock repurchase program, effective at the end of fiscal 2023.
Refer to Note C: Stock-Based Compensation in the 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.
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Stockholder Return Performance Graph
The following information in this Item 5 shall not be deemed filed for purposes of Section 18 of the Securities Exchange 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.
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COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN
Among Ross Stores, Inc., the S&P 500 Index, and Dow Jones Apparel Retailers
| Indexed Returns for Fiscal Years Ended | ||||||||||||||||||||||||||||||||||||||
| Base Period | ||||||||||||||||||||||||||||||||||||||
| Company/Index | 2019 | 2020 | 2021 | 2022 | 2023 | 2024 | ||||||||||||||||||||||||||||||||
| Ross Stores, Inc. | 100 | 100 | 87 | 109 | 133 | 141 | ||||||||||||||||||||||||||||||||
| S&P 500 Index | 100 | 117 | 145 | 133 | 160 | 203 | ||||||||||||||||||||||||||||||||
| Dow Jones Apparel Retailers | 100 | 109 | 120 | 131 | 155 | 187 | ||||||||||||||||||||||||||||||||
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ITEM 6. RESERVED
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 1,831 locations in 43 states, the District of Columbia, and Guam, as of February 1, 2025. 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 355 dd’s DISCOUNTS stores in 22 states as of February 1, 2025 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. Macroeconomic pressures and uncertainties continue to impact both consumer confidence and discretionary spending. We are closely monitoring these external factors, along with market share trends for the off-price industry. We believe that our flexible business model better positions us to navigate through uncertainty, and we plan to continue to focus on strong execution of our key initiatives. We believe that our market share gains can continue to grow through our continued focus on bringing value and convenience to our customers.
Our merchandising strategies emphasize consistently offering a wide assortment of quality branded bargains for our customers. We believe that our merchandising and operational strategies enable us to deliver the most competitive bargains available to meet our customers’ ongoing demand for quality branded goods for the family and home at compelling discounts every day. Additionally, we anticipate the current retail environment will result in more opportunities for us to obtain close-out merchandise and to deliver even greater values on branded goods. We believe that staying diligently focused on executing our merchandising strategies is an important driver of our ability to gain market share in fiscal 2025 and the long term.
The fiscal years ended February 1, 2025, February 3, 2024, and January 28, 2023 are referred to as fiscal 2024, fiscal 2023, and fiscal 2022, respectively. Fiscal 2023 was a 53-week year. Fiscal 2024 and 2022 were each 52-week years.
The discussion that follows relates to fiscal 2024 and fiscal 2023. Discussion of fiscal 2022 items and year-to-year comparisons between fiscal 2023 and fiscal 2022 that are not included in this Annual Report on Form 10-K can be found in Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for fiscal 2023.
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Results of Operations
The following table summarizes our financial results for fiscal 2024, 2023, and 2022:
| 2024 | 2023 | 2022 | ||||||||||||||||||||||||
| Sales | ||||||||||||||||||||||||||
| Sales (millions) | $ | 21,129 | $ | 20,377 | $ | 18,696 | ||||||||||||||||||||
| Sales growth (decline) | 3.7% | 9.0% | (1.2)% | |||||||||||||||||||||||
Comparable store sales growth (decline)1 | 3% | 5% | (4)% | |||||||||||||||||||||||
| Costs and expenses (as a percent of sales) | ||||||||||||||||||||||||||
| Cost of goods sold | 72.2% | 72.7% | 74.6% | |||||||||||||||||||||||
| Selling, general and administrative | 15.5% | 16.0% | 14.8% | |||||||||||||||||||||||
| Operating income (as a percent of sales) | 12.2% | 11.3% | 10.7% | |||||||||||||||||||||||
| Interest (income) expense, net | (0.8)% | (0.8)% | 0.0% | |||||||||||||||||||||||
| Net earnings (as a percent of sales) | 9.9% | 9.2% | 8.1% | |||||||||||||||||||||||
1 Comparable stores are stores open for more than 14 complete months. | ||||||||||||||||||||||||||
Stores. Total stores open at the end of fiscal 2024, 2023, and 2022 were 2,186, 2,109, and 2,015, respectively. The number of stores at the end of fiscal 2024, 2023, and 2022 increased by 4%, 5%, and 5% from the respective prior years. In fiscal 2024, we opened 89 new stores. Looking forward to 2025, we expect to open approximately 90 new stores. Our long-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. We continue to believe that consumers’ focus on value and convenience provide opportunities for us to gain market share.
The following table summarizes the stores opened and closed during fiscal 2024, 2023, and 2022:
| Store Count | 2024 | 2023 | 2022 | |||||||||||||||||
| Ross Dress for Less | ||||||||||||||||||||
| Beginning of the period | 1,764 | 1,693 | 1,628 | |||||||||||||||||
| Opened in the period | 75 | 72 | 1 | 71 | ||||||||||||||||
| Closed in the period | (8) | (1) | (6) | 2 | ||||||||||||||||
| Total Ross Dress for Less stores end of period | 1,831 | 1,764 | 1,693 | |||||||||||||||||
dd’s DISCOUNTS | ||||||||||||||||||||
| Beginning of the period | 345 | 322 | 295 | |||||||||||||||||
| Opened in the period | 14 | 25 | 28 | |||||||||||||||||
| Closed in the period | (4) | (2) | (1) | |||||||||||||||||
Total dd’s DISCOUNTS stores end of period | 355 | 345 | 322 | |||||||||||||||||
| Total stores end of period | 2,186 | 2,109 | 2,015 | |||||||||||||||||
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. | ||||||||||||||||||||
The total selling square footage as of February 1, 2025, February 3, 2024, and January 28, 2023 was 43.9 million, 42.8 million, and 41.4 million, respectively.
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Sales. Sales for fiscal 2024 increased $752.3 million, or 3.7%, compared to the prior year. This was primarily due to the 3% increase in comparable store sales and the opening of 77 net new stores during fiscal 2024. Sales for fiscal 2023 included approximately $308 million from the additional week of sales due to the 53rd week.
Our sales mix is shown below for fiscal 2024, 2023, and 2022:
| 2024 | 1 | 2023 | 2022 | |||||||||||||||||
| Home Accents and Bed and Bath | 26 | % | 26 | % | 26 | % | ||||||||||||||
| Ladies | 22 | % | 23 | % | 24 | % | ||||||||||||||
| Men’s | 16 | % | 15 | % | 15 | % | ||||||||||||||
| Accessories, Lingerie, Fine Jewelry, and Cosmetics | 15 | % | 15 | % | 14 | % | ||||||||||||||
| Shoes | 12 | % | 13 | % | 12 | % | ||||||||||||||
| Children’s | 9 | % | 8 | % | 9 | % | ||||||||||||||
| Total | 100 | % | 100 | % | 100 | % | ||||||||||||||
Cost of goods sold. Cost of goods sold in fiscal 2024 increased $458.9 million compared to the prior year primarily due to the 3% comparable store sales increase and higher sales from the opening of 77 net new stores during fiscal 2024.
Cost of goods sold as a percentage of sales for fiscal 2024 decreased approximately 40 basis points from fiscal 2023 primarily due to a 45 basis point decrease in buying costs mainly due to lower incentive compensation expense, a 45 basis point decrease in distribution costs, and a 30 basis point decrease in domestic freight costs. Partially offsetting these items was a 60 basis point decrease in merchandise margin primarily due to our continued efforts to offer more sharply priced branded bargains and a 20 basis point increase in occupancy costs.
Selling, general and administrative expenses. For fiscal 2024, selling, general and administrative expenses (“SG&A”) increased $15.5 million compared to the prior year. In December 2024, we completed the sale of a packaway warehouse facility and recognized a pre-tax gain on sale of $61.6 million. This sale, along with lower incentive compensation expense, partially offset the increase in SG&A which was primarily driven by the opening of 77 net new stores during fiscal 2024.
SG&A as a percentage of sales for fiscal 2024 decreased 50 basis points compared to fiscal 2023, primarily due to the gain recognized from the previously mentioned packaway facility sale and lower incentive compensation expense.
Operating income. Operating income as a percentage of sales for fiscal 2024 increased 90 basis points compared to fiscal 2023, primarily due to lower cost of goods sold and lower SG&A expenses.
In fiscal 2025, we expect operating income as a percentage of sales to be impacted by sales deleverage, higher distribution costs, and lower incentive compensation expense.
Interest (income) expense, net. In fiscal 2024, interest (income) expense, net improved by $7.5 million compared to fiscal 2023. Interest (income), expense, net as a percentage of sales, was flat compared to the prior year.
The table below shows the components of interest (income) expense, net for fiscal 2024, 2023, and 2022:
| ($000) | 2024 | 2023 | 2022 | |||||||||||||||||||||||
| Interest income | $ | (234,955) | $ | (238,207) | $ | (77,706) | ||||||||||||||||||||
| Capitalized interest expense | (19,447) | (12,106) | (5,678) | |||||||||||||||||||||||
| Other interest expense | 1,571 | 1,599 | 1,668 | |||||||||||||||||||||||
| Interest expense on long-term debt | 81,263 | 84,596 | 84,558 | |||||||||||||||||||||||
| Interest (income) expense, net | $ | (171,568) | $ | (164,118) | $ | 2,842 | ||||||||||||||||||||
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Taxes on earnings. Our effective tax rate for fiscal 2024, 2023, and 2022 was approximately 24%. Our effective tax rate represents the applicable combined federal and state statutory rates reduced by the federal benefit of state taxes deductible on federal returns. Our effective tax rate is impacted by changes in tax law and accounting guidance, location of new stores, level of earnings, tax effects associated with stock-based compensation, and the resolution of tax positions with various tax authorities.
Earnings per share. Diluted earnings per share in fiscal 2024 was $6.32 compared to $5.56 in the prior year. Fiscal 2024 earnings include a per share benefit of approximately $0.14 from the sale of the packaway warehouse facility. Fiscal 2023 earnings include a per share benefit of approximately $0.20 from the 53rd week. The $0.76 increase in diluted earnings per share in fiscal 2024 was primarily attributable to a 12% increase in net earnings and a 2% reduction in weighted-average diluted shares outstanding largely due to stock repurchases under our stock repurchase program.
Financial Condition
Liquidity and Capital Resources
The primary sources of funds for our business activities are 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, capital expenditures related to our new and existing stores, and investments in distribution centers, information systems, and buying and corporate offices. We also use cash to repurchase stock under our stock repurchase programs, pay dividends, and repay debt as it becomes due. In September 2024, we repaid at maturity the $250 million principal amount of the 3.375% Senior Notes. As of February 1, 2025, we had $700 million principal amount of 4.600% Senior Notes that will reach maturity in 2025.
| ($ millions) | 2024 | 2023 | 2022 | |||||||||||||||||
| Cash provided by operating activities | $ | 2,357 | $ | 2,514 | $ | 1,689 | ||||||||||||||
| Cash used in investing activities | (637) | (763) | (654) | |||||||||||||||||
| Cash used in financing activities | (1,859) | (1,428) | (1,405) | |||||||||||||||||
| Net (decrease) increase in cash, cash equivalents, and restricted cash and cash equivalents | $ | (139) | $ | 323 | $ | (370) | ||||||||||||||
Operating Activities
Net cash provided by operating activities was $2.4 billion in fiscal 2024. This was primarily driven by net earnings excluding non-cash expenses for depreciation, amortization, stock-based compensation, and the gain on sale of property (i.e., packaway warehouse facility), partially offset by the payment of fiscal 2023 incentive bonuses in fiscal 2024. Net cash provided by operating activities was $2.5 billion in fiscal 2023. This was primarily driven by net earnings excluding non-cash expenses for depreciation, amortization, and stock-based compensation. Net cash provided by operating activities was $1.7 billion in fiscal 2022. This was primarily driven by net earnings excluding non-cash expenses for depreciation, amortization, and stock-based compensation, and an increase in deferred income taxes, partially offset by merchandise inventory payments and payment of fiscal 2021 incentive bonuses.
The decrease in cash provided by operating activities in fiscal 2024 compared to fiscal 2023 was primarily driven by
higher incentive compensation payments, partially offset by higher net earnings.
Accounts payable leverage (defined as accounts payable divided by merchandise inventory) was 87% and 89% as of February 1, 2025 and February 3, 2024, respectively. The decrease in accounts payable leverage in fiscal 2024 compared to fiscal 2023 was primarily due to the timing of inventory receipts and related payments versus last year.
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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 to our stores. 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 typically packaway remains in storage for 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 affect our operating cash flow. Packaway inventory was 41% of total inventory at the end of fiscal 2024, compared to 40% at the end of fiscal 2023.
Investing Activities
Net cash used in investing activities was $637 million, $763 million, and $654 million in fiscal 2024, 2023, and 2022, respectively, and was primarily related to our capital expenditures. In fiscal 2024, capital expenditures were partially offset by cash proceeds from the sale of the packaway warehouse facility. Our capital expenditures include costs to build, expand, and improve distribution centers, open new stores and improve existing stores, and for various other expenditures related to our information technology systems and buying and corporate offices.
The decrease in cash used in investing activities in fiscal 2024 compared to fiscal 2023 was primarily due to lower capital expenditures in fiscal 2024 related to our new Buckeye, Arizona distribution center and cash proceeds from the sale of the packaway facility, partially offset by the purchase of land and the start of construction for our next distribution center.
Our capital expenditures over the last three years are set forth in the table below:
| ($ millions) | 2024 | 2023 | 2022 | |||||||||||||||||
| Distribution and transportation | $ | 260 | $ | 306 | $ | 270 | ||||||||||||||
| New stores | 193 | 209 | 171 | |||||||||||||||||
| Existing stores | 171 | 168 | 148 | |||||||||||||||||
| Information systems, corporate, and other | 96 | 80 | 65 | |||||||||||||||||
| Total capital expenditures | $ | 720 | $ | 763 | $ | 654 | ||||||||||||||
Capital expenditures for fiscal 2025 are projected to be approximately $855 million. Our planned capital expenditures for fiscal 2025 are for costs to open new stores and improve existing stores, investments in our supply chain to support long-term growth, including construction of our next distribution centers, investments in our information technology systems, and for various other expenditures related to our stores, distribution centers, and buying and corporate offices. We expect to fund capital expenditures with available cash. The increase in our planned capital expenditures for fiscal 2025 compared to fiscal 2024 is primarily driven by investments in our next distribution centers, new and existing store improvements, and various investments in our information technology systems.
Financing Activities
Net cash used in financing activities was $1.9 billion, $1.4 billion, and $1.4 billion in fiscal 2024, 2023, and 2022, respectively, primarily resulting from stock repurchases under our stock repurchase program and dividend payments. In fiscal 2024, we repaid the $250 million principal amount of the 3.375% Senior Notes in September 2024.
Revolving credit facilities. We have a $1.3 billion senior unsecured revolving credit facility (“Credit Facility”). As of February 1, 2025, we had no borrowings or standby letters of credit outstanding under the Credit Facility, the $1.3 billion Credit Facility remained in place and available, and we were in compliance with the financial covenant. Refer to Note D: Debt in the Notes to Consolidated Financial Statements for additional information.
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Senior notes. As of February 1, 2025, we had approximately $2.2 billion of outstanding unsecured Senior Notes, of which $699.7 million was classified within Current Liabilities on our Consolidated Balance Sheet. Refer to Note D: Debt in the Notes to Consolidated Financial Statements for additional information.
Other financing activities. In March 2024, our Board of Directors approved a two-year program to repurchase up to $2.1 billion of the Company’s common stock through January 31, 2026. This program followed the previous two-year $1.9 billion stock repurchase program, effective at the end of fiscal 2023.
The following table summarizes our stock repurchase activity in fiscal 2024, 2023, and 2022:
| Fiscal Year | Shares repurchased (in millions) | Average repurchase price | Amount repurchased (in millions) | ||||||||||||||||||||
| 2024 | 7.3 | $ | 144.46 | $ | 1,050 | 1 | |||||||||||||||||
| 2023 | 8.2 | $ | 115.24 | $ | 950 | 1 | |||||||||||||||||
| 2022 | 10.3 | $ | 92.15 | $ | 950 | ||||||||||||||||||
1 Amount excludes excise tax due under the Inflation Reduction Act of 2022. | |||||||||||||||||||||||
During fiscal 2024, 2023, and 2022, we also acquired 0.6 million, 0.5 million, and 0.5 million shares of treasury stock, respectively, from our employee equity incentive plans for aggregate purchase prices of approximately $86.1 million, $48.6 million, and $48.9 million, respectively.
On March 4, 2025, our Board of Directors declared a quarterly cash dividend of $0.4050 per common share, payable on March 31, 2025.
Our Board of Directors declared a cash dividend of $0.3675 per common share in March, May, August, and November 2024. Our Board of Directors declared a cash dividend of $0.3350 per common share in February, May, August, and November 2023, and a cash dividend of $0.3100 per common share in March, May, August, and November 2022.
During fiscal 2024, 2023, and 2022, we paid dividends of $488.7 million, $454.8 million, and $431.3 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 and expect to be able to maintain adequate trade credit, bank credit facility, and other credit sources to meet our capital and liquidity requirements.
During fiscal 2024, fiscal 2023, and fiscal 2022, our liquidity and capital requirements were provided by available cash and cash flows from operations.
We ended fiscal 2024 with $4.7 billion of unrestricted cash balances, which were held primarily in overnight money market funds invested in U.S. treasury and government instruments across a highly diversified set of banks and other financial institutions. We also have $1.3 billion available under our Credit Facility. We estimate that existing cash and cash equivalent balances, cash flows from operations, our bank credit facility, and trade credit are adequate to meet our operating cash needs and to fund our planned capital investments, debt repayments, interest payments, common stock repurchases, and quarterly dividend payments for at least the next 12 months.
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Contractual Obligations
The table below presents our significant contractual obligations as of February 1, 2025:
| Less than 1 year | Greater than 1 year | Total¹ | |||||||||||||||
| ($000) | |||||||||||||||||
| Recorded contractual obligations: | |||||||||||||||||
| Senior notes | $ | 700,000 | $ | 1,524,991 | $ | 2,224,991 | |||||||||||
| Operating leases | 758,519 | 2,869,467 | 3,627,986 | ||||||||||||||
New York buying office ground lease2 | 7,552 | 1,092,953 | 1,100,505 | ||||||||||||||
| Unrecorded contractual obligations: | |||||||||||||||||
Real estate obligations3 | 9,026 | 178,204 | 187,230 | ||||||||||||||
| Interest payment obligations | 55,778 | 299,040 | 354,818 | ||||||||||||||
Purchase obligations4 | 4,183,454 | 104,916 | 4,288,370 | ||||||||||||||
| Total contractual obligations | $ | 5,714,329 | $ | 6,069,571 | $ | 11,783,900 | |||||||||||
1 We have a $61.3 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, transportation, information technology services, store fixtures and supplies, and maintenance contracts. | |||||||||||||||||
Supply chain finance program. We facilitate a voluntary supply chain finance program (the “program”) to provide certain suppliers with the opportunity to sell their receivables due from us to participating financial institutions at the sole discretion of both the suppliers and the financial institutions. A third-party financial institution administers the program. Our responsibility is limited to making payments on the terms originally negotiated with each supplier, regardless of whether a supplier sells its receivable to a financial institution. We are not a party to the agreements between the participating financial institutions and the suppliers in connection with the program, and we do not receive financial incentives from the suppliers or the financial institutions. We do not provide guarantees under the program, and our rights and obligations to our suppliers are not affected by the program. The range of payment terms negotiated with suppliers is consistent, irrespective of whether a supplier participates in the program.
All outstanding payments owed under the program are recorded within Accounts payable in the Consolidated Balance Sheets. We account for all payments made under the program as a reduction to operating cash flows in Accounts payable within the Consolidated Statements of Cash Flows. The amounts owed to participating financial institutions under the program and included in Accounts payable were $159.2 million and $146.9 million at February 1, 2025 and February 3, 2024, respectively.
Standby letters of credit and collateral trust. We use standby letters of credit outside of our revolving credit facility and a funded trust to collateralize some of our insurance obligations. As of February 1, 2025 and February 3, 2024, we had $1.8 million and $2.2 million, respectively, in standby letters of credit outstanding. As of February 1, 2025 and February 3, 2024, we had $63.9 million and $60.8 million, respectively, held in a collateral trust. The standby letters of credit are collateralized by restricted cash and the collateral trust consists of restricted cash and cash equivalents.
Other than the unrecorded contractual obligations noted above, we did not have any material off-balance sheet arrangements as of February 1, 2025.
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Other
Critical Accounting Estimates
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 estimates 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 estimates.
Merchandise inventory. Our merchandise inventory is stated at the lower of cost (determined using a weighted-average basis) or net realizable value. Inventory we purchase 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. Merchandise inventory includes acquisition, transportation, processing, and storage costs. Included in the carrying value of our merchandise inventory is a provision for shortage. The shortage reserve is based on historical shortage rates as determined through our annual physical inventory counts and cycle counts. Historically, our actual physical inventory count results have shown our provision for shortage to be reliable. A five percent change in shortage rates as of February 1, 2025 would not have materially impacted our cost of goods sold in fiscal 2024.
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. A five percent increase or decrease in our insurance reserves would not have materially impacted our net earnings in fiscal 2024.
Recent Accounting Pronouncements
Refer to Note A: Summary of Significant Accounting Policies in the Notes to Consolidated Financial Statements 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 2024, 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, projected sales, costs, earnings, planned new store growth, capital expenditures, sustainability and carbon reduction targets, 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,” “outlook,” “looking ahead,” and similar expressions identify forward-looking statements.
Future impact from inflation, high interest rates and interest rate changes, tariffs, ongoing military conflicts and economic sanctions, extreme weather, public health events, natural disasters, climate change, and other economic, regulatory, consumer spending, and industry trends that could potentially adversely affect our revenue, profitability, operating conditions, and growth are 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. RISK FACTORS 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 and plans 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.
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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 February 1, 2025.
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 February 1, 2025, we had no borrowings outstanding under our revolving credit facility.
As of February 1, 2025, we had outstanding six 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 February 1, 2025. 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.
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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Consolidated Statements of Earnings
| Fiscal Year Ended | ||||||||||||||||||||
| ($000, except per share data) | February 1, 2025 | February 3, 2024 | January 28, 2023 | |||||||||||||||||
| Sales | $ | $ | $ | |||||||||||||||||
| Costs and Expenses | ||||||||||||||||||||
| Cost of goods sold | ||||||||||||||||||||
| Selling, general and administrative | ||||||||||||||||||||
| Operating income | ||||||||||||||||||||
| Interest (income) expense, net | ( | ( | ||||||||||||||||||
| Earnings before taxes | ||||||||||||||||||||
| Provision for taxes on earnings | ||||||||||||||||||||
| Net earnings | $ | $ | $ | |||||||||||||||||
| Earnings per share | ||||||||||||||||||||
| Basic | $ | $ | $ | |||||||||||||||||
| Diluted | $ | $ | $ | |||||||||||||||||
| Weighted-average shares outstanding (000) | ||||||||||||||||||||
| Basic | ||||||||||||||||||||
| Diluted | ||||||||||||||||||||
| The accompanying notes are an integral part of these consolidated financial statements. | ||||||||||||||||||||
34
Consolidated Statements of Comprehensive Income
| Fiscal Year Ended | ||||||||||||||||||||
| ($000) | February 1, 2025 | February 3, 2024 | January 28, 2023 | |||||||||||||||||
| Net earnings | $ | $ | $ | |||||||||||||||||
| Other comprehensive income | ||||||||||||||||||||
| Comprehensive income | $ | $ | $ | |||||||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
35
Consolidated Balance Sheets
| ($000, except share data) | February 1, 2025 | February 3, 2024 | ||||||||||||
| 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 $ Authorized Issued and outstanding | ||||||||||||||
| Additional paid-in capital | ||||||||||||||
| Treasury stock | ( | ( | ||||||||||||
| Retained earnings | ||||||||||||||
| Total stockholders’ equity | ||||||||||||||
| Total liabilities and stockholders’ equity | $ | $ | ||||||||||||
| The accompanying notes are an integral part of these consolidated financial statements. | ||||||||||||||
36
Consolidated Statements of Stockholders’ Equity
| Additional paid-in capital | ||||||||||||||||||||||||||||||||||||||||||||
| Common stock | Treasury stock | Retained earnings | ||||||||||||||||||||||||||||||||||||||||||
| (000) | Shares | Amount | Total | |||||||||||||||||||||||||||||||||||||||||
| Balance at January 29, 2022 | $ | $ | $ | ( | $ | $ | ||||||||||||||||||||||||||||||||||||||
| Net earnings | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||
| Common stock issued under stock plans, net of shares used for tax withholding | ( | — | ( | |||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||
| Common stock repurchased | ( | ( | ( | — | ( | ( | ||||||||||||||||||||||||||||||||||||||
Dividends declared ($ | — | — | — | — | ( | ( | ||||||||||||||||||||||||||||||||||||||
| Balance at January 28, 2023 | $ | $ | $ | ( | $ | $ | ||||||||||||||||||||||||||||||||||||||
| Net earnings | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||
| Common stock issued under stock plans, net of shares used for tax withholding | ( | — | ( | |||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||
| Common stock repurchased, inclusive of excise tax | ( | ( | ( | — | ( | ( | ||||||||||||||||||||||||||||||||||||||
Dividends declared ($ | — | — | — | — | ( | ( | ||||||||||||||||||||||||||||||||||||||
| Balance at February 3, 2024 | $ | $ | $ | ( | $ | $ | ||||||||||||||||||||||||||||||||||||||
| Net earnings | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||
| Common stock issued under stock plans, net of shares used for tax withholding | ( | — | ( | |||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||
| Common stock repurchased, inclusive of excise tax | ( | ( | ( | — | ( | ( | ||||||||||||||||||||||||||||||||||||||
Dividends declared ($ | — | — | — | — | ( | ( | ||||||||||||||||||||||||||||||||||||||
| Balance at February 1, 2025 | $ | $ | $ | ( | $ | $ | ||||||||||||||||||||||||||||||||||||||
| The accompanying notes are an integral part of these consolidated financial statements. | ||||||||||||||||||||||||||||||||||||||||||||
37
Consolidated Statements of Cash Flows
| Fiscal Year Ended | ||||||||||||||||||||
| ($000) | February 1, 2025 | February 3, 2024 | January 28, 2023 | |||||||||||||||||
| Cash Flows From Operating Activities | ||||||||||||||||||||
| Net earnings | $ | $ | $ | |||||||||||||||||
| Adjustments to reconcile net earnings to net cash provided by operating activities: | ||||||||||||||||||||
| Depreciation and amortization | ||||||||||||||||||||
| Stock-based compensation | ||||||||||||||||||||
| Gain on sale of property | ( | |||||||||||||||||||
| 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 | ( | |||||||||||||||||||
| Net cash provided by operating activities | ||||||||||||||||||||
| Cash Flows From Investing Activities | ||||||||||||||||||||
| Additions to property and equipment | ( | ( | ( | |||||||||||||||||
| Proceeds from sale of property | ||||||||||||||||||||
| Net cash used in investing activities | ( | ( | ( | |||||||||||||||||
| Cash Flows From Financing Activities | ||||||||||||||||||||
| Issuance of common stock related to stock plans | ||||||||||||||||||||
| Treasury stock purchased | ( | ( | ( | |||||||||||||||||
| Repurchase of common stock | ( | ( | ( | |||||||||||||||||
| Excise tax paid on repurchase of common stock | ( | |||||||||||||||||||
| Dividends paid | ( | ( | ( | |||||||||||||||||
| Payment of long-term debt | ( | |||||||||||||||||||
| Net cash used in financing activities | ( | ( | ( | |||||||||||||||||
| Net (decrease) increase in cash, cash equivalents, and restricted cash and cash equivalents | ( | ( | ||||||||||||||||||
| Cash and cash equivalents, and restricted cash and cash equivalents: | ||||||||||||||||||||
Beginning of year | ||||||||||||||||||||
| End of year | $ | $ | $ | |||||||||||||||||
| Supplemental Cash Flow Disclosures | ||||||||||||||||||||
| Interest paid | $ | $ | $ | |||||||||||||||||
| Income taxes paid, net | $ | $ | $ | |||||||||||||||||
| The accompanying notes are an integral part of these consolidated financial statements. | ||||||||||||||||||||
38
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 2024, the Company operated 1,831 Ross Dress for Less® (“Ross”) locations in 43 states, the District of Columbia, and Guam, and 355 dd’s DISCOUNTS® stores in 22 states. The Ross and dd’s DISCOUNTS stores are supported by the Company’s headquarters, buying offices, and its network of distribution centers and warehouses.
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 February 1, 2025, February 3, 2024, and January 28, 2023 are referred to as fiscal 2024, fiscal 2023, and fiscal 2022, respectively. Fiscal 2023 was a 53-week year. Fiscal 2024 and 2022 were each 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. Actual results could differ materially from the Company’s estimates. The Company’s significant accounting estimates include valuation reserves for inventory, packaway and other inventory carrying costs, useful lives of fixed assets, insurance reserves, reserves for uncertain tax positions, and legal claims.
Segment reporting. The Company has one reportable segment. Refer to Note I: Segment Reporting for additional information.
Cash and cash equivalents. Cash equivalents consist of highly liquid, fixed income instruments purchased with an original maturity of three months or less. The institutions where these instruments are held could potentially subject the Company to concentrations of credit risk. The Company manages its risk associated with these instruments by primarily holding its cash and cash equivalents across a highly diversified set of banks and other financial institutions.
Restricted cash and cash equivalents. Restricted cash and cash equivalents serve as collateral for certain insurance obligations. These restricted funds are invested in bank deposits, money market mutual funds, and U.S. Government and agency 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 Company uses standby letters of credit in addition to a funded trust to collateralize certain insurance obligations. The standby letters of credit are collateralized by restricted cash. As of February 1, 2025, February 3, 2024, and January 28, 2023, the Company had $1.8 million, $2.2 million, and $2.6 million, respectively, in standby letters of credit outstanding. As of February 1, 2025, February 3, 2024, and January 28, 2023, the Company had $63.9 million, $60.8 million, and $57.8 million, respectively, in a collateral trust.
39
The following table provides a reconciliation of cash, cash equivalents, and restricted cash and cash equivalents in the Consolidated Balance Sheets, that reconcile to the amounts shown on the Consolidated Statements of Cash Flows:
| ($000) | 2024 | 2023 | 2022 | |||||||||||||||||
| 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 | ||||||||||||||||||||
| Total cash and cash equivalents, and restricted cash and cash equivalents | $ | $ | $ | |||||||||||||||||
Estimated fair value of financial instruments. The carrying value of cash and cash equivalents, restricted cash and cash equivalents, accounts receivable, other long-term assets, accounts payable, and other long-term liabilities approximates their estimated fair value. Refer to Note B: Fair Value Measurements and Note D: Debt for additional information.
Cash and cash equivalents were $4.7 billion and $4.9 billion at February 1, 2025 and February 3, 2024, respectively, and include bank deposits, money market funds, and U.S. Government and agency securities 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.
Merchandise inventory. Merchandise inventory is stated at the lower of cost (determined using a weighted-average basis) or net realizable value. Inventory purchased by the Company 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. Merchandise inventory includes acquisition, transportation, processing, and storage costs. The timing of the release of packaway inventory to the stores is principally driven by the product mix, 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 . Included in the carrying value of the Company’s merchandise inventory is a provision for shortage. The shortage reserve is based on historical shortage rates as determined through our annual physical merchandise inventory counts and cycle counts.
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 years to 12 years for equipment, 20 years to 40 years for land improvements and buildings, and three years 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 $446.8 million, $419.4 million, and $394.7 million for fiscal 2024, 2023, and 2022, respectively. The Company capitalizes interest during the construction period of facilities and during the development and implementation phase of software projects. Interest capitalized was $19.4 million, $12.1 million, and $5.7 million in fiscal 2024, 2023, and 2022, respectively.
As of February 1, 2025, February 3, 2024, and January 28, 2023, the Company had $85.4 million, $78.2 million, and $71.0 million, respectively, of property and equipment purchased but not yet paid. These purchases are included in Property and Equipment and the related liabilities are included in Accounts payable and Accrued expenses and other in the accompanying Consolidated Balance Sheets.
In December 2024, the Company completed the sale of a packaway warehouse facility and recognized a pre-tax gain on sale of $61.6 million which is included within Selling, general and administrative on the Consolidated Statements of Earnings. Cash proceeds from the sale of the facility were $82.6 million.
40
Other long-term assets. Other long-term assets as of February 1, 2025 and February 3, 2024 consisted of the following:
| ($000) | 2024 | 2023 | ||||||||||||
| Deferred compensation (Note G) | $ | $ | ||||||||||||
| Restricted cash and cash equivalents | ||||||||||||||
| Other | ||||||||||||||
| Total | $ | $ | ||||||||||||
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. No
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 $71.3 million and $61.4 million at February 1, 2025 and February 3, 2024, respectively. The Company includes the change in book cash overdrafts in operating cash flows.
Supply chain finance program. The Company facilitates a voluntary supply chain finance program (the “program”) to provide certain suppliers with the opportunity to sell their receivables due from the Company to participating financial institutions at the sole discretion of both the suppliers and the financial institutions. A third-party financial institution administers the program. The Company’s responsibility is limited to making payments on the terms originally negotiated with each supplier, regardless of whether a supplier sells its receivable to a financial institution. The Company is not a party to the agreements between the participating financial institutions and the suppliers in connection with the program, and does not receive financial incentives from the suppliers or the financial institutions. The Company does not provide guarantees under the program, and the Company’s rights and obligations to its suppliers are not affected by the program. The range of payment terms negotiated with a supplier is consistent, irrespective of whether a supplier participates in the program.
The following table is a reconciliation of the outstanding obligations confirmed as valid under the Company’s supply chain finance program for fiscal 2024:
| ($000) | 2024 | |||||||||||||
| Confirmed obligations outstanding at the beginning of the year | $ | |||||||||||||
| Invoices confirmed during the year | ||||||||||||||
| Confirmed invoices paid during the year | ( | |||||||||||||
| Confirmed obligations outstanding at the end of the year | $ | |||||||||||||
41
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 February 1, 2025 and February 3, 2024 consisted of the following:
| ($000) | 2024 | 2023 | ||||||||||||
| Workers’ compensation | $ | $ | ||||||||||||
| General liability | ||||||||||||||
| Medical plans | ||||||||||||||
| Total | $ | $ | ||||||||||||
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 February 1, 2025 and February 3, 2024 consisted of the following:
| ($000) | 2024 | 2023 | ||||||||||||
| Deferred compensation (Note G) | $ | $ | ||||||||||||
| Income taxes (Note F) | ||||||||||||||
| Other | ||||||||||||||
| Total | $ | $ | ||||||||||||
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. Refer to Note E: Leases for additional information.
Revenue recognition. The Company recognizes revenue at the point of sale, net of sales taxes collected and an allowance for estimated future returns. 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 $12.4 million, $12.1 million, and $11.8 million and the liability recorded for the refund due to the customer was $24.1 million, $23.7 million, and $23.1 million as of February 1, 2025, February 3, 2024, and January 28, 2023, 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.
42
The following sales mix table disaggregates revenue by merchandise category for fiscal 2024, 2023, and 2022:
| 2024 | 1 | 2023 | 2022 | |||||||||||||||||
| Home Accents and Bed and Bath | % | % | % | |||||||||||||||||
| Ladies | % | % | % | |||||||||||||||||
| Men’s | % | % | % | |||||||||||||||||
| Accessories, Lingerie, Fine Jewelry, and Cosmetics | % | % | % | |||||||||||||||||
| Shoes | % | % | % | |||||||||||||||||
| Children’s | % | % | % | |||||||||||||||||
| Total | % | % | % | |||||||||||||||||
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.
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 2024, 2023, and 2022 were $70.2 million, $67.7 million, and $66.5 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. Refer to Note C: Stock-Based Compensation for more information on the Company’s stock-based compensation plans.
Interest (income) expense, net. Interest (income) expense, net primarily includes interest income, capitalized interest expense, interest expense on long-term debt, and other interest expense.
The table below shows the components of interest (income) expense, net for fiscal 2024, 2023, and 2022:
| ($000) | 2024 | 2023 | 2022 | |||||||||||||||||
| Interest income | $ | ( | $ | ( | $ | ( | ||||||||||||||
| Capitalized interest expense | ( | ( | ( | |||||||||||||||||
| Other interest expense | ||||||||||||||||||||
| Interest expense on long-term debt | ||||||||||||||||||||
| Interest (income) expense, net | $ | ( | $ | ( | $ | |||||||||||||||
Taxes on earnings. The Company accounts for income taxes in accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“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. Refer to Note F: Taxes on Earnings for additional information.
Treasury stock. The Company records treasury stock at cost. Treasury stock includes shares purchased from employees for tax withholding purposes related to vesting of equity plan awards.
43
Earnings per share. The Company computes and reports both basic earnings per share (“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 and restricted stock units.
Shares are excluded from the calculation of diluted EPS if their effect would have been anti-dilutive to the calculation of diluted EPS. In fiscal 2024, 2023, and 2022 approximately 49,600 , 200 , and 11,100 weighted-average shares were excluded from the calculation of diluted EPS, respectively.
The following is a reconciliation of the number of shares (denominator) used in the basic and diluted EPS computations:
| Shares in (000s) | Basic EPS | Effect of dilutive common stock equivalents | Diluted EPS | |||||||||||||||||
| 2024 | ||||||||||||||||||||
| Shares | ||||||||||||||||||||
| Amount | $ | $ | ( | $ | ||||||||||||||||
| 2023 | ||||||||||||||||||||
| Shares | ||||||||||||||||||||
| Amount | $ | $ | ( | $ | ||||||||||||||||
| 2022 | ||||||||||||||||||||
| Shares | ||||||||||||||||||||
| Amount | $ | $ | ( | $ | ||||||||||||||||
Recently adopted accounting standards. In November 2023, the FASB issued Accounting Standards Update (“ASU”) 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. The ASU is intended to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. The Company adopted ASU 2023-07 for the fiscal year ended February 1, 2025 on a retrospective basis. The adoption of the standard did not have a material impact on the Company’s consolidated financial statements.
In September 2022, the FASB issued ASU 2022-04, Liabilities — Supplier Finance Programs (Subtopic 405-50): Disclosure of Supplier Finance Program Obligations, to enhance transparency about an entity’s use of supplier finance programs. The ASU requires enhanced and additional disclosures about the key terms of supplier finance programs including a description of where in the financial statements any related amounts are presented. The Company adopted ASU 2022-04 in the first quarter of fiscal 2023 on a retrospective basis, and the rollforward requirements for the fiscal year ended February 1, 2025 on a prospective basis. The adoption of this standard did not have a material impact on the Company’s consolidated financial statements.
Recently issued accounting standards. In November 2024, the FASB issued ASU 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses. The ASU is intended to enhance transparency of income statement disclosures primarily through additional disaggregation of relevant expense captions. The standard is effective for annual reporting periods beginning after December 15, 2026, and interim periods within annual reporting periods beginning after December 15, 2027, with prospective or retrospective application permitted. The Company is currently evaluating the impact of this guidance on its disclosures in the consolidated financial statements.
44
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. The ASU is intended to enhance the transparency and decision usefulness of income tax disclosures. It requires the Company to disclose disaggregated jurisdictional and categorical information for the tax rate reconciliation and the amount of income taxes paid as well as additional income tax related amounts. The new guidance is effective for annual reporting periods beginning after December 15, 2024, with retrospective application permitted. The Company is currently evaluating the impact of this guidance on its disclosures in the consolidated financial statements.
Note B: Fair Value Measurements
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, maximize the use of observable inputs, and minimize the use of unobservable inputs when measuring fair value. Corporate and U.S. government and agency securities are classified within Level 1 because these securities are valued using quoted market prices.
The fair value of the Company’s financial instruments as of February 1, 2025 and February 3, 2024 are as follows:
| ($000) | 2024 | 2023 | ||||||||||||||||||
Cash and cash equivalents (Level 1) | $ | $ | ||||||||||||||||||
Restricted cash and cash equivalents (Level 1) | $ | $ | ||||||||||||||||||
The underlying assets in the Company’s nonqualified deferred compensation program as of February 1, 2025 and February 3, 2024 (included in Other long-term assets and Other long-term liabilities) primarily consist of participant-directed money market, stock, and bond funds. The fair value measurement for funds with quoted market prices in active markets (Level 1) are as follows:
| ($000) | 2024 | 2023 | |||||||||
| Nonqualified deferred compensation program (Level 1) | $ | $ | |||||||||
Note C: Stock-Based Compensation
On May 17, 2017, the Company’s stockholders approved the Ross Stores, Inc. 2017 Equity Incentive Plan (the “2017 Plan”). The 2017 Plan had an initial share reserve of 12.0 million shares of the Company’s common stock, which could 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.
Restricted stock. The Company grants shares of restricted stock and restricted stock units to directors, officers, and key employees. The fair value of shares of restricted stock and restricted stock units at the date of grant is amortized to expense over the vesting period of generally to five years .
Performance 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 three years from the date the performance award was granted.
In fiscal 2024, the Company also granted a performance-conditioned restricted stock unit award (“PRSU”) in connection with the hiring of its new CEO. The PRSU is subject to vesting based on both service and market-based conditions, over a period that ends in March 2029. The fair value of the PRSU on the grant date was $6.9 million, determined using a Monte Carlo simulation model, and will be amortized to expense over the service period.
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Restricted stock awards and performance awards (including the PRSU) are collectively referred to as stock awards.
A summary of stock awards activity for fiscal 2024 is presented below:
| Number of shares (000) | Weighted-average grant date fair value | |||||||||||||
| Unvested at February 3, 2024 | $ | |||||||||||||
| Awarded | ||||||||||||||
| Released | ( | |||||||||||||
| Forfeited | ( | |||||||||||||
| Unvested at February 1, 2025 | $ | |||||||||||||
All unvested shares at February 1, 2025, with the exception of the PRSU shares, are only subject to service vesting conditions. The 51,164 PRSU shares awarded in fiscal 2024 all remain unvested as of February 1, 2025. The weighted-average grant date fair value of the PRSU shares was $135.83 .
The unamortized stock award compensation expense at February 1, 2025 and February 3, 2024 was $229.3 million and $217.1 million, respectively, which are each expected to be recognized over a weighted-average remaining period of 1.7 years. Intrinsic value for unvested stock awards, defined as the closing market value per share on the last business day of fiscal year 2024 (or $150.56 ), applied to the unvested shares was $625.9 million. A total of 7.3 million, 7.8 million, and 8.9 million shares were available under the 2017 Plan for new stock awards at the end of fiscal 2024, 2023, and 2022, respectively.
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 2024, 2023, and 2022, employees purchased approximately 0.2 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 $126.18 , $98.86 , and $74.54 , respectively. Through February 1, 2025, approximately 41.5 million shares had been issued under this plan and 3.4 million shares remained available for future issuance.
For fiscal 2024, 2023, and 2022, the Company recognized stock-based compensation expense as follows:
| ($000) | 2024 | 2023 | 2022 | ||||||||||||||
| Restricted stock | $ | $ | $ | ||||||||||||||
| Performance awards | |||||||||||||||||
| Employee stock purchase plan | |||||||||||||||||
| Total | $ | $ | $ | ||||||||||||||
Capitalized stock-based compensation cost was not material in any year presented.
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Total stock-based compensation recognized in the Company’s Consolidated Statements of Earnings for fiscal 2024, 2023, and 2022 is as follows:
| Statements of Earnings Classification ($000) | 2024 | 2023 | 2022 | ||||||||||||||
| Cost of goods sold | $ | $ | $ | ||||||||||||||
| Selling, general and administrative | |||||||||||||||||
| Total | $ | $ | $ | ||||||||||||||
The tax benefits related to stock-based compensation expense for fiscal 2024, 2023, and 2022 were $29.6 million, $29.6 million, and $24.8 million, respectively.
Note D: Debt
Long-term debt. Unsecured senior debt (the “Senior Notes”), net of unamortized discounts and debt issuance costs, as of February 1, 2025 and February 3, 2024 consisted of the following:
| ($000) | 2024 | 2023 | ||||||||||||
| $ | $ | |||||||||||||
Total long-term debt1 | $ | $ | ||||||||||||
| Less: current portion | $ | $ | ||||||||||||
| Total due beyond one year | $ | $ | ||||||||||||
Interest on all Senior Notes is payable semi-annually and the Senior Notes are subject to prepayment penalties for early payment of principal.
In September 2024, the Company repaid at maturity the $250 million principal amount of the 3.375 % Senior Notes.
The aggregate fair value of the remaining six outstanding series of Senior Notes was approximately $2.1 billion as of February 1, 2025. The aggregate fair value of the seven outstanding series of Senior Notes was approximately $2.3 billion as of February 3, 2024. 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.
The following table shows scheduled annual principal payments on long-term debt:
| ($000) | |||||||||||
| 2025 | $ | ||||||||||
| 2026 | $ | ||||||||||
| 2027 | $ | ||||||||||
| Thereafter | $ | ||||||||||
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Revolving credit facilities. The Company’s $1.3 billion senior unsecured revolving credit facility (“Credit Facility”) expires in February 2027 and may be extended at the Company’s request for up to two additional one-year periods subject to customary conditions. The Credit Facility contains a $300 million sublimit for issuance of standby letters of credit. It also contains an option allowing the Company to increase the size of its Credit Facility by up to an additional $700 million, with the agreement of the committing lenders. Interest on borrowings under this Credit Facility is a term rate based on the Secured Overnight Financing Rate (“Term SOFR”) (or an alternate benchmark rate, if Term SOFR is no longer available) plus an applicable margin and is payable quarterly and upon maturity.
The Credit Facility is subject to a quarterly Consolidated Adjusted Debt to Consolidated EBITDAR financial leverage ratio covenant. As of February 1, 2025, the Company was in compliance with the financial covenant, had no 1.3 billion Credit Facility remained in place and available.
Note E: Leases
The Company currently leases its store locations with original, non-cancelable terms that in general range from three years 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 certain distribution/warehouse facilities with expiration dates ranging from 2025 to 2031 and the majority contain renewal provisions. The Company also leases office space for its Los Angeles and Boston buying offices. The lease terms for these facilities expire in 2027 and 2026, respectively. The Los Angeles and Boston buying office facilities 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 cost included in the Consolidated Statement of Earnings for fiscal 2024, 2023, and 2022:
| ($000) | 2024 | 2023 | 2022 | ||||||||
Operating lease cost1 | $ | $ | $ | ||||||||
Variable lease costs2 | |||||||||||
Net lease cost3 | $ | $ | $ | ||||||||
1 Net of sublease income which was immaterial. | |||||||||||
2 Includes property and rent taxes, insurance, common area maintenance, percentage rent, and negotiated rent abatements. | |||||||||||
3 Excludes short-term lease costs which were immaterial. | |||||||||||
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The maturity of operating lease liabilities, including the ground lease related to the New York buying office as of February 1, 2025, are as follows:
| ($000) | Operating Leases1 | ||||
| 2025 | $ | ||||
| 2026 | |||||
| 2027 | |||||
| 2028 | |||||
| 2029 | |||||
| Thereafter | |||||
| Total lease payments | $ | ||||
| Less: interest | |||||
| Present value of lease liabilities | $ | ||||
| Less: current operating lease liabilities | |||||
| Non-current operating lease liabilities | $ | ||||
1 Operating leases exclude $ | |||||
The weighted-average remaining lease term and the weighted-average discount rate for operating leases as of February 1, 2025 and February 3, 2024 are as follows:
| 2024 | 2023 | |||||||||||||
| 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 | % | % | ||||||||||||
The following table presents cash paid for amounts included in the measurement of operating lease liabilities and operating lease assets obtained in exchange for operating lease liabilities (includes new leases and remeasurements or modifications of existing leases) for fiscal 2024, 2023, and 2022:
| ($000) | 2024 | 2023 | 2022 | ||||||||
Cash paid for amounts included in the measurement of operating lease liabilities | $ | $ | $ | ||||||||
Operating lease assets obtained in exchange for operating lease liabilities | $ | $ | $ | ||||||||
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Note F: Taxes on Earnings
The provision for income taxes consisted of the following:
| ($000) | 2024 | 2023 | 2022 | |||||||||||||||||
| Current | ||||||||||||||||||||
| Federal | $ | $ | $ | |||||||||||||||||
| State | ||||||||||||||||||||
| Deferred | ||||||||||||||||||||
| Federal | ( | ( | ||||||||||||||||||
| State | ( | ( | ||||||||||||||||||
| ( | ( | |||||||||||||||||||
| Total | $ | $ | $ | |||||||||||||||||
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:
| 2024 | 2023 | 2022 | |||||||||||||||||||||
| Federal income taxes at the statutory rate | % | % | % | ||||||||||||||||||||
| State income taxes (net of federal benefit) and other, net | % | % | % | ||||||||||||||||||||
| Total | % | % | % | ||||||||||||||||||||
The components of deferred taxes at February 1, 2025 and February 3, 2024 are as follows:
| ($000) | 2024 | 2023 | |||||||||||||||
| 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 and amortization | ( | ( | |||||||||||||||
| Merchandise inventory | ( | ( | |||||||||||||||
| Supplies | ( | ( | |||||||||||||||
| Operating lease assets | ( | ( | |||||||||||||||
| Other | ( | ( | |||||||||||||||
| Deferred Tax Liabilities | ( | ( | |||||||||||||||
| Net Deferred Tax Liabilities | $ | ( | $ | ( | |||||||||||||
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At the end of fiscal 2024 and 2023, the Company’s state tax credit carryforwards for income tax purposes were approximately $9.6 million and $10.1 million, respectively. The state tax credit carryforwards will begin to expire in fiscal 2031. The Company has provided a valuation allowance of $0.6 million as of the end of fiscal 2024 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 2024, 2023, and 2022 are as follows:
| ($000) | 2024 | 2023 | 2022 | |||||||||||||||||
| Unrecognized tax benefits - beginning of year | $ | $ | $ | |||||||||||||||||
| 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 | ( | ( | ( | |||||||||||||||||
| Unrecognized tax benefits - end of year | $ | $ | $ | |||||||||||||||||
At the end of fiscal 2024, 2023, and 2022, the reserves for unrecognized tax benefits were $62.2 million, $58.6 million, and $60.6 million inclusive of $7.9 million, $6.2 million, and $7.1 million of related reserves for interest and penalties, respectively. The Company accounts for interest and penalties related to unrecognized tax benefits as a part of its provision for taxes on earnings. If recognized, $49.4 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 $7.7 million.
The Company is open to audit by the Internal Revenue Service under the statute of limitations for fiscal years 2021 through 2024. The Company’s state income tax returns are generally open to audit under the various statutes of limitations for fiscal years 2020 through 2024. 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.
In December 2021, the Organization for Economic Co-operation and Development released Pillar Two Model Rules (“Pillar Two”), which provide for a global minimum tax of 15% on multinational entities. Although the United States has not yet adopted Pillar Two, several countries enacted Pillar Two with an initial effective date of January 1, 2024. The impact of Pillar Two on the Company’s effective tax rate was not material for fiscal 2024. The Company will continue to monitor future Pillar Two legislation in relevant jurisdictions for any impacts to its effective tax rate.
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 $28.6 million, $26.9 million, and $24.8 million in fiscal 2024, 2023, and 2022, respectively.
The Company also makes available to management a Nonqualified 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 $196.8 million and $165.6 million at February 1, 2025 and February 3, 2024, respectively, of long-term plan investments, at market value, set aside or designated for the Nonqualified Deferred Compensation Plan. Refer to
51
Note B: Fair Value Measurements for additional information. 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 $196.8 million and $165.6 million at February 1, 2025 and February 3, 2024, respectively, included in Other long-term liabilities in the Consolidated Balance Sheets.
Note H: Shareholders’ Equity
Stock repurchase program. In March 2024, the Company’s Board of Directors approved a two-year program to repurchase up to $2.1 billion of the Company’s common stock through January 31, 2026. This program followed the previous two-year $1.9 billion stock repurchase program, effective at the end of fiscal 2023.
The following table summarizes the Company’s stock repurchase activity in fiscal 2024, 2023, and 2022:
| Fiscal Year | Shares repurchased (in millions) | Average repurchase price | Amount repurchased (in millions) | ||||||||||||||||||||
| 2024 | $ | $ | 1 | ||||||||||||||||||||
| 2023 | $ | $ | 1 | ||||||||||||||||||||
| 2022 | $ | $ | |||||||||||||||||||||
1 Amount excludes excise tax due under the Inflation Reduction Act of 2022. | |||||||||||||||||||||||
Treasury stock. As of February 1, 2025 and February 3, 2024, the Company held 16.4 million and 15.8 million shares of treasury stock, respectively. Shares repurchased for tax withholding are considered treasury shares which are available for reissuance. Shares purchased by the Company for tax withholding totaled 0.6 million, 0.5 million, and 0.5 million shares for fiscal 2024, 2023, and 2022, respectively.
Preferred stock. The Company has 4.0 million shares of preferred stock authorized, with a par value of $.01 per share. No
Dividends. On March 4, 2025, the Company’s Board of Directors declared a quarterly cash dividend of $0.4050 per common share, payable on March 31, 2025. The Company’s Board of Directors declared a cash dividend of $0.3675 0.3350 0.3100 488.7 million, $454.8 million, and $431.3 million, respectively.
Note I: Segment Reporting
The Company has one reportable segment. As of February 3, 2024, the Company identified two operating segments; Ross and dd’s DISCOUNTS. Each operating segment’s operations include only activities related to off-price retailing in stores throughout the United States and its territories. The Company determined that the two operating segments share similar economic and other qualitative characteristics and are therefore aggregated into one reportable segment.
The Company considers operating income, defined as earnings before interest and taxes, to be the measure of profit or loss for its reportable segment. The measure of segment assets is reported on the Consolidated Balance Sheets as Total assets. Segment information is prepared on the same basis that the Company’s Chief Executive Officer, who is the Chief Operating Decision Maker (CODM), manages the segments. The CODM uses operating income to monitor budget versus actual results, make key operating decisions, perform competitive analysis to the Company’s peers, and make resource allocation decisions.
52
The financial information below, including the significant expense categories regularly provided to the CODM, is presented for the Company’s reportable segment for the fiscal years ended February 1, 2025, February 3, 2024, and January 28, 2023:
| ($000) | 2024 | 2023 | 2022 | |||||||||||||||||
| Sales | $ | $ | $ | |||||||||||||||||
| Less: | ||||||||||||||||||||
Costs and Expenses1 | ||||||||||||||||||||
Cost of goods sold, excluding occupancy costs2 | ||||||||||||||||||||
| Occupancy costs | ||||||||||||||||||||
Store related costs3 | ||||||||||||||||||||
Other segment items4 | ||||||||||||||||||||
| Segment operating income | ||||||||||||||||||||
Interest (income) expense, net5 | ( | ( | ||||||||||||||||||
| Earnings before taxes | $ | $ | $ | |||||||||||||||||
1 Refer to Note A: Summary of Significant Accounting Policies in the Notes to Consolidated Financial Statements for depreciation and amortization expense. | ||||||||||||||||||||
2 Cost of goods sold, excluding occupancy costs primarily includes merchandise related costs, distribution costs, freight costs, and buying costs. | ||||||||||||||||||||
3 Store related costs primarily includes store payroll, other store operating expenses, and advertising costs. | ||||||||||||||||||||
4 Other segment items included in Segment operating income primarily includes other general and administrative expenses. | ||||||||||||||||||||
5 Refer to Note A: Summary of Significant Accounting Policies in the Notes to Consolidated Financial Statements for disclosure of the components of Interest (income) expense, net. | ||||||||||||||||||||
Note J: Litigation, Claims, and Assessments
Like many retailers, the Company has been named in class/representative action lawsuits, primarily in California, alleging violations by the Company of wage and hour laws. Class/representative action litigation remains pending as of February 1, 2025.
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 currently 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.
53
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 February 1, 2025 and February 3, 2024, the related consolidated statements of earnings, comprehensive income, stockholders’ equity, and cash flows for each of the fiscal years ended February 1, 2025, February 3, 2024, and January 28, 2023, 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 February 1, 2025, 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 February 1, 2025 and February 3, 2024, and the results of its operations and its cash flows for each of the fiscal years ended February 1, 2025, February 3, 2024, and January 28, 2023, 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 February 1, 2025, based on criteria established in Internal Control - Integrated Framework (2013) issued by COSO.
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 these 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 audits 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 to 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.
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 a material effect on the financial statements.
54
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. 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.
Critical Audit Matters
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
March 31, 2025
We have served as the Company’s auditor since 1982.
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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 February 1, 2025.
Our internal control over financial reporting as of February 1, 2025 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 31, 2025, 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 2024 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.
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ITEM 9B. OTHER INFORMATION
ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
None
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The information required by Item 401 of Regulation S-K is incorporated herein by reference to the section entitled “Executive Officers of the Registrant” at the end of Item I of this report; and to the section of the Ross Stores, Inc. Proxy Statement for the Annual Meeting of Stockholders to be held on Wednesday, May 21, 2025 (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 “Delinquent Section 16(a) Reports.” 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.” The information required by Item 408(b) of Regulation S-K is incorporated by reference to the section of the Proxy Statement entitled “Additional Executive Compensation Policies, Practices, and Guidelines” under the caption “Insider Trading Policy and Procedures and Guidelines Governing Hedging and Securities Trades by Directors, Officers, and Employees.”
Our Board of Directors has adopted a Code of Ethics for Senior Financial Officers that applies to our Chief Executive Officer (Principal Executive Officer), Chief Financial Officer (Principal Financial Officer), and Chief Accounting Officer (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,” “Discussion of Summary Compensation Table,” “CEO Pay Ratio,” “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.”
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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 February 1, 2025:
| Shares in (000s) | (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 | (c) Number of securities remaining available for future issuance (excluding securities reflected in column (a)) | ||||||||||||||||||||
| Equity compensation plans | |||||||||||||||||||||||
| approved by security holders | 495 | — | 10,744 | 1 | |||||||||||||||||||
| Equity compensation plans not | |||||||||||||||||||||||
| approved by security holders | — | — | — | ||||||||||||||||||||
| Total | 495 | — | 10,744 | ||||||||||||||||||||
1 Includes 3.4 million shares reserved for issuance under the Employee Stock Purchase Plan and 7.3 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 Item 404 of Regulation S-K is incorporated herein by reference to the section of the Proxy Statement entitled “Related Person Transactions.” The information required by Item 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.”
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
Information concerning principal accountant fees and services, and the pre-approval of those services by the Audit Committee, will appear in the Proxy Statement under the caption “Summary of Audit, Audit-Related, Tax, and All Other Fees.” Such information is incorporated herein by reference.
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PART IV
ITEM 15. EXHIBITS AND 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 February 1, 2025, February 3, 2024, and January 28, 2023.
Consolidated Statements of Comprehensive Income for the years ended February 1, 2025, February 3, 2024, and January 28, 2023.
Consolidated Balance Sheets at February 1, 2025 and February 3, 2024.
Consolidated Statements of Stockholders’ Equity for the years ended February 1, 2025, February 3, 2024, and January 28, 2023.
Consolidated Statements of Cash Flows for the years ended February 1, 2025, February 3, 2024, and January 28, 2023.
Notes to Consolidated Financial Statements.
Report of Independent Registered Public Accounting Firm (PCAOB ID: 34 ).
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.
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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.
| ROSS STORES, INC. | |||||||||||
| (Registrant) | |||||||||||
| By: | /s/James G. Conroy | ||||||||||
| Date: | March 31, 2025 | James G. Conroy | |||||||||
| Chief Executive Officer | |||||||||||
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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/James G. Conroy | Chief Executive Officer, Director | March 31, 2025 | ||||||||||||
| James G. Conroy | (Principal Executive Officer) | |||||||||||||
| /s/Adam Orvos | Executive Vice President and Chief Financial Officer | March 31, 2025 | ||||||||||||
| Adam Orvos | (Principal Financial Officer) | |||||||||||||
| /s/Jeffrey P. Burrill | Senior Vice President, Chief Accounting Officer and | March 31, 2025 | ||||||||||||
| Jeffrey P. Burrill | Corporate Controller (Principal Accounting Officer) | |||||||||||||
| /s/Michael Balmuth | Executive Chairman, Director | March 31, 2025 | ||||||||||||
| Michael Balmuth | ||||||||||||||
| /s/K. Gunnar Bjorklund | Director | March 31, 2025 | ||||||||||||
| K. Gunnar Bjorklund | ||||||||||||||
| /s/Michael J. Bush | Director | March 31, 2025 | ||||||||||||
| Michael J. Bush | ||||||||||||||
| /s/Edward G. Cannizzaro | Director | March 31, 2025 | ||||||||||||
| Edward G. Cannizzaro | ||||||||||||||
| /s/Sharon D. Garrett | Director | March 31, 2025 | ||||||||||||
| Sharon D. Garrett | ||||||||||||||
| /s/Michael J. Hartshorn | Group President and Chief Operating Officer, Director | March 31, 2025 | ||||||||||||
| Michael J. Hartshorn | ||||||||||||||
| /s/Stephen D. Milligan | Director | March 31, 2025 | ||||||||||||
| Stephen D. Milligan | ||||||||||||||
| /s/Patricia H. Mueller | Director | March 31, 2025 | ||||||||||||
| Patricia H. Mueller | ||||||||||||||
| /s/George P. Orban | Director | March 31, 2025 | ||||||||||||
| George P. Orban | ||||||||||||||
| /s/Doniel N. Sutton | Director | March 31, 2025 | ||||||||||||
| Doniel N. Sutton | ||||||||||||||
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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 | |||||
| 10.1 | |||||
| MANAGEMENT CONTRACTS AND COMPENSATORY PLANS (EXHIBITS 10.2 - 10.35) | |||||
| 10.2 | |||||
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| 10.3 | |||||
| 10.4 | |||||
| 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 | |||||
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| 10.20 | |||||
| 10.21 | |||||
| 10.22 | |||||
| 10.23 | |||||
| 10.24 | |||||
| 10.25 | |||||
| 10.26 | |||||
| 10.27 | |||||
| 10.28 | |||||
| 10.29 | |||||
| 10.30 | |||||
| 10.31 | |||||
| 10.32 | |||||
| 10.33 | |||||
| 10.34 | |||||
| 10.35 | |||||
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| 19 | |||||
| 21 | |||||
| 23 | |||||
| 31.1 | |||||
| 31.2 | |||||
| 32.1 | |||||
| 32.2 | |||||
| 97.1 | |||||
| 101.INS | XBRL Instance Document. (The instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.) | ||||
| 101.SCH | Inline XBRL Taxonomy Extension Schema | ||||
| 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase | ||||
| 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase | ||||
| 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase | ||||
| 101.PRE | 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.) | ||||
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EXECUTIVE EMPLOYMENT AGREEMENT
THIS EXECUTIVE EMPLOYMENT AGREEMENT (this “Agreement”) is made effective October 21, 2024 (the “Sign-on Date”) by and between Ross Stores, Inc., a Delaware corporation, and James G. Conroy (the “Executive”). References herein to the “Company” shall mean Ross Stores, Inc. and, where appropriate, Ross Stores, Inc. and each and any of its divisions, affiliates or subsidiaries.
RECITALS
A. The Company wishes to employ the Executive, and the Executive is willing to accept such employment, initially as Chief Executive Officer–Elect (“CEO-Elect”) and then as Chief Executive Officer (“CEO”).
B. It is now the mutual desire of the Company and the Executive to enter into a written employment agreement to govern the terms of the Executive’s employment by the Company as of and following the Effective Date on the terms and conditions set forth below.
TERMS AND CONDITIONS
In consideration for the promises of the parties set forth below, the Company and the Executive hereby agree as follows:
1. Term. Subject to the provisions of Section 6 of this Agreement, the term of employment of the Executive by the Company under this Agreement shall be as follows:
(a) Initial Term. The initial term of employment of the Executive by the Company under this Agreement shall begin on or about December 2, 2024 (the “Effective Date”) and end on March 31, 2029 (the “Initial Term”), unless extended or terminated earlier in accordance with this Agreement. The Initial Term plus any Extension (as defined in Section 1(c) hereof) thereof shall be the “Term of Employment.”
(b) Extension Intent Notice. By December 31, 2026, the Executive shall advise the Chairman of the Board of Directors of the Company (the “Chairman”) or the Chairman’s designee whether the Executive would like the Term of Employment extended. If the Executive does not timely notify the Company of Executive’s desire to extend (or not to extend) the Term of Employment, then such action shall be deemed to result in the Executive’s Voluntary Termination as of the Term of Employment end date unless the Company determines otherwise in its sole and absolute discretion.
(c) New Agreement. Provided that, in accordance with Section 1(b) hereof, the Executive has timely notified the Chairman or the Chairman’s designee of the Executive’s desire to extend the Executive’s employment, the Company will consider whether to offer the Executive an extension under this Agreement or a new Employment Agreement. If the Company decides in its sole and absolute discretion to offer the Executive an extension or a new Employment Agreement, the Company will notify the Executive accordingly (an "Extension Notice") not less than one hundred eighty (180) days prior to the expiration of the Term of Employment. If the Company timely provides an Extension Notice and the Executive and the Company enter into such extension
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(or a new Employment Agreement), the Initial Term hereof will be extended by such additional period of time set forth in the Extension Notice (each an "Extension"). If the Company timely provides an Extension Notice and offers the Executive an extension or a new Employment Agreement providing at least comparable terms to the Executive’s then current Employment Agreement but the Executive does not agree to enter into such extension or new Employment Agreement, such action shall be deemed to result in Executive’s Voluntary Termination as of the Term of Employment end date unless the Company determines otherwise in its sole and absolute discretion.
(d) This Agreement shall be effective as of the Sign-on Date and the Executive’s employment with the Company will commence on the Effective Date. The Company may not amend, revoke or terminate this Agreement between the Sign-on Date and the Effective Date for any reason.
2. Position and Duties. During the Term of Employment, the Executive shall serve as (i) CEO-Elect through February 1, 2025, reporting to the Executive Chairman of the Board of Directors of the Company, and (ii) CEO from February 2, 2025 thru the end of the Term of Employment and during this period, the Executive shall have overall responsibility for the Company’s corporate policy making, organization and operation, and accomplishments of its plans and objectives, reporting to and subject to oversight by the Board of Directors. The Executive will be appointed to the Company’s Board of Directors, effective as of the Effective Date. The Executive’s interim designation as CEO-Elect is intended to afford the Executive the opportunity to gain the knowledge and relationships to effectively lead the Company. To this end, the Executive will be provided with the opportunity, and shall endeavor, to: (a) meet with senior executives to understand their functions, current projects and strategic goals; (b) learn about the Company’s market position, long-term goals and ongoing initiatives, opportunities for growth, HR policies, and employee engagement and organizational strategies; and (c) obtain an overview of the legal, regulatory and compliance requirements applicable to the Company, including corporate governance best practices. During the Term of Employment, the Executive may engage in outside activities provided (A) such activities (including but not limited to membership on boards of directors of not-for-profit and for-profit organizations) do not conflict with the Executive’s duties and responsibilities or the Company’s business hereunder and (B) the Executive obtains written approval from the Chairman of any significant outside business activity in which the Executive plans to become involved, whether or not such activity is pursued for profit.
3. Principal Place of Employment. The Executive shall be based out of the Company’s offices in New York, NY, except for required travel on the Company’s business to an extent substantially consistent with present business travel obligations of the Executive’s position. The Executive agrees that the Executive will relocate to the New York metropolitan area by August 31, 2025.
4. Compensation and Related Matters.
(a) Salary. During the Term of Employment, the Company shall pay to the Executive a salary at a rate of not less than One Million Four Hundred Fifty Thousand Dollars ($1,450,000) per annum. The Executive’s salary shall be payable in substantially equal installments in accordance with the Company’s normal payroll practices applicable to senior
2
executives. Subject to the first sentence of this Section 4(a), the Executive’s salary may be adjusted from time to time in accordance with normal business practices of the Company.
(b) Bonus. During the Term of Employment commencing with the Company’s fiscal year beginning in 2025, the Executive shall be eligible to receive an annual bonus paid under the Company’s existing incentive bonus plan under which the Executive is eligible (which is currently the Incentive Compensation Plan) or any replacement plan that may subsequently be established and in effect during the Term of Employment. The current target annual bonus the Executive is eligible to earn upon achievement of 100% of all applicable performance targets under such incentive bonus plan is 200% of the Executive’s then effective annual salary rate. Annual bonuses are not earned until the date any such bonus is paid in accordance with the terms of the applicable bonus plan. As such, the Executive’s termination for Cause or Voluntary Termination (as described in Sections 6(c) and 6(f), respectively) prior to the Company’s payment of the bonus for a fiscal year of the Company will cause the Executive to be ineligible for any annual bonus for that fiscal year or any pro-rata portion of such bonus.
(c) Expenses. During the Term of Employment, the Executive shall be entitled to receive prompt reimbursement for all reasonable expenses incurred by the Executive in performing services hereunder, including, but not limited to, all reasonable expenses of travel and living while away from home, provided that such expenses are incurred and accounted for in accordance with the policies and procedures established by the Company.
(d) Benefits. During the Term of Employment, the Executive shall be entitled to participate in all of the Company’s employee benefit plans and arrangements in which senior executives of the Company are eligible to participate. The Company shall not make any changes in such plans or arrangements which would adversely affect the Executive’s rights or benefits thereunder, unless such change occurs pursuant to a program applicable to all senior executives of the Company and does not result in a proportionately greater reduction in the rights or benefits of the Executive as compared with any other similarly situated senior executive of the Company. The Executive shall be entitled to participate in, or receive benefits under, any employee benefit plan or arrangement made available by the Company in the future to its senior executives, subject to, and on a basis consistent with, the terms, conditions and overall administration of such plans and arrangements. Except as otherwise specifically provided herein, nothing paid to the Executive under any plan or arrangement presently in effect or made available in the future shall be in lieu of the salary or bonus otherwise payable under this Agreement.
(e) Vacations. During the Term of Employment, the Executive shall be entitled to twenty (20) vacation days in each calendar year, determined in accordance with the Company’s vacation plan. The Executive shall also be entitled to all paid holidays given by the Company to its senior executives. Unused vacation days shall not be forfeited once they have been earned and, if still unused at the time of the Executive’s termination of employment with the Company, shall be promptly paid to the Executive at their then-current value, based on the Executive’s daily salary rate at the time of the Executive’s termination of employment.
(f) Services Furnished. The Company shall furnish the Executive with office space and such services as are suitable to the Executive’s position and adequate for the performance of the Executive’s duties during the Term of Employment.
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(g) Estate Planning. During the Term of Employment, Executive shall be eligible for reimbursement of reasonable expenses incurred for estate and financial planning services, up to a maximum of $20,000 per fiscal year of the Company, provided that such expenses are incurred and accounted for in accordance with the policies and procedures established by the Company.
5. Confidential Information and Intellectual Property.
(a) This Agreement is intended to supplement, and not to supersede, any rights the Company may have in law or equity with respect to the protection of trade secrets or confidential or proprietary information.
(b) Other than in the performance of the Executive’s duties hereunder, the Executive agrees not to use in any manner or disclose, distribute, publish, communicate or in any way cause to be used, disclosed, distributed, published, or communicated in any way or at any time, either while in the Company's employ or at any time thereafter, to any person not employed by the Company, or not engaged to render services to the Company, any Confidential Information (as defined below) obtained while in the employ of the Company.
(c) Confidential Information includes any written or unwritten information which relates to and/or is used by the Company or its subsidiaries, affiliates or divisions, including, without limitation: (i) the names, addresses, buying habits and other special information regarding past, present and potential customers, employees and suppliers of the Company; (ii) customer and supplier contracts and transactions or price lists of the Company and suppliers; (iii) methods of distribution; (iv) all agreements, files, books, logs, charts, records, studies, reports, processes, schedules and statistical information; (v) data, figures, projections, estimates, pricing data, customer lists, buying manuals or procedures, distribution manuals or procedures, and other policy and procedure manuals or handbooks; (vi) supplier information, tax records, personnel histories and records, sales information and property information; (vii) information regarding the present or future phases of business; (viii) ideas, inventions, trademarks, business information, know-how, processes, techniques, improvements, designs, redesigns, creations, discoveries, trade secrets, and developments; (ix) all computer software licensed or developed by the Company or its subsidiaries, affiliates or divisions, computer programs, computer-based and web-based training programs, and systems; and (x) finances and financial information. However, Confidential Information will not include information of the Company or its subsidiaries, affiliates or divisions that (1) became or becomes a matter of public knowledge through sources independent of the Executive, (2) has been or is disclosed by the Company or its subsidiaries, affiliates or divisions without restriction on its use, or (3) has been or is required or specifically permitted to be disclosed by law or governmental order or regulation, provided that the disclosure does not exceed the extent of disclosure required by such law, order or regulation. The Executive shall provide prompt written notice of any such order to the Chairman or the Chairman’s designee sufficiently in advance of making any disclosure to permit the Company to contest the order or seek confidentiality protections, as determined in the Company’s sole and absolute discretion. The Executive agrees that, if there is any reasonable doubt whether an item is public knowledge, the Executive will not regard the item as public knowledge until and unless the Chairman or the Chairman’s designee confirms to the Executive that the information is public knowledge.
(d) The provisions of this Section 5 shall not preclude the Executive from disclosing such information to the Executive's professional tax advisor or legal counsel solely to
4
the extent necessary to the rendering of their professional services to the Executive if such individuals agree to keep such information confidential.
(e) Notwithstanding the foregoing, the U.S. Defend Trade Secrets Act of 2016 (“DTSA”) provides that an individual shall not be held criminally or civilly liable under any federal or state trade secret law for the disclosure of a trade secret that is made (i) in confidence to a federal, state, or local government official, either directly or indirectly, or to an attorney; and (ii) solely for the purpose of reporting or investigating a suspected violation of law; or (iii) in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal. In addition, DTSA provides that an individual who files a lawsuit for retaliation by an employer for reporting a suspected violation of law may disclose the trade secret to the attorney of the individual and use the trade secret information in the court proceeding, if the individual (A) files any document containing the trade secret under seal; and (B) does not disclose the trade secret, except pursuant to court order.
(f) The Executive agrees that upon leaving the Company’s employ the Executive will remain reasonably available to answer questions from Company officers regarding the Executive’s former duties and responsibilities and the knowledge the Executive obtained in connection therewith.
(g) The Executive agrees that upon leaving the Company's employ the Executive will not communicate directly or indirectly with, or give statements to, any member of the media (including print, television, radio or social media) relating to any matter (including pending or threatened lawsuits or administrative investigations) about which the Executive has knowledge or information (other than knowledge or information that is not Confidential Information) as a result of employment with the Company. The Executive further agrees to notify the Chairman or the Chairman’s designee immediately after being contacted by any member of the media with respect to any matter affected by this section.
(h) The Executive agrees that all information, inventions and discoveries, whether or not patented or patentable, protected by a copyright or copyrightable, or registered as a trademark or eligible to be registered as a trademark, made or conceived by the Executive, either alone or with others, at any time while employed by the Company, which arise out of such employment or is pertinent to any field of business or research in which, during such employment, the Company, its subsidiaries, affiliates or divisions is engaged or (if such is known to or ascertainable by the Executive) is considering engaging (“Intellectual Property”) shall (i) be and remain the sole property of the Company and the Executive shall not seek a patent or copyright or trademark protection with respect to such Intellectual Property without the prior consent of an authorized representative of the Company and (ii) be disclosed promptly to an authorized representative of the Company along with all information the Executive possesses with regard to possible applications and uses. Further, at the request of the Company, and without expense or additional compensation to the Executive, the Executive agrees to, during and after the Executive’s employment, execute such documents and perform such other acts as the Company deems necessary to obtain, perfect, maintain, protect and enforce patents on such Intellectual Property in a jurisdiction or jurisdictions designated by the Company, and to assign and transfer to the Company or its designee all such Intellectual Property rights and all patent applications and patents relating thereto. The Executive hereby irrevocably grants the Company power of attorney to execute and
5
deliver any such documents on the Executive’s behalf in the Executive’s name and to do all other lawfully permitted acts to transfer the work product to the Company and further the transfer, issuance, prosecution, and maintenance of all Intellectual Property rights therein, to the full extent permitted by law, if the Executive does not promptly cooperate with the Company’s request (without limiting the rights the Company shall have in such circumstances by operation of law). The power of attorney is coupled with an interest and shall not be affected by the Executive’s subsequent incapacity.
(i) The Executive represents and warrants that, as of the Effective Date, there is no Intellectual Property that: (i) has been created by or on behalf of the Executive, and/or (ii) is owned exclusively by the Executive or jointly by the Executive with others or in which the Executive has an interest, and that relate in any way to any of the Company’s actual or proposed businesses, products, services, or research and development, and which are not assigned to the Company hereunder.
(j) The Executive and the Company agree that the Executive intends all original works of authorship within the purview of the copyright laws of the United States authored or created by the Executive in the course of the Executive’s employment with the Company will be works for hire within the meaning of such copyright law.
(k) Upon termination of the Executive’s employment, or at any time upon request of the Company, the Executive will (i) promptly return to the Company all Confidential Information and Intellectual Property, in any form, including but not limited to letters, memoranda, reports, notes, notebooks, books of account, drawings, prints, specifications, formulae, data printouts, microfilms, magnetic tapes, disks, recordings, documents, and all copies thereof, and (ii) delete or destroy all copies of any such documents and materials not returned to the Company that remain in the Executive’s possession or control, including those stored on any non-Company devices, networks, storage locations, and media in the Executive’s possession or control.
(l) Further, nothing in this Agreement shall limit the Executive’s right to disclose sexual harassment or sexual assault disputes.
6. Termination. The Executive’s employment may be terminated during the Term of Employment only as follows:
(a) Death. The Executive’s employment shall terminate upon the Executive’s death.
(b) Disability. If, as a result of the Executive’s Disability (as defined below), the Executive shall have been absent from the Executive’s duties hereunder on a full-time basis for the entire period of six consecutive months, and, within thirty days after written notice of termination is given by the Company (which may occur before or after the end of such six-month period), the Executive shall not have returned to the performance of the Executive’s duties hereunder on a full-time basis, the Executive’s employment shall terminate in accordance with Section 7(b)(ii). For purposes of this Agreement, the term “Disability” shall have the same meaning as ascribed to such term under the Company's long-term disability plan in which the Executive is participating; provided that in the absence of such plan (or the absence of the Executive's participation in such plan), Disability shall mean the Executive’s inability to substantially perform the Executive’s
6
duties hereunder due to a medically determinable physical or mental impairment which has lasted for a period of not less than one hundred twenty (120) consecutive days.
(c) For Cause. The Company may terminate the Executive’s employment for Cause. For this purpose, “Cause” means the occurrence of any of the following (i) the Executive’s repeated failure to substantially perform the Executive’s duties hereunder (unless such failure is a result of a Disability as defined in Section 6(b)); (ii) the Executive’s theft, dishonesty, breach of fiduciary duty for personal profit or falsification of any documents of the Company; (iii) the Executive’s material failure to abide by the applicable code(s) of conduct or other policies (including, without limitation, policies relating to confidentiality and reasonable workplace conduct) of the Company; (iv) the Executive’s failure to relocate to (i.e., by establishing a permanent primary residence in) the New York metropolitan area by August 31, 2025; (v) knowing or intentional misconduct by the Executive as a result of which the Company is required to prepare an accounting restatement; (vi) the Executive’s unauthorized use, misappropriation, destruction or diversion of any tangible or intangible asset or corporate opportunity of the Company (including, without limitation, the Executive’s improper use or disclosure of confidential or proprietary information of the Company); (vii) any intentional misconduct or illegal or grossly negligent conduct by the Executive which is materially injurious to the Company monetarily or otherwise; (viii) any material breach by the Executive of the provisions of Section 9 [Certain Employment Obligations] of this Agreement; or (ix) the Executive’s conviction (including any plea of guilty or nolo contendere) of any criminal act involving fraud, dishonesty, misappropriation, or moral turpitude, or which materially impairs the Executive’s ability to perform the Executive’s duties with the Company. A termination for Cause shall not take effect unless: (1) the Executive is given written notice by the Company of its intention to terminate the Executive for Cause; (2) the notice specifically identifies the particular act or acts or failure or failures to act which are the basis for such termination; and (3) where practicable, the notice is given within sixty days of the Company’s learning of such act or acts or failure or failures to act.
(d) Without Cause. The Company may terminate the Executive’s employment at any time Without Cause. A termination “Without Cause” is a termination by the Company of the Executive’s employment with the Company for any reasons other than the death or Disability of the Executive or the termination by the Company of the Executive for Cause as described in Section 6(c).
(e) Termination by the Executive for Good Reason.
(i) Termination Not in Connection with a Change in Control. At any time during the Term of Employment, other than within the period commencing one month prior to and ending twelve months following a Change in Control (as defined below in Section 8(e)(ii)), the Executive may terminate the Executive’s employment with the Company for “Good Reason,” which shall be deemed to occur if, within sixty days after receipt of written notice to the Company by the Executive of the occurrence of one or more of the following conditions, any of the following conditions have not been cured: (i) a failure by the Company to comply with any material provision of this Agreement (including but not limited to the reduction of the Executive’s salary or the target annual bonus opportunity set forth in Section 4(b)); (ii) a significant diminishment in the nature or scope of the authority, power, function, or duty attached to the position which the Executive currently maintains without the express written consent of the
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Executive;; or (iii) the relocation of the Executive’s Principal Place of Employment as described in Section 3 to a location that increases the regular one-way commute distance between the Executive’s residence and Principal Place of Employment by more than 25 miles without the Executive’s prior written consent. In order to constitute a termination of employment for Good Reason, the Executive must provide written notice to the Company of the existence of the condition giving rise to the Good Reason termination within sixty days of the initial existence of the condition, and in the event such condition is cured by the Company within sixty days from its receipt of such written notice, the termination shall not constitute a termination for Good Reason.
(ii) Termination in Connection with a Change in Control. Within the period commencing a month prior to and ending twelve months following a Change in Control, the Executive may terminate the Executive’s employment with the Company for “Good Reason,” which shall be deemed to occur if, within sixty days after receipt of written notice to the Company by the Executive of the occurrence of one or more of the following conditions, any of the following conditions have not been cured: (i) a failure by the Company to comply with any provision of this Agreement (including, but not limited to, the reduction of the Executive’s salary, the target annual bonus opportunity or any other incentive opportunity, in each case, as of immediately prior to the Change in Control); (ii) a change in title, the nature or scope of the authority, power, function, responsibilities, reporting relationships, or duty attached to the position which the Executive currently maintains without the express written consent of the Executive; (iii) the relocation of the Executive’s Principal Place of Employment as described in Section 3 to a location that increases the regular one-way commute distance between the Executive’s residence and Principal Place of Employment by more than 25 miles without the Executive’s prior written consent; (iv) a change in the benefits to which the Executive is entitled to immediately prior to the Change in Control; or (v) the failure of the Company to assign this Agreement to any successor to the Company. In order to constitute a termination of employment for Good Reason, the Executive must provide written notice to the Company of the existence of the condition giving rise to the Good Reason termination within sixty days of the initial existence of the condition, and in the event such condition is cured by the Company within sixty days from its receipt of such written notice, the termination shall not constitute a termination for Good Reason.
(f) Voluntary Termination. The Executive may voluntarily resign from the Executive’s employment with the Company at any time (a “Voluntary Termination”). A voluntary resignation from employment by the Executive for Good Reason pursuant to Section 6(e) shall not be deemed a Voluntary Termination.
(g) Non-Renewal Termination. If the Company does not provide the Executive an Extension Notice in accordance with Section 1(c), this Agreement shall automatically expire at the end of the then current Term of Employment (a “Non-Renewal Termination”).
(h) Resignation from Board. Upon termination of Executive’s employment with the Company for any reason, regardless of whether such termination was initiated by the Company or the Executive, the Executive shall be deemed to have resigned, effective as of the date of such termination, from (i) the Board of Directors of the Company and (ii) any and all other positions the Executive may hold as an officer, director or member of any committee of the Board, and any positions or offices held with the Company or any subsidiary or affiliate thereof. The Executive agrees to promptly execute any documents reasonably requested by the Company to effectuate or
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confirm such resignations. If the Executive fails to execute any such documents, the Agreement shall constitute the Executive’s resignation from all such positions as of the date of termination.
7. Notice and Effective Date of Termination.
(a) Notice. Any termination of the Executive’s employment by the Company or by the Executive during the Term of Employment (other than as a result of the death of the Executive, a Non-Renewal Termination described in Section 6(g), or a Voluntary Termination described in Section 6(f)) shall be communicated by written notice of termination to the other party hereto. Such notice shall indicate the specific termination provision in this Agreement relied upon and, except in the case of termination Without Cause described in Section 6(d), shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive’s employment under that provision.
(b) Date of Termination. The date of termination of the Executive’s employment shall be:
(i) if the Executive’s employment is terminated due to the Executive’s death, the date of the Executive’s death;
(ii) if the Executive’s employment is terminated due to Disability pursuant to Section 6(b), the date of termination shall be the last to occur of the 31st day following delivery of the notice of termination to the Executive by the Company or the end of the consecutive six-month period referred to in Section 6(b);
(iii) if the Executive’s employment is terminated by the Executive as a Voluntary Termination, the effective date shall be a date mutually agreed to by the Company and the Executive, or if the Executive’s employment is terminated for any other reason by either party (other than Voluntary Termination), the date on which a notice of termination is delivered to the other party or, in the event of the Company’s termination of the Executive, such date as the Company may specify in such notice; and
(iv) if the Agreement expires pursuant to a Non-Renewal Termination described in Section 6(g), the parties’ employment relationship shall terminate on the last day of the then current Term of Employment without any notice.
8. Compensation and Benefits Upon Termination.
(a) Termination Due To Disability, Without Cause, or For Good Reason. If the Executive’s employment terminates pursuant to Section 6(b) [Disability], Section 6(d) [Without Cause], or Section 6(e)(i) [Termination by Executive for Good Reason Not in Connection with a Change in Control], then, subject to Section 22 [Compliance with Section 409A], in addition to all salary, annual bonuses, expense reimbursements, benefits and accrued vacation days earned by the Executive pursuant to Section 4 through the date of the Executive’s termination of employment, the Executive shall be entitled to the compensation and benefits set forth in Sections 8(a)(i) through (viii), provided that within sixty days following the Executive’s termination of employment (i) the Executive has executed and delivered to the Company a general release of claims against the Company and its subsidiaries, affiliates, stockholders, directors, officers, employees, agents,
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successors, and assigns in the current form approved by the Company and attached as Exhibit A (provided, however, that the Company may modify such release in Exhibit A from time to time solely as needed to comply with federal, state or local laws in effect at the time such release is to be executed) (the “Release”), and (ii) the Release has become irrevocable:
(i) Salary. Commencing on the sixtieth day after the date of the Executive's termination of employment, the Company shall continue to pay to the Executive the Executive’s salary, at the rate in effect immediately prior to such termination of employment, through the remainder of the Term of Employment then in effect; provided, however, that any such salary otherwise payable during the 60-day period immediately following the date of such termination of employment shall be paid to the Executive sixty days following such termination of employment.
(ii) Bonus. The Company shall continue to pay to the Executive an annual bonus through the remainder of the Term of Employment then in effect; provided, however, that the amount of the annual bonus determined in accordance with this Section 8(a)(ii) for the fiscal year of the Company (“Fiscal Year”) in which such Term of Employment ends shall be prorated on the basis of the number of days of such Term of Employment occurring within such Fiscal Year. The amount of each annual bonus payable pursuant to this Section 8(a)(ii), prior to any proration, shall be equal to the annual bonus that the Executive would have earned had no such termination under Section 8(a) occurred, contingent on the relevant annual bonus plan performance goals for the respective year having been obtained. However, in no case shall any such annual bonus, prior to proration, attributable to any Fiscal Year commencing on or after the first day of the Fiscal Year in which the Executive’s termination of employment occurs exceed 100% of the Executive's target bonus for the Fiscal Year in which the Executive's termination of employment occurs. Such bonuses shall be paid on the later of the date they would otherwise be paid in accordance with the applicable Company bonus plan or sixty days after the date of the Executive's termination of employment.
(iii) Stock Options. Stock options granted to the Executive by the Company and which remain outstanding immediately prior to the date of termination of the Executive’s employment, as provided in Section 7(b), shall remain outstanding until and shall immediately become vested in full upon the Release becoming irrevocable.
(iv) Restricted Stock. Shares of restricted stock granted to the Executive by the Company, according to the terms of the Ross Stores, Inc. Restricted Stock Agreement, which have not become vested as of the date of termination of the Executive’s employment, as provided in Section 7(b), shall immediately become vested on a pro rata basis upon the Release becoming irrevocable. The number of such additional shares of restricted stock that shall become vested as of the date of the Executive’s termination of employment shall be that number of additional shares that would have become vested through the date of such termination of employment at the rate(s) determined under the vesting schedule applicable to such shares had such vesting schedule provided for the accrual of vesting on a daily basis (based on a 365 day year). The pro rata amount of shares vesting through the date of termination shall be calculated by multiplying the number of unvested shares scheduled to vest in each respective vesting year by the ratio of the number of days from the date of grant through the date of termination and the number of days from the date of grant through the original vesting date of the respective vesting tranche.
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Any shares of restricted stock remaining unvested after such pro rata vesting shall automatically be reacquired by the Company in accordance with the provisions of the applicable restricted stock agreement, and the Executive shall have no further rights in such unvested portion of the restricted stock. In addition, the Company shall waive any reacquisition or repayment rights for dividends paid on restricted stock prior to the Executive’s termination of employment.
(v) Performance Share Awards. On the Performance Share Vesting Date (as defined in the Executive's Notice of Grant of Performance Shares and Performance Share Agreement from the Company (collectively the "Performance Share Agreement")) next following the Executive's date of termination of employment, the number of Performance Shares that shall become Vested Performance Shares (as defined in the Performance Share Agreement) shall be determined by multiplying (a) that number of shares of Company Common Stock subject to the Performance Share Agreement that would have become Vested Performance Shares had no such termination occurred; provided, however, in no case shall the number of Performance Shares that become Vested Performance Shares prior to proration exceed 100% of the Target Number of Performance Shares set forth in the Performance Share Agreement by (b) the ratio of the number of full months of the Executive's employment with the Company during the Performance Period (as defined in the Performance Share Agreement) to the number of full months contained in the Performance Period. Vested Common Shares shall be issued in settlement of such Vested Performance Shares on the Settlement Date next following the date of the Executive’s termination of employment.
(vi) Unvested Common Shares Issued in Settlement of Performance Share Awards. If the Executive terminates employment pursuant to Sections 6(b), 6(d) or 6(e)(i) after the Performance Share Vesting Date, all Unvested Common Shares (as defined in the Performance Share Agreement) issued in settlement of the Performance Share Award shall become vested in full effective as of the date of such termination
(vii) Inducement Restricted Stock Units. If the Executive terminates employment pursuant to Sections 6(b), 6(d) or 6(e)(i), Inducement Restricted Stock Units (“IRSUs”) granted to the Executive that have not become vested as of the Executive’s employment termination date shall become vested on a pro rata basis. The number of IRSUs that are only subject to service-based vesting that become vested as of the employment termination date shall be calculated by multiplying (A) the number of IRSUs scheduled to vest on each of the respective service-based vesting dates by the (B) ratio of (I) the number of days from the grant date through the employment termination date to (II) the number of days from the grant date through the respective vesting dates. The number of earned performance based IRSUs that become vested IRSUs shall be determined by applying such ratios to the performance based IRSUs earned in the respective vesting periods. Any unvested IRSUs shall be forfeited and voided, and the Executive shall have no further rights in such unvested IRSUs.
(viii) Health Care Coverage. The Company shall continue to provide the Executive with medical, dental, vision and mental health care coverage at or equivalent to the level of coverage that the Executive had at the time of the termination of employment (including coverage for the Executive’s eligible dependents to the extent such dependents were covered immediately prior to such termination of employment) for the remainder of the Term of Employment, except coverage for a dependent will end when the dependent is no longer eligible
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for coverage, if earlier than the Term of Employment end date, provided, however that in the event such coverage may no longer be extended to the Executive following termination of the Executive’s employment either by the terms of the Company’s health care plans or under then applicable law, the Company shall instead reimburse the Executive for the Executive’s cost of substantially equivalent health care coverage available to the Executive under ERISA Section 601 and thereafter and Section 4980B of the Internal Revenue Code (i.e., COBRA coverage) for a period not to exceed the lesser of (A) 18 months after the termination of the Executive’s employment or (B) the remainder of the Term of Employment, and provided further that (1) any such health care coverage or reimbursement for health care coverage shall cease at such time that the Executive becomes eligible for health care coverage through another employer and (2) any such reimbursement shall be made no later than the last day of the calendar year following the end of the calendar year with respect to which such coverage or reimbursement is provided. The Executive must notify the Company within five business days of becoming eligible for such other coverage and promptly repay the Company any benefits the Executive received in error.
The Company shall have no further obligations to the Executive as a result of termination of employment described in this Section 8(a) except as set forth in Section 13.
(b) Termination for Cause or Voluntary Termination. If the Executive’s employment terminates pursuant to Section 6(c) [For Cause] or Section 6(f) [Voluntary Termination], the Executive shall be entitled to receive only the salary, annual bonuses, expense reimbursements, benefits, and accrued vacation days earned by the Executive pursuant to Section 4 through the date of the Executive’s termination of employment. Annual bonuses are not earned until the date any such bonus is paid in accordance with the terms of the applicable bonus plan. As such, the Executive shall not be entitled to any bonus not paid prior to the date of the Executive’s termination of employment, and the Executive shall not be entitled to any prorated bonus payment for the year in which the Executive’s employment terminates. Any stock options granted to the Executive by the Company shall continue to vest only through the date on which the Executive’s employment terminates, and unless otherwise provided by their terms, any restricted stock, Inducement Restricted Stock Units, performance share awards, or other equity awards that were granted to the Executive by the Company that remain unvested as of the date on which the Executive’s employment terminates shall automatically be forfeited and the Executive shall have no further rights with respect to such awards. The Company shall have no further obligations to the Executive as a result of termination of employment described in this Section 8(b) except as set forth in Section 13.
(c) Death. If the Executive’s employment terminates pursuant to Section 6(a) [Death], (i) the Executive’s designated beneficiary or the Executive’s estate shall be entitled to receive only the salary, any unpaid annual bonus for the fiscal year of the Company occurring immediately prior to the fiscal year in which the Executive’s death occurred, expense reimbursements, benefits, and accrued vacation earned by the Executive pursuant to Section 4 through the date of the Executive’s death; (ii) at the time payable under the applicable Company bonus plan, an annual bonus shall be paid to the Executive’s designated beneficiary or the Executive’s estate for the fiscal year of the Executive’s death based on the annual bonus that the Executive would have earned under the Company’s bonus plan for such fiscal year had the Executive not died, contingent on the relevant annual bonus plan performance goals for said year having been obtained, capped at 100% of the Executive’s target bonus for such fiscal year and pro-
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rated for the number of days the Executive is employed during such fiscal year until the Executive’s death; (iii) any shares of restricted stock granted to the Executive by the Company at least 12 months prior to the Executive’s date of death that are unvested as of such date shall immediately become fully vested and any shares of restricted stock granted to the Executive by the Company within the 12-month period ending on the Executive’s date of death that are unvested as of such date shall automatically be forfeited and the Executive shall have no further rights with respect to such restricted stock; and (iv) the Company shall waive any reacquisition or repayment rights for dividends paid on restricted stock prior to the Executive’s death.
(i) Performance Share Awards. On the Performance Share Vesting Date next following the Executive's date of death, the number of Performance Shares that shall become Vested Performance Shares shall be determined by multiplying (a) that number of shares of Company Common Stock subject to the Performance Share Agreement that would have become Vested Performance Shares had no such termination occurred; provided, however, in no case shall the number of Performance Shares that become Vested Performance Shares prior to proration exceed 100% of the Target Number of Performance Shares set forth in the Performance Share Agreement, by (b) the ratio of the number of full months of the Executive's employment with the Company during the Performance Period (as defined in the Performance Share Agreement) to the number of full months contained in the Performance Period. Vested Common Shares shall be issued in settlement of such Vested Performance Shares on the Settlement Date next following the Executive’s date of death.
(ii) Unvested Common Shares Issued in Settlement of Performance Share Awards. If the Executive dies after the Performance Share Vesting Date, all Unvested Common Shares issued in settlement of the Performance Share Award shall become vested in full effective as of the date of such termination.
(iii) Inducement Restricted Stock Units. Inducement Restricted Stock Units (“IRSUs”) granted to the Executive that have not become vested as of the Executive’s date of death shall vest pro-rata. The number of IRSUs subject to service-based vesting only that become vested as of the Executive’s date of death shall be calculated by multiplying (A) the number IRSUs scheduled to vest on each of the respective service-based vesting dates by the (B) ratio of (I) the number of days worked from the grant date through the Executive’s date of date to (II) the number of days from the grant date through the respective vesting dates. The number of earned performance-based IRSUs that become vested IRSUs shall be determined by applying such ratios to the performance based IRSUs earned in the respective vesting periods. Any unvested IRSUs shall be forfeited and voided, and the Executive shall have no further rights in such unvested IRSUs.
(d) Non-Renewal Termination. If the Agreement expires as set forth in Section 6(g) [Non-Renewal Termination], then, subject to Section 22 [Compliance with Section 409A], in addition to all salary, annual bonuses, expense reimbursements, benefits, and accrued vacation days earned by the Executive pursuant to Section 4 through the date of the Executive’s termination of employment, the Executive shall be entitled to the compensation set forth in Sections 8(d)(i) through (vi), provided that within sixty days following the Executive’s termination of employment (i) the Executive has executed and delivered the Release to the Company, and (ii) the Release has become irrevocable:
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(i) Bonus. The Company shall pay the Executive an annual bonus for the fiscal year of the Company (“Fiscal Year”) in which the date of the Executive’s termination of employment occurs, which shall be prorated for the number of days of such Fiscal Year that the Executive is employed by the Company. The amount of such annual bonus, prior to proration, shall be equal to the annual bonus that the Executive would have earned under the Company’s bonus plan for the Fiscal Year in which the Executive’s termination of employment occurs had the Executive remained in its employment, contingent on the relevant annual bonus plan performance goals for the year in which the Executive terminates having been obtained. However, in no case shall any such annual bonus, prior to proration, attributable to any Fiscal Year commencing on or after the first day of the Fiscal Year in which the Executive’s termination of employment occurs exceed 100% of the Executive's target bonus for the Fiscal Year in which the Executive's termination of employment occurs. Such bonus shall be paid on the later of the date they would otherwise be paid in accordance with the applicable Company bonus plan or sixty days after the date of the Executive's termination of employment.
(ii) Stock Options. Stock options granted to the Executive by the Company and which remain outstanding immediately prior to the date of termination of the Executive’s employment, as provided in Section 7(b), shall remain outstanding until and shall immediately become vested in full upon the Release becoming irrevocable.
(iii) Restricted Stock. Shares of restricted stock granted to the Executive by the Company which have not become vested as of the date of termination of the Executive’s employment, as provided in Section 7(b), shall immediately become vested on a pro rata basis upon the Release becoming irrevocable. The number of such additional shares of restricted stock that shall become vested as of the date of the Executive’s termination of employment shall be that number of additional shares that would have become vested through the date of such termination of employment at the rate(s) determined under the vesting schedule applicable to such shares had such vesting schedule provided for the accrual of vesting on a daily basis (based on a 365-day year). The pro rata amount of shares vesting through the date of non-renewal shall be calculated by multiplying the number of unvested shares scheduled to vest in each respective vesting year by the ratio of the number of days from the date of grant through the date of non-renewal, and the number of days from the date of grant through the original vesting date of the respective vesting tranche. Any shares of restricted stock remaining unvested after such pro rata vesting shall automatically be reacquired by the Company in accordance with the provisions of the applicable restricted stock agreement, and the Executive shall have no further rights in such unvested portion of the restricted stock. In addition, the Company shall waive any reacquisition or repayment rights for dividends paid on restricted stock prior to the Executive’s termination of employment.
(iv) Performance Share Awards. On the Performance Share Vesting Date on or next following the Executive's date of termination of employment, the number of Performance Shares that shall become Vested Performance Shares shall be determined by multiplying (a) that number of shares of Company Common Stock subject to the Performance Share Agreement that would have become Vested Performance Shares had no such termination occurred; provided, however, in no case shall the number of Performance Shares that become Vested Performance Shares prior to proration exceed 100% of the Target Number of Performance Shares set forth in the Performance Share Agreement, by (b) the ratio of the number of full months
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of the Executive's employment with the Company during the Performance Period (as defined in the Performance Share Agreement) to the number of full months contained in the Performance Period. Vested Common Shares shall be issued in settlement of such Vested Performance Shares on the Settlement Date next following the date of the Executive’s termination of employment.
(v) Unvested Common Shares Issued in Settlement of Performance Share Awards. If the Executive terminates employment pursuant to Section 6(g) after the Performance Share Vesting Date, all Unvested Common Shares issued in settlement of the Performance Share Award shall become vested in full effective as of the date of such termination.
(vi) Inducement Restricted Stock Units. If the Executive terminates employment pursuant to Section 6(g), Inducement Restricted Stock Units (“IRSUs”) granted to the Executive that are subject to service-based vesting only will be fully vested. Performance-based IRSUs will be earned and fully vested if the performance metric is satisfied prior to the end of the respective vesting periods. Any unvested IRSUs shall be forfeited and voided, and the Executive shall have no further rights in such unvested IRSUs.
(e) Special Change in Control Provisions.
(i) Termination of Employment in Connection with a Change in Control. If the Executive’s employment is terminated either by the Company Without Cause (as defined in Section 6(d)) or by the Executive for Good Reason (as defined in Section 6(e)(ii)), in either case within the period commencing one month prior to and ending twelve months following a Change in Control, then, subject to Section 22 [Compliance with Section 409A], the Executive shall be entitled to the compensation and benefits set forth in Sections 8(e)(i)(a) through (e) (in addition to any other payments or benefits provided under this Agreement), provided that within sixty days following the Executive’s termination of employment (i) the Executive has executed and delivered the Release to the Company, and (ii) the Release has become irrevocable:
a. Salary. The Executive shall be entitled to a cash payment equal to 2.99 times the Executive’s then-current annual base salary, which shall be paid to the Executive sixty days following such termination of employment. The payment under this Section 8(e)(i)(a) shall take the place of any payment under Section 8(a)(i) and the Executive shall not be entitled to receive a payment under Section 8(a)(i) if the Executive is entitled to a payment under this Section 8(e)(i)(a).
b. Bonus. The Executive shall be entitled to a cash payment equal to 2.99 times the Executive’s target annual bonus for the Company’s fiscal year then in effect on the date termination of employment occurs, which shall be paid to the Executive sixty days following such termination of employment. The payment under this Section 8(e)(i)(b) shall take the place of any payment under Section 8(a)(ii) and the Executive shall not be entitled to receive a payment under Section 8(a)(ii) if the Executive is entitled to a payment under this Section 8(e)(i)(b).
c. Equity. All shares of restricted stock and Inducement Restricted Stock Units granted to the Executive by the Company shall become vested in full upon the termination. Additionally, if the termination occurs prior to the Performance Share Vesting Date, 100% of the Target Number of Performance Shares shall be deemed Vested
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Performance Shares effective as of the date of the termination. All Unvested Common Shares issued in settlement of the Performance Share Award shall become vested effective as of the date of such termination. Except as set forth in this Section 8(e), the treatment of stock options, performance share awards and all other equity awards granted to the Executive by the Company that remain outstanding immediately prior to the date of such Change in Control shall be determined in accordance with their terms.
d. Estate Planning. The Executive shall be entitled to reimbursement of the Executive’s estate planning expenses (including attorneys’ fees) on the same basis, if any, as to which the Executive was entitled to such reimbursements immediately prior to such termination of employment for the remainder of the Term of Employment then in effect.
e. Health Care Coverage. The Company shall continue to provide Executive with medical, dental, vision, and mental health care coverage at or equivalent to the level of coverage which the Executive had at the time of the termination of employment (including coverage for the Executive’s eligible dependents to the extent such dependents were covered immediately prior to such termination of employment) for the remainder of the Term of Employment, except coverage for dependents will end when dependent is no longer eligible for coverage, if earlier than the Term of Employment end date; provided, however that in the event such coverage may no longer be extended to the Executive following termination of the Executive’s employment either by the terms of the Company’s health care plans or under then applicable law, the Company shall instead reimburse the Executive for the Executive’s cost of substantially equivalent health care coverage available to the Executive under ERISA Section 601 and thereafter and Section 4980B of the Internal Revenue Code (i.e., COBRA coverage) for a period not to exceed 18 months after the termination of the Executive’s employment; and provided further that (1) any such health care coverage or reimbursement for health care coverage shall cease at such time that the Executive becomes eligible for health care coverage through another employer and (2) any such reimbursement shall be made by the last day of the calendar year following the end of the calendar year with respect to which such coverage or reimbursement is provided. The Executive must notify the Company within five business days of becoming eligible for such other coverage and promptly repay the Company any benefits the Executive received in error.
(ii) Change in Control Defined. “Change in Control” means the occurrence of any one or more of the following with respect to the Company:
(1) any “person” (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (“Exchange Act”)) acquires during a twelve-month period ending on the date of the most recent acquisition by such person, in one or a series of transactions, “beneficial ownership” (as such term is defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing thirty-five percent (35%) or more of the total combined voting power of the Company’s then-outstanding securities entitled to vote generally in the election of directors; provided, however, that a Change in Control shall not be deemed to have occurred if such degree of beneficial ownership results from any of the following: (A) an acquisition by any person who, on the Effective Date of the then current Equity Incentive Plan, is the beneficial owner of thirty-five percent (35%) or more of such voting power; (B) any acquisition directly from the Company, including, without limitation, pursuant to or in
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connection with a public offering of securities; (C) any acquisition by the Company; (D) any acquisition by a trustee or other fiduciary under an employee benefit plan of the Company; or (E) any acquisition by an entity owned directly or indirectly by the stockholders of the Company in substantially the same proportions as their ownership of the voting securities of the Company; or
(2) any of the following events (“Ownership Change Event”) or series of related Ownership Change Events (collectively, a “Transaction”): (A) the direct or indirect sale or exchange in a single or series of related transactions by the stockholders of the Company of securities of the Company representing more than fifty percent (50%) of the combined voting power of the Company’s then outstanding securities then entitled to vote generally in the election of directors; (B) a merger or consolidation in which the Company is a party; or (C) the sale, exchange, or transfer of all or substantially all of the assets of the Company (other than a sale, exchange, or transfer to one or more subsidiaries of the Company), provided that with respect to any such Transaction the stockholders of the Company immediately before the Transaction do not retain immediately after such Transaction direct or indirect beneficial ownership of more than fifty percent (50%) of the total combined voting power of the outstanding securities entitled to vote generally in the election of directors or, in the Ownership Change Event described in clause (C), the entity to which the assets of the Company were transferred (the “Transferee”), as the case may be; or
(3) a date specified by the Compensation Committee of the Board following approval by the stockholders of a plan of complete liquidation or dissolution of the Company. For purposes of the preceding sentence, indirect beneficial ownership shall include, without limitation, an interest resulting from ownership of the voting securities of one or more corporations or other business entities which own the Company or the Transferee, as the case may be, either directly or indirectly or through one or more subsidiary corporations or other business entities. The Committee shall determine whether multiple events described in clauses (1), (2), or (3) are related and to be treated in the aggregate as a single Change in Control, and its determination shall be final, binding and conclusive.
(iii) Excise Tax - Best After-Tax Result. In the event that any payment or benefit received or to be received by the Executive pursuant to this Agreement or otherwise (“Payments”) would (a) constitute a “parachute payment” within the meaning of Section 280G of the Code and (b) but for this section, be subject to the excise tax imposed by Section 4999 of the Code, any successor provisions, or any comparable federal, state, local, or foreign excise tax (“Excise Tax”), then, subject to the provisions of Section 8(e)(iv), such Payments shall be either (1) provided in full pursuant to the terms of this Agreement or any other applicable agreement, or (2) provided as to such lesser extent which would result in no portion of such Payments being subject to the Excise Tax (“Reduced Amount”), whichever of the foregoing amounts, taking into account the applicable federal, state, local, and foreign income, employment and other taxes and the Excise Tax (including, without limitation, any interest or penalties on such taxes), results in the receipt by the Executive, on an after-tax basis, of the greatest amount of payments and benefits provided for hereunder or otherwise, notwithstanding that all or some portion of such Payments may be subject to the Excise Tax. If the Executive’s payments or benefits are delivered to a lesser extent in accordance with this clause (2) above, then the Executive’s aggregate benefits shall be reduced in the following order: (i) cash severance pay that is exempt from Section 409A; (ii) any other cash severance pay; (iii) reimbursement payments
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under Section 4(c), above; (iv) any restricted stock; (v) any equity awards other than restricted stock and stock options; and (vi) stock options. Unless the Company and the Executive otherwise agree in writing, any determination required under this Section shall be made by an independent advisor designated by the Company and reasonably acceptable to the Executive (“Independent Advisor”), whose determination shall be conclusive and binding upon the Executive and the Company for all purposes. For purposes of making the calculations required under this Section, Independent Advisor may make reasonable assumptions and approximations concerning applicable taxes and may rely on reasonable, good faith interpretations concerning the application of Sections 280G and 4999 of the Code; provided that Independent Advisor shall assume that the Executive pays all taxes at the highest marginal rate. The Company and the Executive shall furnish to Independent Advisor such information and documents as Independent Advisor may reasonably request in order to make a determination under this Section. The Company shall bear all costs that Independent Advisor may incur in connection with any calculations contemplated by this Section. In the event that this Section 8(e)(iii) applies, then based on the information provided to the Executive and the Company by Independent Advisor, the Executive may, in the Executive’s sole discretion and within thirty days of the date on which the Executive is provided with the information prepared by Independent Advisor, determine which and how much of the Payments (including the accelerated vesting of equity compensation awards) to be otherwise received by the Executive shall be eliminated or reduced (as long as after such determination the value (as calculated by Independent Advisor in accordance with the provisions of Sections 280G and 4999 of the Code) of the amounts payable or distributable to the Executive equals the Reduced Amount). If the Internal Revenue Service (the “IRS”) determines that any Payment is subject to the Excise Tax, then Section 8(e)(iv) hereof shall apply, and the enforcement of Section 8(e)(iv) shall be the exclusive remedy to the Company.
(iv) Adjustments. If, notwithstanding any reduction described in Section 8(e)(iii) (or in the absence of any such reduction), the IRS determines that the Executive is liable for the Excise Tax as a result of the receipt of one or more Payments, then the Executive shall be obligated to surrender or pay back to the Company, within 120 days after a final IRS determination, an amount of such payments or benefits equal to the “Repayment Amount.” The Repayment Amount with respect to such Payments shall be the smallest such amount, if any, as shall be required to be surrendered or paid to the Company so that the Executive’s net proceeds with respect to such Payments (after taking into account the payment of the excise tax imposed on such Payments) shall be maximized. Notwithstanding the foregoing, the Repayment Amount with respect to such Payments shall be zero if a Repayment Amount of more than zero would not eliminate the Excise Tax imposed on such Payments or if a Repayment Amount of more than zero would not maximize the net amount received by the Executive from the Payments. If the Excise Tax is not eliminated pursuant to this Section, the Executive shall pay the Excise Tax.
(v) Acquirer Does Not Assume Performance Share Award. In the event of a Change in Control, the surviving, continuing, successor, or purchasing corporation or other business entity or parent thereof, as the case may be (the “Acquirer”), may, without the consent of the Executive, assume or continue in full force and effect the Company’s rights and obligations under a Performance Share Award or substitute for the Award a substantially equivalent award for the Acquirer’s stock. For purposes of this Section, a Performance Share Award shall be deemed assumed if, following the Change in Control, the Award confers the right to receive, subject to the terms and conditions of the applicable Company incentive plan and this
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Agreement, for each Performance Share or Unvested Common Share subject to the Award immediately prior to the Change in Control, the consideration (whether stock, cash, other securities or property or a combination thereof) to which a holder of a share of Stock on the effective date of the Change in Control was entitled. Notwithstanding any other provision of this Agreement to the contrary, if the Acquirer elects not to assume, continue, or substitute for the outstanding Performance Share Awards in connection with a Change in Control prior to the Performance Share Vesting Date, (i) the Target Number of Performance Shares shall become fully vested and such Performance Shares shall be deemed Vested Performance Shares and one Vested Common Share shall be issued to the Executive for each such Vested Performance Share immediately prior to the Change in Control and (ii) any Unvested Common Shares issued in settlement of Performance Share Awards shall become fully vested effective immediately prior to the Change in Control, provided that the Executive’s employment with the Company has not terminated immediately prior to the Change in Control. The vesting of Performance Shares and settlement of Awards that were permissible solely by reason of this Section shall be conditioned upon the consummation of the Change in Control.
(vi) Acquirer Does Not Assume Restricted Stock Award. In the event of a Change in Control, the Acquirer, may, without the consent of the Executive, assume or continue in full force and effect the Company’s rights and obligations under a Restricted Stock Award or substitute for the Award a substantially equivalent award for the Acquirer’s stock. For purposes of this Section, a Restricted Stock Award shall be deemed assumed if, following the Change in Control, the Award confers the right to receive, subject to the terms and conditions of the applicable Company incentive plan and this Agreement, for each Share subject to the Award immediately prior to the Change in Control, the consideration (whether stock, cash, other securities or property or a combination thereof) to which a holder of a share of Stock on the effective date of the Change in Control was entitled. Notwithstanding any other provision of this Agreement to the contrary, if the Acquirer elects not to assume, continue or substitute for the outstanding Stock Award in connection with a Change in Control, all of the Shares shall become vested immediately prior to the Change in Control, provided that the Executive’s employment with the Company has not terminated immediately prior to the Change in Control. The vesting of Shares and settlement of Awards that were permissible solely by reason of this Section shall be conditioned upon the consummation of the Change in Control.
9. Certain Employment Obligations.
(a) Employee Acknowledgement. The Company and the Executive acknowledge that (i) the Company has a special interest in and derives significant benefit from the unique skills and experience of the Executive; (ii) as a result of the Executive’s service with the Company, the Executive will use and have access to some of the Company’s proprietary and valuable Confidential Information during the course of the Executive’s employment; (iii) the Confidential Information has been developed and created by the Company at substantial expense and constitutes valuable proprietary assets of the Company, and the Company will suffer substantial damage and irreparable harm which will be difficult to compute if, during the Term of Employment or thereafter, the Executive should disclose or improperly use such Confidential Information in violation of the provisions of this Agreement; (iv) the Company will suffer substantial damage and irreparable harm which will be difficult to compute if the Executive competes with the Company in violation of this Agreement; (v) the Company will suffer substantial damage which will be difficult
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to compute if the Executive solicits or interferes with the Company’s employees, clients, or customers; (vi) the provisions of this Agreement are reasonable and necessary for the protection of the business of the Company; and (vii) the provisions of this Agreement will not preclude the Executive from obtaining other gainful employment or service.
(b) Non-Compete.
(i) During the period of the Executive’s employment with the Company and for a period of 24 months following the Executive's termination of employment with the Company, the Executive shall not, directly or indirectly, own, manage, control, be employed by, consult with, participate in, or be connected in any manner with the ownership, management, operation, control of, or otherwise become involved with, any Competing Business, without the Company’s written consent.
For purposes of this Agreement, a Competing Business shall mean any of the following: (1) any off-price retailer including, without limitation, Burlington Stores, Inc. and The TJX Companies, Inc.; (2) Macy’s, Inc.; and (3) any affiliates, subsidiaries or successors of the businesses identified above.
(ii) Section 9(b)(i) shall not prohibit the Executive from making any investment of 1% or less of the equity securities of any publicly-traded corporation which is considered to be a Competing Business
(c) Non-Solicitation of Employees. During the period of the Executive’s employment with the Company and for a period of 24 months following the Executive’s termination of that employment with the Company, the Executive shall not, without the written permission of the Company or an affected affiliate, directly or indirectly (i) solicit, recruit, attempt to recruit or raid, or have or cause any other person or entity to solicit, recruit, attempt to recruit or raid, or otherwise induce the termination of employment of, any person who is employed by the Company or was employed by the Company during the 6-month period prior to such solicitation, employment, or retainer; (ii) encourage any such person not to devote such person’s full business time to the Company; or (iii) agree to hire or employ any such person. The Executive also shall not use any of the Company’s trade secrets to directly or indirectly solicit the employees of the Company. These non-solicitation provisions explicitly cover all forms of oral, written, or electronic communication, including, but not limited to, communications by email, regular mail, express mail, telephone, fax, instant message, and social media, including, but not limited to, Facebook, LinkedIn, Instagram, Twitter, TikTok, and any other social media platform, whether or not in existence at the time of entering into this Agreement. However, it will not be deemed a violation of this Agreement if the Executive merely updates the Executive's LinkedIn profile without engaging in any other substantive communication, by social media or otherwise, that is prohibited by this non-solicitation provision.
(d) Non-Solicitation of Third Parties. During the period of the Executive’s employment with the Company and for a period of 24 months following the Executive’s termination of employment with the Company, the Executive shall not in any way use any of the Company’s trade secrets to directly or indirectly solicit or otherwise influence any entity with a business arrangement with the Company, including, without limitation, suppliers, sales
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representatives, lenders, lessors, and lessees, to discontinue, reduce, or otherwise materially or adversely affect such relationship. These non-solicitation provisions explicitly cover all forms of oral, written, or electronic communication, including, but not limited to, communications by email, regular mail, express mail, telephone, fax, instant message, and social media, including, but not limited to, Facebook, LinkedIn, Instagram, Twitter, TikTok, and any other social media platform, whether or not in existence at the time of entering into this Agreement. However, it will not be deemed a violation of this Agreement if the Executive merely updates the Executive's LinkedIn profile without engaging in any other substantive communication, by social media or otherwise, that is prohibited by this non-solicitation provision.
(e) Non-Disparagement. The Executive acknowledges and agrees that the Executive will not defame or criticize the services, business, integrity, veracity, or personal or professional reputation of the Company or any of its directors, officers, employees, affiliates, or agents of any of the foregoing in either a professional or personal manner either during the Term of Employment or thereafter.
10. Company Remedies for Executive’s Breach of Certain Obligations.
(a) The Executive acknowledges and agrees that in the event that the Executive breaches or threatens to breach Sections 5 or 9 of this Agreement, all compensation and benefits otherwise payable pursuant to this Agreement and the vesting and/or exercisability of all stock options, restricted stock, performance shares, and other forms of equity compensation previously awarded to the Executive, notwithstanding the provisions of any agreement evidencing any such award to the contrary, shall immediately cease.
(b) The Company shall give prompt notice to the Executive of its discovery of a breach by the Executive of Sections 5 or 9 of this Agreement. If it is determined by a vote of not less than two-thirds of the members of the Board that the Executive has breached Sections 5 or 9 of this Agreement and has not cured such breach within ten business days of such notice, then:
(i) the Executive shall forfeit to the Company (A) all stock options, stock appreciation rights, performance shares and other equity compensation awards (other than shares of restricted stock, restricted stock units, common shares issued in settlement of performance share awards, or similar awards) granted to the Executive by the Company which remain outstanding and unexercised or unpaid as of the date of such determination by the Board (the “Breach Determination Date”) and (B) all shares of restricted stock, restricted stock units, and common shares issued in settlement of performance share awards and similar awards granted to the Executive by the Company which continue to be held by the Executive as of the Breach Determination Date to the extent that such awards vested during the Forfeiture Period (as defined below); and
(ii) the Executive shall pay to the Company all gains realized by the Executive upon (A) the exercise by or payment in settlement to the Executive on and after the commencement of the Forfeiture Period of stock options, stock appreciation rights, performance shares and other equity compensation awards (other than shares of restricted stock, restricted stock units or similar awards) granted to the Executive by the Company and (B) the sale on and after the commencement of the Forfeiture Period of shares or other property received by the Executive
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pursuant to awards of restricted stock, restricted stock units, or similar awards granted to the Executive by the Company and which vested during the Forfeiture Period.
(c) For purposes of this Section, the gain realized by the Executive upon the exercise or payment in settlement of stock options, stock appreciation rights, performance shares, and other equity compensation awards shall be equal to (A) the closing sale price on the date of exercise or settlement (as reported on the stock exchange or market system constituting the principal market for the shares subject to the applicable award) of the number of vested shares issued to the Executive upon such exercise or settlement, reduced by the purchase price, if any, paid by the Executive to acquire such shares, or (B) if any such award was settled by payment in cash to the Executive, the gain realized by the Executive shall be equal to the amount of cash paid to the Executive. Further, for purposes of this Section, the gain realized by the Executive upon the sale of shares or other property received by the Executive pursuant to awards of restricted stock, restricted stock units, or similar awards shall be equal to the gross proceeds of such sale realized by the Executive. Gains determined for purposes of this Section shall be determined without regard to any subsequent increase or decrease in the market price of the Company’s stock or taxes paid by or withheld from the Executive with respect to such transactions.
(d) For the purposes of this Section, the “Forfeiture Period” shall be the period ending on the Breach Determination Date and beginning on the earlier of (A) the date six months prior to the Breach Determination Date or (B) the business day immediately preceding the date of the Executive’s termination of employment with the Company.
(e) The Executive agrees to pay to the Company immediately upon the Breach Determination Date the amount payable by the Executive to the Company pursuant to this Section.
(f) The Executive acknowledges that money will not adequately compensate the Company for the substantial damages that will arise upon the breach or threatened breach of Sections 5 or 9 of this Agreement and that the Company will not have any adequate remedy at law. For this reason, such breach or threatened breach will not be subject to the arbitration clause in Section 19; rather, the Company will be entitled, in addition to other rights and remedies, to specific performance, injunctive relief, and other equitable relief to prevent or restrain such breach or threatened breach. The Company may obtain such relief from an arbitrator pursuant to Section 19 hereof, or by simultaneously seeking arbitration under Section 19 and a temporary injunction from a court pending the outcome of the arbitration. It shall be the Company’s sole and exclusive right to elect which approach to use to vindicate its rights. The Executive further agrees that in the event of a breach or threatened breach, the Company shall be entitled to obtain an immediate injunction and restraining order to prevent such breach and/or threatened breach and/or continued breach, without posting a bond or having to prove irreparable harm or damages, and to obtain all costs and expenses, including reasonable attorneys’ fees and costs. In addition, the existence of any claim or cause of action by the Executive against the Company, whether predicated on this Agreement or otherwise, shall not constitute a defense to the enforcement by the Company of the restrictive covenants in this Agreement.
(g) Recoupment. The Executive hereby understands and agrees that (i) if the Executive is an “Affected Officer”, as defined in the Company’s Policy for Recovery of Erroneously Awarded Incentive Compensation, adopted November 15, 2023 (“Recovery Policy”),
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the Executive shall be subject to the Recovery Policy in addition to the Company’s recoupment policy (“Recoupment Policy”) and (ii) if the Executive is not an Affected Officer, the Executive shall be subject to the Company’s Recoupment Policy. Under the Recoupment Policy applicable to the Company’s senior executives, subject to the discretion and approval of the Board, the Company may, to the extent permitted by governing law, require reimbursement of any cash payments and reimbursement and/or cancellation of any Performance Share or Common Shares issued in settlement of a Performance Share to the Executive where all of the following factors are present: (1) the award was predicated upon the achievement of certain financial results that were subsequently the subject of a material restatement, (2) the Board determines that the Executive engaged in fraud or intentional misconduct that was a substantial contributing cause to the need for the restatement, and (3) a lower award would have been made to the Executive based upon the restated financial results. In each instance, the Company may seek to recover the Executive’s entire gain received by the Executive within the relevant period, plus a reasonable rate of interest.
11. Exercise of Stock Options Following Termination. If the Executive's employment terminates, the Executive (or the Executive's estate) may exercise the Executive's right to purchase any vested stock under the stock options granted to the Executive by the Company as provided in the applicable stock option agreement or Company plan. All such purchases must be made by the Executive in accordance with the applicable stock option plans and agreements between the parties.
12. Successors; Binding Agreement. This Agreement and all rights of the Executive hereunder shall inure to the benefit of and be enforceable by the Executive’s personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If the Executive should die while any amounts would still be payable to the Executive hereunder, all such amounts shall be paid in accordance with the terms of this Agreement and applicable law to the Executive’s beneficiary pursuant to a valid written designation of beneficiary, as determined by the Compensation Committee in its discretion, or, if there is no effective written designation of beneficiary by the Executive, to the Executive’s estate.
13. Insurance and Indemnity. The Company shall, to the extent permitted by law, include the Executive during the Term of Employment under any directors and officers’ liability insurance policy maintained for its directors and officers, with coverage at least as favorable to the Executive in amount and each other material respect as the coverage of other officers covered thereby. The Company’s obligation to provide insurance and indemnify the Executive shall survive expiration or termination of this Agreement with respect to proceedings or threatened proceedings based on acts or omissions of the Executive occurring during the Executive’s employment with the Company. Such obligations shall be binding upon the Company’s successors and assigns and shall inure to the benefit of the Executive’s heirs and personal representatives.
14. Notice. For the purposes of this Agreement, notices, demands and all other communications provided for in the Agreement shall be in writing and shall be deemed to have been duly given when delivered or (unless otherwise specified) mailed by United States registered mail, return receipt requested, postage prepaid, addressed as follows:
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| If to the Executive: | James G. Conroy | |||||||
1372 Broadway | ||||||||
New York, NY 10018 | ||||||||
| With copy to: | ||||||||
| James G. Conroy | ||||||||
| If to the Company: | Ross Stores, Inc | |||||||
| 5130 Hacienda Drive | ||||||||
| Dublin, CA 94568-7579 | ||||||||
| Attention: General Counsel | ||||||||
or to such other address as any party may have furnished to the other in writing in accordance herewith, except that notices of change of address shall be effective only upon receipt.
15. Complete Agreement; Modification, Waiver; Entire Agreement. This Agreement, along with any compensation and benefits summary, stock option, restricted stock, performance share, or other equity compensation award agreements between the parties, represents the complete agreement of the parties with respect to the subject matter hereof and supersedes all prior and contemporaneous agreements, promises or representations of the parties, including any prior employment agreement or similar agreement between the parties, except those relating to repayment of signing and related bonuses, or relocation expense reimbursements. To the extent that the bonus payment provisions (i.e., post-termination bonus payments) provided in this Agreement differ from the provisions of the Company’s incentive bonus plans (currently the Incentive Compensation Plan) or any replacement plans, such bonus payments shall be paid pursuant to the provisions of this Agreement except to the extent expressly prohibited by law. Except as provided by Section 22 [Compliance with Section 409A], no provision of this Agreement may be amended or modified except in a document signed by the Executive and such person as may be designated by the Company. No waiver by the Executive or the Company of any breach of, or lack of compliance with, any condition or provision of this Agreement by the other party shall be considered a waiver of any other condition or provision or the same condition or provision at another time. To the extent that this Agreement is in any way deemed to be inconsistent with any prior or contemporaneous compensation and benefits summary, stock option, restricted stock, performance share, or other equity compensation award agreements between the parties, or term sheet referencing such specific awards, the terms of this Agreement shall control. No agreements or representations, oral or otherwise, with respect to the subject matter hereof have been made by either party which are not set forth expressly in this Agreement. This Agreement shall be modified to comply with any federal securities law or rule or any NASDAQ listing rule adopted to comply therewith.
16. Governing Law - Severability. The validity, interpretation, construction, performance, and enforcement of this Agreement shall be governed by the laws of the State of New York without reference to that state’s choice of law rules. If any provision of this Agreement shall
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be held or deemed to be invalid, illegal, or unenforceable in any jurisdiction, for any reason, the invalidity of that provision shall not have the effect of rendering the provision in question unenforceable in any other jurisdiction or in any other case or of rendering any other provisions herein unenforceable, but the invalid provision shall be substituted with a valid provision which most closely approximates the intent and the economic effect of the invalid provision and which would be enforceable to the maximum extent permitted in such jurisdiction or in such case.
17. Mitigation. In the event the Executive’s employment with the Company terminates for any reason, the Executive shall not be obligated to seek other employment following such termination. However, any amounts due to the Executive under Sections 8(a)(i), 8(a)(ii), 8(a)(viii), 8(e)(i)(a), 8(e)(i)(b), 8(e)(i)(d) or 8(e)(i)(e) (collectively, “Mitigable Severance”) shall be offset by any cash remuneration, health care coverage and/or estate planning reimbursements (collectively, “Mitigable Compensation”) attributable to any subsequent employment or consulting/independent contractor arrangement that the Executive may obtain during the period of payment of compensation under this Agreement following the termination of the Executive’s employment with the Company. For any calendar quarter, the Executive shall not be entitled to any Mitigable Severance unless the Executive certifies in writing to the Company on or before the first day of any such calendar quarter the amount and nature of Mitigable Compensation the Executive expects to receive during such quarter. In addition, the Executive must notify the Company within five business days of any increase in the amount and/or nature of Mitigable Compensation not previously reported in the most recent quarterly certification. The Executive shall repay to the Company any Mitigable Severance the Executive received in error within ten days of the receipt of such Mitigable Severance.
18. Withholding. All payments required to be made by the Company hereunder to the Executive or the Executive’s estate or beneficiaries shall be subject to the withholding of such amounts as the Company may reasonably determine it should withhold pursuant to any applicable law. To the extent permitted, the Executive may provide all or any part of any necessary withholding by contributing Company stock with value, determined on the date such withholding is due, equal to the number of shares contributed multiplied by the closing price per share as reported on the securities exchange constituting the primary market for the Company’s stock on the date preceding the date the withholding is determined.
19. Arbitration. Except as otherwise provided by applicable law, the Company and the Executive shall resolve all disputes or claims relating to or arising out of the parties' employment relationship or this Agreement (including, but not limited to, any claims of breach of contract, wrongful termination, discrimination, harassment, retaliation, failure to accommodate, or wage and hour violations), pursuant to the Federal Arbitration Act and, as applicable, in accordance with the Company's then-current Dispute Resolution Agreement ("Arbitration Agreement"). The Executive and the Company hereby mutually agree that all such disputes shall be fully, finally, and exclusively resolved by binding arbitration in the city in which the Executive’s principal place of employment is located. Notwithstanding the Arbitration Agreement, arbitration shall be conducted by JAMS arbitration services pursuant to its Employment Arbitration Rules and Procedures (“JAMS Arbitration Rules”) by an arbitrator mutually agreed upon by the parties hereto or, in the absence of such agreement, by an arbitrator selected in accordance with JAMS’ then-current Arbitration Rules. To the extent permitted by law, the Company and the Executive agree that each may file claims against the other only in their individual capacities, and may not file claims as a
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named plaintiff, or participate as a class member, in any class or collective action against the other. Nothing in this arbitration provision or the Arbitration Agreement shall prevent either the Executive or the Company from seeking interim or temporary injunctive or equitable relief from a court of competent jurisdiction pending arbitration. This provision fully incorporates the Arbitration Agreement provided, however, that in the event of any conflict between this provision and the Arbitration Agreement, this provision shall govern.
If there is termination of the Executive’s employment with the Company followed by a dispute as to whether the Executive is entitled to the benefits provided under this Agreement, then, during the period of that dispute the Company shall pay the Executive 50% of the amount specified in Section 8 hereof (except that the Company shall pay 100% of any insurance premiums provided for in Section 8), if, and only if, the Executive agrees in writing that if the dispute is resolved against the Executive, the Executive shall promptly refund to the Company all such payments received by, or made by the Company on behalf of, the Executive. If the dispute is resolved in the Executive’s favor, promptly after resolution of the dispute the Company shall pay the Executive the sum that was withheld during the period of the dispute plus interest at the rate provided in Section 1274(d) of the Code.
20. Attorney’s Fees. Except as otherwise provided herein, each party shall bear its own attorney’s fees and costs incurred in any action or dispute arising out of this Agreement.
21. Miscellaneous. No right or interest to, or in, any payments shall be assignable by the Executive; provided, however, that the Executive shall not be precluded from designating in writing one or more beneficiaries to receive any amount that may be payable after the Executive’s death and the legal representative of the Executive’s estate shall not be precluded from assigning any right hereunder to the person or persons entitled thereto. This Agreement shall be binding upon and shall inure to the benefit of the Executive, the Executive’s heirs and legal representatives and, the Company and its successors.
22. Compliance with Section 409A. Notwithstanding any other provision of this Agreement to the contrary, the provision, time and manner of payment or distribution of all compensation and benefits provided by this Agreement that constitute nonqualified deferred compensation subject to and not exempted from the requirements of Code Section 409A (“Section 409A Deferred Compensation”) shall be subject to, limited by and construed in accordance with the requirements of Code Section 409A and all regulations and other guidance promulgated by the Secretary of the Treasury pursuant to such Section (such Section, regulations and other guidance being referred to herein as “Section 409A”), including the following:
(a) Separation from Service. Payments and benefits constituting Section 409A Deferred Compensation otherwise payable or provided pursuant to Section 8 upon the Executive’s termination of employment shall be paid or provided only at the time of a termination of the Executive’s employment that constitutes a Separation from Service. For the purposes of this Agreement, a “Separation from Service” is a separation from service within the meaning of Treasury Regulation Section 1.409A-1(h).
(b) Six-Month Delay Applicable to Specified Employees. If, at the time of a Separation from Service of the Executive, the Executive is a “specified employee” within the meaning of Section 409A(a)(2)(B)(i) (a “Specified Employee”), then any payments and benefits
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constituting Section 409A Deferred Compensation to be paid or provided pursuant to Section 8 upon the Separation from Service of the Executive shall be paid or provided commencing on the later of (i) the date that is six months after the date of such Separation from Service or, if earlier, the date of death of the Executive (in either case, the “Delayed Payment Date”), or (ii) the date or dates on which such Section 409A Deferred Compensation would otherwise be paid or provided in accordance with Section 8. All such amounts that would, but for this Section 22(b), become payable prior to the Delayed Payment Date shall be accumulated and paid on the Delayed Payment Date.
(c) Health Care and Estate Planning Benefits. In the event that all or any of the health care or estate planning benefits to be provided pursuant to Sections 8(a)(viii); 8(e)(i)(d) or 8(e)(i)(e) as a result of a Participant’s Separation from Service constitute Section 409A Deferred Compensation, the Company shall provide for such benefits constituting Section 409A Deferred Compensation in a manner that complies with Section 409A. To the extent necessary to comply with Section 409A, the Company shall determine the health care premium cost necessary to provide such benefits constituting Section 409A Deferred Compensation for the applicable coverage period and shall pay such premium cost which becomes due and payable during the applicable coverage period on the applicable due date for such premiums; provided, however, that if the Executive is a Specified Employee, the Company shall not pay any such premium cost until the Delayed Payment Date. If the Company’s payment pursuant to the previous sentence is subject to a Delayed Payment Date, the Executive shall pay the premium cost otherwise payable by the Company prior to the Delayed Payment Date, and on the Delayed Payment Date the Company shall reimburse the Executive for such Company premium cost paid by the Executive and shall pay the balance of the Company’s premium cost necessary to provide such benefit coverage for the remainder of the applicable coverage period as and when it becomes due and payable over the applicable period.
(d) Stock-Based Awards. The vesting of any stock-based compensation awards which constitute Section 409A Deferred Compensation and are held by the Executive, if the Executive is a Specified Employee, shall be accelerated in accordance with this Agreement to the extent applicable; provided, however, that the payment in settlement of any such awards shall occur on the Delayed Payment Date. Any stock based compensation which vests and becomes payable upon a Change in Control in accordance with Section 8(e) shall not be subject to this Section 22(d).
(e) Change in Control. Notwithstanding any provision of this Agreement to the contrary, to the extent that any amount constituting Section 409A Deferred Compensation would become payable under this Agreement by reason of a Change in Control, such amount shall become payable only if the event constituting a Change in Control would also constitute a change in ownership or effective control of the Company or a change in the ownership of a substantial portion of the assets of the Company within the meaning of Section 409A.
(f) Installments. The Executive’s right to receive any installment payments payable hereunder shall be treated as a right to receive a series of separate payments and, accordingly, each such installment payment shall at all times be considered a separate and distinct payment for purposes of Section 409A.
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(g) Reimbursements. To the extent that any reimbursements payable to the Executive pursuant to this Agreement are subject to the provisions of Section 409A of the Code, such reimbursements shall be paid to the Executive no later than December 31 of the year following the year in which the cost was incurred; the amount of expenses reimbursed in one year shall not affect the amount eligible for reimbursement in any subsequent year; and the Executive’s right to reimbursement under this Agreement will not be subject to liquidation or exchange for another benefit.
(h) Rights of the Company; Release of Liability. It is the mutual intention of the Executive and the Company that the provision of all payments and benefits pursuant to this Agreement be made in compliance with the requirements of Section 409A. To the extent that the provision of any such payment or benefit pursuant to the terms and conditions of this Agreement would fail to comply with the applicable requirements of Section 409A, the Company may, in its sole and absolute discretion and without the consent of the Executive, make such modifications to the timing or manner of providing such payment and/or benefit to the extent it determines necessary or advisable to comply with the requirements of Section 409A; provided, however, that the Company shall not be obligated to make any such modifications. Any such modifications made by the Company shall, to the maximum extent permitted in compliance with the requirements of Section 409A, preserve the aggregate monetary face value of such payments and/or benefits provided by this Agreement in the absence of such modification; provided, however, that the Company shall in no event be obligated to pay any interest or other compensation in respect of any delay in the provision of such payments or benefits in order to comply with the requirements of Section 409A. The Executive acknowledges that (i) the provisions of this Section 22 may result in a delay in the time at which payments would otherwise be made pursuant to this Agreement and (ii) the Company is authorized to amend this Agreement, to void or amend any election made by the Executive under this Agreement and/or to delay the payment of any monies and/or provision of any benefits in such manner as may be determined by the Company, in its discretion, to be necessary or appropriate to comply with Section 409A (including any transition or grandfather rules thereunder) without prior notice to or consent of the Executive. The Executive hereby releases and holds harmless the Company, its directors, officers and stockholders from any and all claims that may arise from or relate to any tax liability, penalties, interest, costs, fees or other liability incurred by the Executive as a result of the application of Code Section 409A.
23. Future Equity Compensation. The Executive understands and acknowledges that all awards, if any, of stock options, restricted stock, performance shares, and other forms of equity compensation by the Company are made at the sole discretion of the Board or such other committee or person designated by the Board. The Executive further understands and acknowledges, however, that unless the Executive has executed this Agreement and each successive amendment extending the Term of Employment as may be agreed to by the Company and the Executive, it is the intention of the Board and the Executive that, notwithstanding any continued employment with the Company, (a) the Company shall have no obligation to grant any award of stock options, restricted stock, performance shares, or any other form of equity compensation which might otherwise have been granted to the Executive on or after the intended commencement of the Initial Term or any Extension thereof for which the Executive has failed to sign the Agreement or the applicable Extension amendment and (b) any such award which is nevertheless granted to the Executive after the intended commencement of the Initial Term or any Extension thereof for which the Executive has failed to sign such Agreement or applicable
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Extension amendment shall not vest unless and until the Executive has executed the Agreement or applicable Extension amendment, notwithstanding the provisions of any agreement evidencing such award to the contrary.
24. Counsel. The Executive has been advised of the Executive’s right to consult with counsel prior to executing this Agreement.
IN WITNESS WHEREOF, the parties have executed this Executive Employment Agreement effective as of the date and year first above written.
| Ross Stores, Inc. and Subsidiaries | Executive | |||||||||||||||||||
| /s/Michael Balmuth | /s/James G. Conroy | |||||||||||||||||||
| By: | Michael Balmuth | James G. Conroy | ||||||||||||||||||
| Executive Chairman of the Board | ||||||||||||||||||||
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Exhibit A to Executive Employment Agreement
CONFIDENTIAL SEPARATION AGREEMENT AND GENERAL RELEASE
This Confidential Separation Agreement and General Release (“Agreement”) is entered into by and between ________________ (“Executive”) and Ross Stores, Inc. and its subsidiaries (collectively “Ross” or “the Company”). In consideration for the mutual covenants and undertakings set forth below, Executive and Ross knowingly and voluntarily agree as follows:
1. Separation. Executive’s employment with Ross terminates or terminated effective ______________ (the “Separation Date”).
2. Verification of Employment. Executive agrees to refer prospective employers or others seeking verification of Executive’s employment to the Company's third party provider, The Work Number (1-800-367-5690 or http://www.theworknumber.com). The Work Number will verify Executive’s dates of employment and job title only.
3. Compensation and Benefits. Ross shall pay and provide Executive the compensation and benefits set forth in Sections 8(a)(i) through (vii) of the Executive Employment Agreement, dated _____________ (“Executive Agreement”) in accordance with the terms of those Sections and subject to the provisions in Section 17 of the Executive Agreement regarding mitigation.
4. Release. In consideration for Ross’ promises herein, Executive knowingly and voluntarily releases and forever discharges Ross, and all of its parent corporations, affiliates, subsidiaries, divisions, successors and assignees, as well as the current and former employees, attorneys, officers, directors, and agents thereof of each (collectively referred to throughout the remainder of this Agreement as “Releasees”), of and from any and all claims, judgments, promises, agreements, obligations, damages, losses, costs, expenses (including attorneys’ fees), and liabilities of whatever kind and character, known and unknown, which Executive may now have, has ever had, or may in the future have, arising from or in any way connected with any and all matters from the beginning of time to the date hereof, including but not limited to any alleged causes of action for violation of:
•Title VII of the Civil Rights Act of 1964,
•the National Labor Relations Act,
•the Civil Rights Act of 1991
•Sections 1981 through 1988 of Title 42 of the United States Code,
•the Employee Retirement Income Security Act of 1974,
•the Immigration Reform and Control Act,
•the Americans with Disabilities Act of 1990, the Age Discrimination in Employment Act of 1967,
•Federal Workers Adjustments and Retraining Notification Act,
•the Occupational Safety and Health Act,
•the Sarbanes-Oxley Act of 2002
•the Equal Pay Act of 1963
•the New York State Civil Rights Act,
____________ ___________
Executive's Initials Ross' Initials
•the New York Equal Pay Law
•the New York State Human Rights Law
•the New York State Labor Law, the New York City Administrative Code and Charter, the Delaware Discrimination in Employment Act, the Delaware Whistleblowers’ Protection Act, the Delaware Wage Payment and Collection Act, the Delaware Persons With Disabilities Employment Protections Act, and any other federal, state or local civil or human rights law, any other local, state or federal law, regulation or ordinance
•any public policy, any contract, tort, or common law, and including any claims for costs, attorneys’ fees, or other expenses,
Notwithstanding anything set forth in this Agreement, this release of claims excludes and does not apply to any claims that cannot be released under applicable law, such as worker’s compensation and unemployment compensation claims.
5. No Filed Claims. Executive represents that, prior to Executive’s execution of this Agreement, Executive did not file any charge, complaint or lawsuit against any of the Releasees with any court or regulatory agency or in any arbitral forum.
6. Participation/Communication Rights and Obligations. Nothing in this Agreement precludes Executive from filing a charge or complaint with, communicating with or providing information or documents to, reporting possible violations of law or regulation to, responding to any inquiry from, providing testimony before, or otherwise participating in an investigation or proceeding by the U.S. Equal Employment Opportunity Commission, the U.S. Securities and Exchange Commission, the U.S. Department of Justice, Congress, any agency Inspector General or other governmental agency or regulatory authority, or from making other disclosures that are protected under the whistleblower provisions of federal, state or local law or regulation. Executive hereby agrees, however, to waive Executive’s right to any monetary or other recovery should any claim released by this Agreement be pursued by or with any of the foregoing government entities or agencies on Executive’s behalf, except that Executive is not prohibited from seeking or obtaining a payment or award from a governmental agency for information provided to the governmental agency. Executive is advised that, notwithstanding Executive’s confidentiality and non-disclosure obligations set forth in this Agreement, pursuant to the federal Defend Trade Secrets Act (‘DTSA”), Executive shall not be held criminally or civilly liable under any federal or state trade secret law for the disclosure of a trade secret that is made: (1) in confidence to a federal, state, or local government official, either directly or indirectly, or to an attorney, and solely for the purpose of reporting or investigating a suspected violation of law; or (2) in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal. In addition, DTSA provides that an individual who files a lawsuit for retaliation by an employer for reporting a suspected violation of law may disclose the trade secret to the attorney of the individual and use the trade secret information in the court proceeding, if the individual (A) files any document containing the trade secret under seal; and (B) does not disclose the trade secret, except pursuant to court order.
____________ ___________
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7. No Other Compensation or Benefits. Executive affirms that Executive has been paid and/or has received all leave (paid or unpaid), compensation, wages, bonuses, commissions, expense reimbursement, and benefits to which Executive may be entitled and that no other leave (paid or unpaid), compensation, wages, bonuses, commissions, expense reimbursement or benefits are due to Executive, except as provided in this Agreement.
8. Acknowledgements Regarding Employment Matters. Executive affirms that Executive has no known workplace injuries or occupational diseases and has been provided and/or has not been denied any leave requested, including any leave under the Family and Medical Leave Act or any other leave authorized by federal or state law. Executive further affirms that Executive has not reported any purported improper, unethical, or illegal conduct or activities to any supervisor, manager, executive, human resources representative, or agent of Ross and has no knowledge of any such improper, unethical, or illegal conduct or activities. Executive additionally affirms that, during the course of employment at Ross, Executive has taken no actions contrary to or inconsistent with Executive’s job responsibilities or the best interests of Ross’ business.
9. Restrictive Covenants. The parties expressly acknowledge that those certain employment obligations set forth in the Executive Agreement, specifically the non-compete provisions in Section 9(b), the non-solicitation of employees provisions in Section 9(c), the non-solicitation of third parties provisions in Section 9(d), and the non-disparagement provisions in Section 9(e) of the Executive Agreement, shall remain in full force and effect for the time period(s) specified in those provisions. In addition, to the extent applicable law considers the reason for termination in determining whether to enforce the employment obligations in Sections 9(b), (c) or (d), Executive’s involuntary termination shall be deemed to have been for cause if Ross, in its discretion, terminated Executive’s employment due to Executive’s poor performance, failure to abide by Ross’s code of conduct or other policy, theft, dishonesty, breach of fiduciary duty, unauthorized use or disclosure of Ross’s property or confidential information, conviction of a crime, unlawful use of illegal drugs, or other misconduct. Notwithstanding anything set forth in this Agreement or in the Executive Agreement, the employment obligations referenced in this paragraph, and any claim or dispute arising therefrom, shall be governed, interpreted and enforced in accordance with the laws of the State of Delaware (where Ross is incorporated) without regard to its conflict or choice of law provisions.
10. Return of Documents, Material, Information and Property. By no later than the Separation Date, Executive agrees to return to Ross all Ross documents (and copies) and other Ross property that Executive has in Executive’s possession, including, but not limited to, Ross files, notes, drawings, records, business plans and forecasts, financial information, specifications, computer-recorded information, tangible property (laptop computer, cell phone, PDA, flash drives, remote access tokens, etc.), credit cards, entry cards, identification badges and keys, and any materials of any kind that contain or embody any proprietary or confidential information of Ross (and all reproductions thereof), including but not limited to any confidential personnel or personally identifiable information about Ross employees learned in the course and scope of Executive’s employment (“Company Property”). Executive represents that Executive has made a diligent search to locate any such documents, property and information, and that Executive has permanently deleted and
____________ ___________
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3
expunged all Ross information in Executive’s possession and from any personal computer, smartphone, tablet, server, cloud or e-mail system. Executive further represents that, other than in the scope of Executive’s employment with Ross and for the benefit of Ross, Executive has not provided any Company Property to any third party and will not do so in the future.
11. Cooperation. Executive further agrees to be available as needed and fully cooperate with Ross in defending any anticipated, threatened, or actual litigation that currently exists or that may arise subsequent to the execution of this Agreement. Such cooperation shall include, but is not limited to, meeting with internal Ross employees to discuss and review issues in which Executive was directly or indirectly involved with during Executive’s employment with Ross, participating in any investigation conducted by Ross either internally or by outside counsel or consultants, signing declarations or witness statements, preparing for and serving as a witness in a deposition or at trial in any civil or administrative proceeding, reviewing documents, and similar activities that Ross deems necessary. Executive further agrees to be available as needed and cooperate in answering questions regarding any previous or current project Executive worked on while employed by Ross so as to insure a smooth transition of responsibilities and to minimize any adverse consequences of Executive’s departure.
12. Confidentiality. Executive agrees that this is a private agreement and that Executive will not disclose or discuss the fact that it exists or discuss or disclose its terms with anyone other than Executive’s spouse, attorney, and accountant, or as required by law. Further, nothing in this Agreement shall limit the Executive’s right to disclose the underlying facts or circumstances of any claims of discrimination, harassment, sexual harassment, sexual assault, or retaliation.
13. Non-Disparagement. Except as required by law, Executive agrees not to make, publish or issue, or cause to be made, published or issued, any untrue, disparaging or derogatory statements concerning the Company or any Releasee.
14. Medicare Representation. Executive warrants that Executive is not a Medicare beneficiary as of the date of this Agreement and, therefore, no conditional payments are required to be made to Medicare.
15. Tax Code Section 409A. This Agreement is intended to comply with Section 409A of the Internal Revenue Code and shall be operated in good-faith compliance with Section 409A and the guidance issued thereunder notwithstanding any provision of this Agreement to the contrary. To the extent that either party believes that any payment to be made hereunder is likely to result in the imposition of the excise taxes applicable under Section 409A of the Internal Revenue Code and the regulations issued thereunder, the parties agree to negotiate in good faith to restructure the timing and form (but not the amount) of any nonconforming payments to the extent necessary to avoid any such excise taxes
16. Forum Selection. Any action arising out of this Agreement or an alleged breach of this Agreement shall be brought only in the courts of the County of New York in the State of
____________ ___________
Executive's Initials Ross' Initials
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New York. Unless otherwise ordered by the Court, only the provisions of this Agreement in dispute or alleged to have been breached shall be disclosed in any such action.
17. Applicable Law. This Agreement shall be governed, interpreted and enforced in accordance with the laws of the State of Delaware (where Ross is incorporated) without regard to its conflict or choice of law provisions.
18. Severability. If any part of this Agreement is found to be invalid or unenforceable, the remaining parts of the Agreement will remain in effect as if no invalid or unenforceable part existed.
19. Entire Agreement. This Agreement sets forth the entire agreement between the parties hereto, and fully supersedes all prior agreements or, promises and understandings between the parties, except that the terms set forth in Section 5 (Confidential Information and Intellectual Property), Section 9 (Certain Employment Obligations), Section 10 (Company Remedies for Executive’s Breach of Certain Obligations), Section 11 (Exercise of Stock Options Following Termination), Section 13 (Insurance and Indemnity), and Section 17 (Mitigation) of the Executive Agreement shall remain in full force and effect in accordance with its terms. In the event of any inconsistency between the terms of this Agreement and the aforementioned surviving terms of the Employment Agreement, the terms of this Agreement shall prevail. This Agreement may not be modified except in a writing agreed to and signed by both parties, providing however that Ross may modify this form of agreement from time to time solely as needed to comply with federal, state, or local laws in effect at the time this Agreement is to be executed. Executive represents that Executive has not relied on any representations, promises, or agreements of any kind made to Executive in connection with Executive’s decision to accept this Agreement except for those set forth in this Agreement.
20. Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original, and all counterparts so executed shall constitute one agreement binding on all of the parties hereto. The Agreement may be signed and transmitted electronically, and such signatures shall be binding and deemed originals for purposes of enforcing this Agreement.
21. Advice of Counsel. Executive is advised to discuss this Agreement with an attorney of Executive’s choice and acknowledges that Executive has been given ample opportunity to do so and has, in fact, done so.
22. Knowing and Voluntary. Executive acknowledges that Executive is entering into this Agreement freely, knowingly and voluntarily, without duress or coercion, and with a full understanding of its terms. Executive further acknowledges that Executive
(a) Has carefully read and understands this Agreement;
(b) Is, through this Agreement, releasing Ross from any and all claims Executive may have against it that have arisen prior to or as of the date of this Agreement, including but
____________ ___________
Executive's Initials Ross' Initials
5
not limited to, rights or claims arising under the Age Discrimination in Employment Act of 1967;
(c) Knowingly and voluntarily agrees to all of the terms set forth in this Agreement; and
(d) Knowingly and voluntarily intends to be legally bound by the terms of this Agreement;
The following subparagraphs shall be applicable only if Executive is forty years of age or older at the time Executive signs this Agreement.
(e) Executive has been given a full twenty-one (21) days within which to consider the terms of this Agreement and consult with an attorney of Executive's choice and, to the extent Executive executes this Agreement prior to expiration of the full twenty-one (21) days, Executive knowingly and voluntarily waives that period; and
(f) Executive has a full seven (7) days following the execution of this Agreement to revoke this Agreement (the “Revocation Period") by providing written revocation notice to the Company’s General Counsel or such other person as the Company designates. The revocation must be personally delivered or mailed to the General Counsel or such other person as the Company designates at 1372 Broadway New York, NY 10018 and postmarked within seven (7) calendar days of Executive’s execution of this Agreement. This Agreement shall not become effective or enforceable until the Revocation Period has expired.
| The parties hereto have knowingly and voluntarily executed this Agreement as of the date set forth below: | ||||||||||||||
Date:_______________________________ | By: | _____________________________________ | ||||||||||||
| [Executive Name] | ||||||||||||||
Date:_______________________________ | By: | _____________________________________ | ||||||||||||
| Ross Stores, Inc. and | ||||||||||||||
| Subsidiaries (“Ross”) | ||||||||||||||
____________ ___________
Executive's Initials Ross' Initials
6
AMENDMENT TO EXECUTIVE EMPLOYMENT AGREEMENT
THIS AMENDMENT TO THE EXECUTIVE EMPLOYMENT AGREEMENT (the “Amendment”) is made, effective as of February 27, 2025, by Ross Stores, Inc. (the “Company”) and James G. Conroy (the “Executive”). The Company and the Executive previously entered into an Executive Employment Agreement (“Employment Agreement”), effective October 21, 2024 (attached hereto), and it is now the intention of the Company and the Executive to amend the Employment Agreement to confirm certain terms of their mutual agreement, as set forth below. Accordingly, the Company and the Executive hereby agree as follows, effective October 21, 2024:
1. Section 4 of the Employment Agreement is hereby amended by adding the following Section 4(h) immediately after Section 4(g):
“(h) Legal Fees. The Company will reimburse the Executive for (i) up to $50,000 in legal fees related to the review and negotiation of the Executive’s initial Employment Agreement and (ii) up to $10,000 in legal fees for each subsequent contract renewal/extension. Reimbursements will be treated as income and subject to applicable deductions and tax withholding.”
2. Section 4 of the Employment Agreement is hereby amended by adding the following Section 4(i) immediately after Section 4(h):
“(i) Car Service. The Company shall furnish the Executive with car service for Executive’s daily commute with expenses paid by the Company which will be treated as income and subject to applicable deductions and tax withholding.”
3. Section 4 of the Employment Agreement is hereby amended by adding the following Section 4(j) immediately after Section 4(i):
“(j) Relocation Bonus. The Company shall pay the Executive a Relocation Bonus of $800,000 (less deductions and withholdings), subject to the terms of the Repayment Agreement, comprised of the following: (a) $300,000 paid within thirty (30) days following the Executive’s Date in Position; and (b) $500,000 to be paid within 30 days of Executive’s entering into a purchase agreement for the purchase of a home within fifty (50) miles of the Company’s New York Buying Office (“NYBO”) on or before August 31, 2025, and providing documentation acceptable to the Company.”
4. Section 4 of the Employment Agreement is hereby amended by adding the following Section 4(k) immediately after Section 4(j):
“(k) Relocation Benefits. The Executive is eligible for Relocation Benefits subject to the terms and conditions of the Repayment Agreement and the Executive’s timely signing the Repayment Agreement. Eligibility for reimbursement is conditioned on adherence to the terms outlined in the Company’s Relocation Policy Guidelines, which has been made available to the Executive. Items eligible for reimbursement to the Executive include temporary lodging near the NYBO until the earlier of relocation to NY or August 31, 2025, airfare for commuting flights to and from NY prior to relocation, and certain relocation expenses incurred that are not listed in the guidelines but are reviewed and pre-approved by the Executive Chairman of the Board.”
5. Section 4 of the Employment Agreement is hereby amended by adding the following Section (l) immediately after Section 4(k):
“(l) Relocation Gross-Up. The Company will gross-up the Executive’s taxable relocation expenses (other than airfare for commuting flights to and from NY prior to relocation) using the inverse-supplemental method, which will provide the Executive with a payment at the federal and state supplemental tax rates determined by the IRS and the applicable state/local government. The gross-up payment will provide a contribution towards the Executive’s tax liability related to taxable relocation expenses.”
Except for the amendments as set forth above, the Employment Agreement and all of its terms remain in force and in effect.
IN WITNESS WHEREOF, the parties have executed this Amendment as of the date and year first written above.
| ROSS STORES, INC | EXECUTIVE | |||||||||||||||||||
| /s/Michael Balmuth | /s/James G. Conroy | |||||||||||||||||||
| Michael Balmuth | James G. Conroy | |||||||||||||||||||
| Executive Chairman of the Board | Chief Executive Officer | |||||||||||||||||||
| Date: | March 2, 2025 | Date: | February 28, 2025 | |||||||||||||||||
2
 |  | ||||
REPAYMENT AGREEMENT
If I remain employed by Ross Stores, Inc. (“Ross”) as described below, I am eligible to earn:
•a Sign-on Bonus of $7,625,000 less applicable deductions and withholdings, which I will earn upon completion of 12 months from my Date in Position (actual first day of employment to be “Date in Position”) with Ross (the “Bonus Earning Period”), but which will be advanced to me within 30 days after my Date in Position, under the terms and conditions described below (the “Sign-On Bonuses”); and
•a Relocation Bonus of $800,000, as further described in the Compensation and Benefits Summary dated October 13, 2024, which is incorporated by reference, under the terms and conditions described below (the “Relocation Bonus”) which I will earn upon completion of 36 months from my Date in Position (the “Bonus Earning Period”), but which may be advanced to me; and
•Relocation Benefits as further described in the Compensation and Benefits Summary dated October 13, 2024, which is incorporated by reference, under the terms and conditions described below (the “Relocation Benefits”) which I will earn upon completion of 36 months from my Date in Position (the “Bonus Earning Period”), but which may be advanced to me.
I understand that the Sign-On Bonus, Relocation Bonus, and Relocation Benefits are provided as an advance based on the expectation that I will remain employed with the Company for the entire Bonus Earning Period applicable to each. I further understand that no portion of the Sign-On Bonus, Relocation Bonus, and Relocation Benefits is earned unless and until I have been employed with the Company for such period.
As such, I agree and acknowledge that, if before the Sign-On Bonus, Relocation Bonus, or Relocation Benefits are advanced and I terminate employment for any reason other than Death or Good Reason as defined in Section 6(e)(i) in my Executive Employment Agreement (the “Executive Agreement”), I will not be paid the Bonus or any portion of the same.
I further agree and acknowledge that, if my employment is involuntarily terminated by Ross for Cause (as defined below) during the applicable Bonus Earning Period, I will not be eligible to earn any portion of the Sign-On Bonus, Relocation Bonus, or Relocation Benefits, and will be required to repay Ross the gross amount of the Sign-On Bonus, Relocation Bonus, and any Relocation Benefits advanced to me.
The Bonus Earning Period is tolled during any leave of absence greater than 3 months.
Repayment of the Sign-On Bonus, Relocation Bonus, or Relocation Benefits is due within thirty days of termination of employment.
To the extent permitted by applicable law, I authorize Ross to deduct the Sign-On Bonus, Relocation Bonus, and/or Relocation Benefits repayment owed from any amounts owed to me by the Company including, without limitation, severance, salary, bonus, and vacation pay. I further agree to provide any additional authorization as
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may be required under applicable law to effectuate this deduction. Should such deduction be insufficient to reimburse Ross fully, I agree to timely pay the remaining amount owed.
I acknowledge and agree that for purposes of this Repayment Agreement, “Cause” means “Cause” as defined in Section 6(c) of my Executive Employment Agreement.
In the event that I fail to timely repay the entire amount owed, I agree that any unpaid amount shall accrue interest at the maximum legal interest rate per year. I further agree that if any action is commenced by Ross to recover monies I owe the Company under this Repayment Agreement (including interest accrued on such debt) I shall pay all costs and expenses incurred, including but not limited to, reasonable attorney’s fees incurred by the Company.
This Repayment Agreement constitutes the complete and final agreement between me and Ross with regard to my Sign-On Bonus, Relocation Bonus, and/or Relocation Benefits. It is entered into without reliance on any promise or representation, written or oral, other than those expressly included herein, and it supersedes any other such promises or representations. This Repayment Agreement may not be modified or amended except in writing and signed by both me and the Executive Chairman of the Board or the Chairman of the Board if the office of Executive Chairman is vacant.
By my signature below, I hereby acknowledge that I have read and fully understand and agree to the terms of this Repayment Agreement, including (without limitation) my obligation to repay the Sign-On Bonus, Relocation Bonus, and/or Relocation Benefits as described herein.
| /s/James G. Conroy | October 21, 2024 | |||||||||||||
| James G. Conroy | Date | |||||||||||||
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ROSS STORES, INC.
NOTICE OF GRANT OF RESTRICTED STOCK UNITS
Ross Stores, Inc. (the “Company”) has granted to the Participant an award (the “Award”) of certain restricted stock units pursuant to the Ross Stores, Inc. 2017 Equity Incentive Plan (the “Plan”), each of which represents the right to receive one (1) share of Stock on the applicable Settlement Date, as follows. Capitalized terms used herein but not otherwise defined have the meanings set forth in the Plan and the Restricted Stock Units Agreement (the “Restricted Stock Units Agreement”):
Participant: | James Conroy | XXXXXXX | ||||||
Date of Grant: | December 2, 2024 | |||||||
Total Number of Units: | 51,164 (each a “Unit”), subject to adjustment as provided by the Restricted Stock Units Agreement. | |||||||
Settlement Date: | Except as provided by the Restricted Stock Units Agreement, the date on which a Unit becomes a Vested Unit. | |||||||
Vested Units: | Except as provided in the Restricted Stock Units Agreement, the Units subject to the Award will become Vested Units with respect to the applicable indicated percentage of the Total Number of Units on the applicable vesting dates specified below (“Vesting Dates”), subject in each case to the Participant’s continued Service through such Vesting Dates and satisfaction of any Stock Appreciation Condition applicable to the vesting of such Units as set forth below: | |||||||
Vested Units | Vesting Date | |||||||
25% | September 8, 2028 | |||||||
25% | September 8, 2028 - if the Stock Appreciation Condition is met on or prior to such date | |||||||
25% | March 23, 2029 | |||||||
25% | March 23, 2029 - if the Stock Appreciation Condition is met on or prior to such date | |||||||
The ”Stock Appreciation Condition” for vesting of the Units will be met if the closing sale price of a share of the Stock over any period of 30 consecutive trading days is not less than $195.45 (125% of the closing sale price of the Stock on December 2, 2024, the Participant’s first date of employment with the Company (the “Date in Position”)) (in each case as reported on the Nasdaq Stock Exchange, and as adjusted to reflect any stock split or stock dividend or similar capitalization event that may occur after the Date in Position). If the Stock Appreciation Condition is not met by September 8, 2028, 25% of the Units subject to the Award will be automatically terminated and cancelled on such date, and will not be eligible to vest. If the Stock Appreciation Condition is not met by March 23, 2029, 25% of the Units subject to the Award will be automatically terminated and cancelled on such date, and will not be eligible to vest.
By their signatures below or by electronic acceptance or authentication in a form authorized by the Company, the Company and the Participant agree that the Award is governed by this Grant Notice and by the provisions of the Restricted Stock Units Agreement and the Plan, both of which are made a part of this document. The Participant acknowledges that copies of the Plan, the Restricted Stock Units Agreement and the prospectus for the Plan are available on the Company’s internal web site and may be viewed and printed by the Participant for attachment to the Participant’s copy of this Grant Notice. The Participant represents that the Participant has read and is familiar with the provisions of the Restricted Stock Units Agreement and the Plan, and hereby accepts the Award subject to all of their terms and conditions.
ROSS STORES, INC. | PARTICIPANT | |||||||
| /s/Elizabeth Garrett | /s/James G. Conroy | |||||||
Elizabeth Garrett | James G. Conroy | |||||||
| December 13, 2024 | December 12, 2024 | |||||||
Date | Date | |||||||
ROSS STORES, INC.
RESTRICTED STOCK UNITS AGREEMENT
Ross Stores, Inc. has granted to the Participant named in the Notice of Grant of Restricted Stock Units (the “Grant Notice”) to which this Restricted Stock Units Agreement (the “Agreement”) is attached an Award consisting of Restricted Stock Units (each a “Unit”) subject to the terms and conditions set forth in the Grant Notice and this Agreement. The Award has been granted pursuant to and shall in all respects be subject to the terms and conditions of the Ross Stores, Inc. 2017 Equity Incentive Plan (the “Plan”), as amended to the Date of Grant, the provisions of which are incorporated herein by reference. By signing the Grant Notice, the Participant: (a) acknowledges receipt of and represents that the Participant has read and is familiar with the Grant Notice, this Agreement, the Plan and a prospectus for the Plan prepared in connection with the registration with the Securities and Exchange Commission of the shares of Stock issuable pursuant to the Award (the “Plan Prospectus”), (b) accepts the Award subject to all of the terms and conditions of the Grant Notice, this Agreement and the Plan and (c) agrees to accept as binding, conclusive and final all decisions or interpretations of the Committee upon any questions arising under the Grant Notice, this Agreement or the Plan.
1. Definitions and Construction.
1.1 Definitions. Unless otherwise defined herein, capitalized terms shall have the meanings assigned to such terms in the Grant Notice or the Plan. For purposes of the Award, the following terms have the following meanings:
(a) “Date of Grant” means the effective Date of Grant of the Award as set forth in the Grant Notice.
(b) “Employment Agreement” means Participant’s Executive Employment Agreement with the Company dated October 21, 2024.
(c) “Total Number of Units” means the total number of Units subject to the Award as set forth in the Grant Notice and as adjusted from time to time pursuant to Section 9.
(d) “Vested Units” mean, on any relevant date, that portion of the Total Number of Units which has vested in accordance with the vesting schedule set forth in the Grant Notice or as otherwise provided by this Agreement, or which have vested in accordance with the terms of the Employment Agreement. Provided that the Participant’s Service has not terminated prior to the relevant vesting date described in the Grant Notice, the number of Units as provided by the Grant Notice shall become Vested Units on such date.
1.2 Construction. Captions and titles contained herein are for convenience only and shall not affect the meaning or interpretation of any provision of this Agreement. Except when otherwise indicated by the context, the singular shall include the plural and the plural shall include the singular. Use of the term “or” is not intended to be exclusive, unless the context clearly requires otherwise.
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2. Administration.
All questions of interpretation concerning the Grant Notice, this Agreement, the Plan or any other form of agreement or other document employed by the Company in the administration of the Plan or the Award shall be determined by the Committee. All such determinations by the Committee shall be final, binding and conclusive upon all persons having an interest in the Award, unless fraudulent or made in bad faith. Any and all actions, decisions and determinations taken or made by the Committee in the exercise of its discretion pursuant to the Plan or the Award or other agreement thereunder (other than determining questions of interpretation pursuant to the preceding sentence) shall be final, binding and conclusive upon all persons having an interest in the Award. Any Officer shall have the authority to act on behalf of the Company with respect to any matter, right, obligation, or election which is the responsibility of or which is allocated to the Company herein, provided the Officer has apparent authority with respect to such matter, right, obligation, or election.
3. The Award.
3.1 Grant of Units. On the Date of Grant, the Participant shall acquire, subject to the provisions of this Agreement, the Total Number of Units set forth in the Grant Notice, subject to adjustment as provided in Section 9. As a condition to the issuance of any shares of Stock upon settlement of the Award, the Participant shall first execute and deliver an executed copy of the Grant Notice to the Company or otherwise accept the Award in accordance with the Company’s electronic acceptance procedures. Each Unit represents a right to receive one (1) share of Stock, on a date determined in accordance with the Grant Notice and this Agreement.
3.2 No Monetary Payment Required. The Participant is not required to make any monetary payment (other than applicable tax withholding, if any) as a condition to receiving the Award of Units or shares of Stock issued upon settlement of the Units, the consideration for which shall be past services actually rendered or future services to be rendered to a Participating Company or for its benefit. Notwithstanding the foregoing, if required by applicable law, the Participant shall furnish consideration in the form of cash or past services rendered to a Participating Company or for its benefit having a value not less than the par value of the shares of Stock issued upon settlement of the Units.
4. Vesting of Units.
Units acquired pursuant to this Agreement shall become Vested Units as provided in the Grant Notice, this Agreement and in the Employment Agreement. Except as provided by the Employment Agreement, no additional Units will become Vested Units following the Participant’s termination of Service for any reason.
5. Company Reacquisition Right.
5.1 Grant of Company Reacquisition Right. Except to the extent otherwise provided by the Employment Agreement, in the event that the Participant’s Service terminates for any reason or no reason, with or without cause, the Participant shall forfeit and the Company shall automatically reacquire all Units which are not Vested Units as of the time of such
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termination (“Unvested Units”), and the Participant shall not be entitled to any payment therefor (the “Company Reacquisition Right”).
5.2 Ownership Change Event, Non-Cash Dividends, Distributions and Adjustments. Upon the occurrence of an Ownership Change Event, a dividend or distribution to the stockholders of the Company paid in shares of Stock or other property, or any other adjustment upon a change in the capital structure of the Company as described in Section 9, any and all new, substituted or additional securities or other property (other than regular, periodic cash dividends paid on Stock pursuant to the Company’s then current dividend grant practices or dividend policy) to which the Participant is entitled by reason of the Participant’s ownership of Unvested Units shall be immediately subject to the Company Reacquisition Right and included in the terms “Units” and “Unvested Units” for all purposes of the Company Reacquisition Right with the same force and effect as the Unvested Units immediately prior to the Ownership Change Event, dividend, distribution or adjustment, as the case may be. For purposes of determining the number of Vested Units following an Ownership Change Event, dividend, distribution or adjustment, credited Service shall include all Service with any corporation which is a Participating Company at the time the Service is rendered, whether or not such corporation is a Participating Company both before and after any such event.
6. Settlement of the Award.
6.1 Issuance of Shares of Stock. Subject to the provisions of Section 6.3, the Company shall issue one (1) share of Stock to the Participant on the Settlement Date with respect to each Vested Unit to be settled on such date. The Settlement Date with respect to a Unit shall be the date on which such Unit becomes a Vested Unit, as provided by the Grant Notice (an “Original Settlement Date”); provided, however, that if the tax withholding obligations of a Participating Company, if any, will not be satisfied by the share withholding method described in Section 7.3 and the Original Settlement Date would occur on a date on which a sale by the Participant of the shares of Stock to be issued in settlement of the Vested Units would violate the Trading Compliance Policy of the Company, then the Settlement Date for such Vested Units shall be deferred until the next day on which the sale of such shares of Stock would not violate the Trading Compliance Policy, but in any event such Settlement Date will be deferred no later than December 31st of the calendar year in which the Original Settlement Date occurs. Notwithstanding the foregoing, if such later Settlement Date is permitted without triggering adverse tax consequences under Section 409A of the Code, the Settlement Date may be delayed pursuant to the foregoing provision until no later than the 15th day of the third calendar month following calendar year that includes the Original Settlement Date. Shares of Stock issued in settlement of Units shall not be subject to any restriction on transfer other than any such restriction as may be required pursuant to Section 6.3, Section 7 or the Company’s Trading Compliance Policy.
6.2 Beneficial Ownership of Shares; Certificate Registration. The Participant hereby authorizes the Company, in its sole discretion, to deposit any or all shares of Stock acquired by the Participant pursuant to the settlement of the Award with the Company’s transfer agent, including any successor transfer agent, to be held in book entry form, or to deposit such shares of Stock for the benefit of the Participant with any broker with which the Participant has an account relationship of which the Company has notice. Except as provided by the foregoing, a certificate for the shares of Stock acquired by the Participant shall be registered in the name of the Participant, or, if applicable, in the names of the heirs of the Participant.
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6.3 Restrictions on Grant of the Award and Issuance of Shares. The grant of the Award and issuance of shares of Stock upon settlement of the Award shall be subject to compliance with all applicable requirements of federal, state or foreign law with respect to such securities. No shares of Stock may be issued hereunder if the issuance of such shares would constitute a violation of any applicable federal, state or foreign securities laws or other law or regulations or the requirements of any stock exchange or market system upon which the Stock may then be listed. The inability of the Company to obtain from any regulatory body having jurisdiction the authority, if any, deemed by the Company’s legal counsel to be necessary to the lawful issuance of any shares of Stock subject to the Award shall relieve the Company of any liability in respect of the failure to issue such shares as to which such requisite authority shall not have been obtained. As a condition to the settlement of the Award, the Company may require the Participant to satisfy any qualifications that may be necessary or appropriate, to evidence compliance with any applicable law or regulation and to make any representation or warranty with respect thereto as may be requested by the Company.
6.4 Fractional Shares. The Company shall not be required to issue fractional shares of Stock upon the settlement of the Award.
7. Tax Withholding.
7.1 In General. At the time the Grant Notice is executed, or at any time thereafter as requested by a Participating Company, the Participant hereby authorizes withholding from payroll and any other amounts payable to the Participant, and otherwise agrees to make adequate provision for, any sums required to satisfy the federal, state, local and foreign tax (including any social insurance) withholding obligations of the Participating Company, if any, which arise in connection with the grant of the Award, the vesting of Units or the issuance of shares of Stock in settlement thereof. The Company shall have no obligation to deliver shares of Stock in settlement of any portion of the Award until the tax withholding obligations of the Participating Company have been satisfied by the Participant.
7.2 Assignment of Sale Proceeds; Payment of Tax Withholding. Subject to compliance with applicable law and the Company’s Trading Compliance Policy, the Company may permit the Participant to satisfy the Participating Company’s tax withholding obligations in accordance with procedures established by the Company providing for either (i) delivery by the Participant to the Company or a broker approved by the Company of properly executed instructions, in a form approved by the Company, providing for the assignment to the Company of the proceeds of a sale with respect to some or all of the shares of Stock being acquired upon settlement of the Units, or (ii) payment by check. The Participant shall deliver written notice of any such permitted election to the Company on a form specified by the Company for this purpose at least thirty (30) days (or such other period established by the Company) prior to the date on which the Company’s tax withholding obligation arises (the “Withholding Date”). If the Participant elects payment by check, the Participant agrees to deliver a check for the full amount of the required tax withholding to the applicable Participating Company on or before the third business day following the Withholding Date. If the Participant elects payment by check but fails to make such payment as required by the preceding sentence, the Company is hereby authorized, at its discretion, to satisfy the tax withholding obligations through any means authorized by this Section 7.2, including by directing a sale for the account of the Participant of some or all of the shares of Stock to be issued upon settlement of the Units from which the required taxes shall be
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withheld, by withholding from payroll and any other amounts payable to the Participant or by withholding shares in accordance with Section 7.3.
7.3 Withholding in Net Settlement Shares. The Company shall have the right, but not the obligation, to require the Participant to satisfy all or any portion of a Participating Company’s tax withholding obligations by deducting from the shares of Stock otherwise deliverable to the Participant in settlement of the Award a number of whole shares having a fair market value, as determined by the Company as of the date on which the tax withholding obligations arise, not in excess of the amount of such tax withholding obligations determined by the applicable rates required to avoid liability classification of the Award under generally accepted accounting principles in the United States.
8. Effect of Change in Control.
In the event of a Change in Control, the Award shall be subject to the definitive agreement entered into by the Company in connection with the Change in Control. Except to the extent that the Committee determines to cash out the Award in accordance with Section 13.1(c) of the Plan, the surviving, continuing, successor, or purchasing corporation or other business entity or parent thereof, as the case may be (the “Acquiror”), may, without the consent of the Participant, assume or continue in full force and effect the Company’s rights and obligations under the Award or substitute for the Award a substantially equivalent award for the Acquiror’s stock. For purposes of this Section, the Award shall be deemed assumed if, following the Change in Control, the Award confers the right to receive, subject to the terms and conditions of the Plan and this Agreement, for each Unit subject to the Award immediately prior to the Change in Control, the consideration (whether stock, cash, other securities or property or a combination thereof) to which a holder of a share of Stock on the effective date of the Change in Control was entitled. In the event that the Acquiror elects not to assume, continue or substitute for the outstanding Award in connection with a Change in Control, the vesting of the Units shall be accelerated in full, and the Total Number of Units shall be deemed Vested Units as of the effective date of the Change in Control, provided that the Participant’s Service has not terminated prior to such date.
9. Adjustments for Changes in Capital Structure.
Subject to any required action by the stockholders of the Company and the requirements of Section 409A of the Code to the extent applicable, in the event of any change in the Stock effected without receipt of consideration by the Company, whether through merger, consolidation, reorganization, reincorporation, recapitalization, reclassification, stock dividend, stock split, reverse stock split, split-up, split-off, spin-off, combination of shares, exchange of shares, or similar change in the capital structure of the Company, or in the event of payment of a dividend or distribution to the stockholders of the Company in a form other than Stock (other than regular, periodic cash dividends paid on Stock pursuant to the Company’s then current dividend grant practices or dividend policy) that has a material effect on the Fair Market Value of shares of Stock, appropriate and proportionate adjustments shall be made in the number of Units subject to the Award and/or the number and kind of shares or other property to be issued in settlement of the Award, in order to prevent dilution or enlargement of the Participant’s rights under the Award. For purposes of the foregoing, conversion of any convertible securities of the Company shall not be treated as “effected without receipt of consideration by the Company.” Any and all new, substituted or additional securities or other property (other than regular,
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periodic cash dividends paid on Stock pursuant to the Company’s dividend policy) to which the Participant is entitled by reason of ownership of Units acquired pursuant to this Award will be immediately subject to the provisions of this Award on the same basis as all Units originally acquired hereunder. Any fractional Unit or share resulting from an adjustment pursuant to this Section shall be rounded down to the nearest whole number. Such adjustments shall be determined by the Committee, and its determination shall be final, binding and conclusive.
10. Dividends; Rights as a Stockholder.
10.1 Dividends. Subject to the terms of the Employment Agreement, prior to the date that shares of Stock are issued in settlement of the Award, the Participant will become entitled to receive payments equal in amount to any cash dividends and other distributions paid in accordance with the Company’s dividend policy with respect to a number of shares of Common Stock corresponding to the number of shares to be issued in settlement of the outstanding Units that remain subject to the Award. Payment of any such dividend or distribution equivalent amounts will be deferred and will remain subject to the same forfeiture restrictions as apply to the Units that remain subject to the Award, and shall accrue to the extent necessary so that such dividend or distribution equivalent amounts are not paid prior to the date that the Units become Vested Units, and will be paid upon the Units becoming Vested Units.
10.2 Stockholder Rights. The Participant shall have no rights as a stockholder with respect to any shares of Stock which may be subject to issuance in settlement of this Award, until the date of the actual issuance of such shares (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company). No adjustment or payment shall be made for dividends, distributions or other rights for which the record date is prior to the date the shares of Stock are issued, except as provided in Section 9 and Section 10.1.
11. Legends.
The Company may at any time place legends or stop transfer restrictions referencing any applicable federal, state or foreign securities law restrictions on all certificates (whether in tangible or electronic form) representing shares of Stock issued pursuant to this Agreement. The Participant shall, at the request of the Company, promptly present to the Company any and all certificates representing shares of Stock acquired pursuant to this Award in the possession or in an electronic account of the Participant in order to carry out the provisions of this Section.
12. Compliance with Section 409A.
It is intended that any election, payment or benefit which is made or provided pursuant to or in connection with this Award and that may result in Section 409A Deferred Compensation shall comply in all respects with the applicable requirements of Section 409A (including applicable regulations or other administrative guidance thereunder, as determined by the Committee in good faith) in order to avoid the unfavorable tax consequences provided therein for non-compliance. In connection with effecting such compliance with Section 409A, the following shall apply:
12.1 Separation from Service; Required Delay in Payment to Specified Employee. Notwithstanding anything set forth herein to the contrary, no amount payable
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pursuant to this Agreement on account of a termination of the Participant’s Service which constitutes a “deferral of compensation” within the meaning of the Treasury Regulations issued pursuant to Section 409A of the Code (the “Section 409A Regulations”) shall be paid unless and until the Participant has incurred a “separation from service” within the meaning of the Section 409A Regulations. Furthermore, to the extent that the Participant is a “specified employee” within the meaning of the Section 409A Regulations as of the date of the Participant’s separation from service, no amount that constitutes a deferral of compensation which is payable on account of the Participant’s separation from service shall be paid to the Participant before the date (the “Delayed Payment Date”) which is the first day of the seventh month after the date of the Participant’s separation from service or, if earlier, the date of the Participant’s death following such separation from service. All such amounts that would, but for this Section, become payable prior to the Delayed Payment Date will be accumulated and paid on the Delayed Payment Date.
12.2 Other Changes in Time of Payment. Neither the Participant nor the Company shall take any action to accelerate or delay the payment of any benefits under this Agreement in any manner which would not be in compliance with the Section 409A Regulations.
12.3 Amendments to Comply with Section 409A; Indemnification. Notwithstanding any other provision of this Agreement to the contrary, the Company is authorized to amend this Agreement, to void or amend any election made by the Participant under this Agreement and/or to delay the payment of any monies and/or provision of any benefits in such manner as may be determined by the Company, in its discretion, to be necessary or appropriate to comply with the Section 409A Regulations, without prior notice to or consent of the Participant. The Participant hereby releases and holds harmless the Company, its directors, officers and stockholders from any and all claims that may arise from or relate to any tax liability, penalties, interest, costs, fees or other liability incurred by the Participant in connection with the Award, including as a result of the application of Section 409A.
12.4 Advice of Independent Tax Advisor. The Company has not obtained a tax ruling or other confirmation from the Internal Revenue Service with regard to the application of Section 409A to the Award, and the Company does not represent or warrant that this Agreement will avoid adverse tax consequences to the Participant, including as a result of the application of Section 409A to the Award. The Participant hereby acknowledges that he or she has been advised to seek the advice of his or her own independent tax advisor prior to entering into this Agreement, and is not relying upon any representations of the Company or any of its agents as to the effect of or the advisability of entering into this Agreement.
13. Miscellaneous Provisions.
13.1 Termination or Amendment. The Committee may terminate or amend the Plan or this Agreement at any time; provided, however, that, except as provided in Section 8 in connection with a Change in Control, no such termination or amendment may have a materially adverse effect on the Participant’s rights under this Agreement without the consent of the Participant, unless such termination or amendment is necessary to comply with applicable law or government regulation (including, but not limited to, Section 409A). No amendment or addition to this Agreement shall be effective unless in writing.
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13.2 Nontransferability of the Award. Prior to the issuance of shares of Stock on the applicable Settlement Date (and except with regard to such issued shares), neither this Award nor any Units that remain subject to this Award shall be subject in any manner to anticipation, alienation, sale, exchange, transfer, assignment, pledge, encumbrance, or garnishment by creditors of the Participant or the Participant’s beneficiary, except transfer by will or by the laws of descent and distribution. All rights with respect to the Award shall be exercisable during the Participant’s lifetime only by the Participant or the Participant’s guardian or legal representative.
13.3 Further Instruments. The parties hereto agree to execute such further instruments and to take such further action as may reasonably be necessary to carry out the intent of this Agreement.
13.4 Binding Effect. This Agreement shall inure to the benefit of the successors and assigns of the Company and, subject to the restrictions on transfer set forth herein, be binding upon the Participant and the Participant’s heirs, executors, administrators, successors and assigns.
13.5 Delivery of Documents and Notices. Any document relating to participation in the Plan or any notice required or permitted hereunder shall be given in writing and shall be deemed effectively given (except to the extent that this Agreement provides for effectiveness only upon actual receipt of such notice) upon personal delivery, electronic delivery at the e-mail address, if any, provided for the Participant by a Participating Company, or upon deposit in the U.S. Post Office or foreign postal service, by registered or certified mail, or with a nationally recognized overnight courier service, with postage and fees prepaid, addressed to the other party at the address of such party set forth in the Grant Notice or at such other address as such party may designate in writing from time to time to the other party.
(a) Description of Electronic Delivery and Signature. The Plan documents, which may include but do not necessarily include: the Plan, the Grant Notice, this Agreement, the Plan Prospectus, and any reports of the Company provided generally to the Company’s stockholders, may be delivered to the Participant electronically. In addition, if permitted by the Company, the Participant may deliver electronically the Grant Notice to the Company or to such third party involved in administering the Plan as the Company may designate from time to time. Such means of electronic delivery may include but do not necessarily include the delivery of a link to a Company intranet or the Internet site of a third party involved in administering the Plan, the delivery of the document via e-mail or such other means of electronic delivery specified by the Company. Any and all such documents and notices may be electronically signed.
(b) Consent to Electronic Delivery and Signature. The Participant acknowledges that the Participant has read Section 13.5(a) of this Agreement and consents to the electronic delivery of the Plan documents and, if permitted by the Company, the delivery of the Grant Notice, as described in Section 13.5(a). The Participant agrees that any and all such documents requiring a signature may be electronically signed and that such electronic signature shall have the same effect as handwritten signature for the purposes of validity, enforceability and admissibility. The Participant acknowledges that he or she may receive from the Company a paper copy of any documents delivered electronically at no cost to the Participant by contacting the Company by telephone or in writing. The Participant further acknowledges that the
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Participant will be provided with a paper copy of any documents if the attempted electronic delivery of such documents fails. Similarly, the Participant understands that the Participant must provide the Company or any designated third party administrator with a paper copy of any documents if the attempted electronic delivery of such documents fails. The Participant may revoke his or her consent to the electronic delivery of documents described in Section 13.5(a) or may change the electronic mail address to which such documents are to be delivered (if Participant has provided an electronic mail address) at any time by notifying the Company of such revoked consent or revised e-mail address by telephone, postal service or electronic mail. Finally, the Participant understands that he or she is not required to consent to electronic delivery of documents described in Section 13.5(a).
13.6 No Rights to Continued Service or Employment. The Participant understands and acknowledges that, except as otherwise provided in the Employment Agreement, the Participant’s employment is “at will” and is for no specified term. Nothing in this Agreement shall confer upon the Participant any right to continue in the Service of a Participating Company, or interfere in any way with any right of the Participating Company Group to terminate the Participant’s Service at any time.
13.7 Integrated Agreement. The Grant Notice, this Agreement and the Plan, taken together with the Employment Agreement, shall constitute the entire understanding and agreement of the Participant and the Participating Company Group with respect to the subject matter contained herein or therein and supersede any prior agreements, understandings, restrictions, representations, or warranties among the Participant and the Participating Company Group with respect to such subject matter. To the extent contemplated herein or therein, the provisions of the Grant Notice, this Agreement and the Plan shall survive any settlement of the Award and shall remain in full force and effect.
13.8 Applicable Law. This Agreement shall be governed by the laws of the State of California as such laws are applied to agreements between California residents entered into and to be performed entirely within the State of California.
13.9 Counterparts. The Grant Notice may be executed in counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.
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ROSS STORES, INC.
INSIDER TRADING POLICY
I. Trading in Securities On the Basis of Company Material Nonpublic Information is Prohibited
The purchase or sale of securities of a public company by any person on the basis of material nonpublic information received in the course of working for the company is a violation of federal and state securities laws. Furthermore, it is important that the appearance, as well as the fact, of trading on the basis of material nonpublic information be avoided. Therefore, it is the policy of Ross Stores, Inc. (together with its subsidiaries, the “Company”) that any person subject to this Insider Trading Policy (“the Policy”) who possesses material nonpublic information pertaining to the Company may not trade in the Company’s securities, advise anyone else to do so, or communicate the information to anyone else outside the Company until the information has been disseminated to the public or is no longer material.
No employee, officer, director, or consultant of the Company or its subsidiaries who is aware of material nonpublic information relating to the Company may, directly or indirectly (including through Family Members [as defined in Section II below] or other persons or entities over which the individual has or shares direct or indirect voting or investment control):
•buy or sell securities of the Company (except pursuant to a written trading plan that complies with Rule 10b5-1(c) promulgated by the Securities and Exchange Commission (“SEC”) and with the Special Guidelines for 10b5-1 Trading Plans included in Appendix I below),
•engage in any other action to take personal advantage of that information (including by trading in the securities of other publicly traded companies based on awareness of that information), or
•pass that information on to others outside the Company (including friends and family) or encourage them to trade in Company securities or other publicly traded securities (a practice referred to as “tipping”).
In addition, it is the policy of the Company that no employee, officer, director, or consultant who, in the course of working for the Company or its subsidiaries, becomes aware of material nonpublic information about another company (including those with which the Company does business, such as a customer, vendor, or supplier, and also including competitors of the Company) may trade in that other company’s securities (or engage in tipping or otherwise provide advice to others in regard to such trading) until that information becomes public or is no longer material.
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II. All Employees, Officers, Directors, Consultants, and Their Family Members and Affiliates Are Subject to This Policy
This Policy applies to all employees, officers, directors, and consultants of the Company and its subsidiaries. This Policy also applies to any other persons whom any of the Company’s insider trading Compliance Officers (as defined in Section IV below) may designate as covered because they have access to material nonpublic information concerning the Company, as well as to any person who receives material nonpublic information from any Company insider. This Policy also applies to family members who reside with an employee, officer, director, or consultant (including spouses, children [whether living at home or away at college], stepchildren, grandchildren, parents, stepparents, grandparents, siblings, and in-laws), anyone else who lives in such persons’ households, and any family members who do not live in their household but whose transactions in the Company’s securities are directed by an employee, officer, director, or consultant, or are subject to the control or influence by such persons, such as parents or children who consult with such persons before they trade in the Company’s securities (collectively referred to as “Family Members”). Each employee, officer, director, and consultant is responsible for assuring that the transactions of their Family Members or other persons are compliant with this Policy, and therefore should make their Family Members aware of the need to confer with them before trading in the Company’s securities, and every employee, officer, director, and consultant should treat all such Family Member transactions for the purposes of this Policy as if the transactions were for the insider’s own account. This Policy also applies to any entities (such as trusts, limited partnerships, and corporations) over which employees, officers, directors, and consultants have or share voting or investment control (collectively referred to as “Controlled Entities”), and transactions by Controlled Entities should be treated for the purposes of this Policy as if they were for the controlling insider person’s own account. This Policy does not, however, apply to personal securities transactions of Family Members where the purchase or sale decision is made by a third party not controlled by, influenced by, or related to any employee, officer, director, or consultant or their Family Members (for example, an independent trustee of a trust). For the purposes of this Policy, officers, outside directors, and consultants are included within the term “employee.”
III. Executive Officers, Directors, and Certain Designated Employees Are Subject to Additional Restrictions
Section 16 Insiders. The Board of Directors of the Company regularly designates certain officer-level employees as holding positions that make them subject to the reporting provisions and additional trading restrictions of Section 16 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the underlying rules and regulations promulgated by the SEC. Each such person, as well as the members of the Board of Directors, is referred to as a “Section 16 Insider.” The Company will maintain a list of Section 16 Insiders, and will amend the list from time to time as necessary to reflect the addition and the deletion (including due to resignation, departure, or change in role) of Section 16 Insiders.
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Access Persons. The Company maintains a list of other employees who are considered to have frequent or recurring access to material nonpublic information concerning the Company (“Access Persons”). The Company will maintain a list of Access Persons and will amend the list from time to time as necessary to reflect the addition and the deletion (including due to resignation, departure, or change in role or information access) of Access Persons.
Additional Restrictions. Because Section 16 Insiders and Access Persons are more likely than other employees to possess or become aware of material nonpublic information about the Company, and in light of the reporting requirements to which Section 16 Insiders are subject under Section 16 of the Exchange Act, Section 16 Insiders and Access Persons are subject to the additional restrictions set forth in Appendix I to this Policy. For purposes of this Policy, Section 16 Insiders and Access Persons are together referred to as “Insiders.”
IV. Insider Trading Compliance Officers
The Company has designated its General Counsel and Corporate Secretary and its Chief Financial Officer as its Insider Trading Compliance Officers (the “Compliance Officers”). The Company’s Group President and Chief Operating Officer is authorized to designate additional Compliance Officers, upon written notice to the other Compliance Officers.
The duties of the Compliance Officers include the following:
•Administering and interpreting this Policy and monitoring and enforcing compliance with policy provisions and procedures.
•Responding to inquiries relating to this Policy and its procedures.
•Establishing and providing to Insiders the Trading Window Calendar for each fiscal year (and revising that calendar as appropriate from time to time), and designating and announcing special trading “blackout” periods (as further discussed in Section XI below) during which Insiders (or designated subgroups of Insiders) are not allowed to trade in Company securities.
•Providing copies of this Policy and other appropriate materials to current and new employees, directors, and officers, as appropriate, and to such consultants and other persons as the Compliance Officers determine may have access to material nonpublic information concerning the Company.
•Administering and monitoring compliance by Insiders and Company employees with federal and state insider trading laws and regulations; and establishing procedures to assist in the preparation and filing of required SEC reports relating to trading in Company securities by Section 16 Insiders, including without limitation Forms 3, 4, and 5.
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•Revising this Policy as appropriate, including where necessary to reflect changes in federal or state insider trading laws and regulations, and stock exchange listing requirements.
•Maintaining as Company records originals or copies of documents required by the provisions of this Policy or the procedures set forth herein, and copies of required SEC reports relating to trading by Section 16 Insiders, including without limitation Forms 3, 4, 5, and 144.
•Establishing and maintaining the accuracy of the list of Section 16 Insiders and the list of Access Persons, and updating such lists periodically as necessary to reflect additions or deletions.
The Company’s Group President and Chief Operating Officer may designate one or more individuals who may perform the Compliance Officers’ duties in the event that one or more of the Compliance Officers are unable or unavailable to perform such duties. In fulfilling their duties under this Policy, the Compliance Officers shall be authorized to consult with the Company’s outside counsel.
V. Applicability of This Policy to Transactions in Company Securities
A. General Rule. This Policy applies to all transactions in the Company’s securities, including common stock, options to purchase common stock and any other securities the Company may issue from time to time, such as preferred stock, bonds, convertible notes, warrants, and convertible debentures, as well as derivative securities relating to the Company’s stock (such as exchange-traded options or swaps), whether or not issued by the Company. For purposes of this Policy, the term “trade” includes any transaction in the Company’s securities, including gifts and pledges.
B. Employee Benefit Plans.
Equity Incentive Plans. The trading prohibitions and restrictions set forth in this Policy do not apply to the exercise of Company-granted stock options or other equity awards for cash, or to the receipt of stock from the Company on a “net exercise” or “net of tax withholding” basis (that is, “exercise and hold,” including exercise or vesting events where shares are accepted by the Company to cover the recipient’s tax withholding obligations), but do apply to all sales to third parties of securities acquired through the exercise of stock options or receipt or settlement of other equity awards. Thus, this Policy does apply to the “same-day sale” (or cashless exercise and sale) of Company stock options.
Employee Stock Purchase Plans. The trading prohibitions and restrictions set forth in this Policy do not apply to periodic contributions by the Company or employees to any employee stock purchase plans or employee benefit plans (e.g., the ESPP or a pension or 401(k) plan) which may be adopted by the Company and used to purchase Company securities pursuant to the employee’s advance instructions. However, no employees will be allowed to enroll in such a plan or to alter their instructions so as to increase their level of withholding or to increase their purchases of Company securities in such plans while in
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the possession of material nonpublic information. Any sale of Company securities acquired under such plans will be subject to the prohibitions and restrictions of this Policy, to the extent such sale is under the control or direction of an employee.
Dividend Reinvestment Plan. This Policy does not apply to purchases of Company stock under any Company dividend reinvestment plan as a result of the reinvestment of dividends paid on Company common stock pursuant to the employee’s advance instructions. This Policy does apply, however, to voluntary purchases of Company stock resulting from additional contributions an employee chooses to make to any such plan, and to an employee’s initial election to participate in any such plan or to voluntarily increase his or her level of participation in the plan. This Policy also applies to the sale of any Company stock purchased by any employee pursuant to any such plan.
Tax Withholding Rights. The trading prohibitions and restrictions set forth in this Policy do not apply to the exercise of tax withholding elections or rights pursuant to which an Insider or any employee elects to have the Company withhold shares to satisfy any tax withholding requirements.
C. Permitted Gifts. No Insider may transfer securities of the Company by gift during a period when the Insider is not permitted to trade, unless the recipient has agreed in writing to hold the securities until the Company trading window is next open, or unless the gift is made pursuant to a qualifying Rule 10b5-1 Plan as described below.
VI. Definition of “Material Nonpublic Information”
A. “Material.” Information about the Company is “material” if it would be expected to affect the investment or voting decisions of a reasonable shareholder or investor, or if the disclosure of the information would be expected to significantly alter the total mix of the information in the marketplace about the Company. In simple terms, material information is any type of information which could reasonably be expected to affect the market price of the Company’s securities. Both positive and negative information may be material. While it is not possible to identify all information that could be deemed material, the following types of information ordinarily would be considered material:
•Financial performance, especially quarterly and year-end operating results (including sales and earnings), and significant changes in financial performance.
•Company guidance, forecasting, projections, and strategic plans.
•Potential mergers or acquisitions, or the sale of significant Company assets or subsidiaries.
•New major contracts, real estate transactions, or financing sources, or the loss thereof.
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•Significant changes or developments in supplies or inventory (and related costs), including significant vendor problems, shipping problems, import problems, product defects, recalls, or product returns.
•Cyber-attacks or hacking, including data security breaches.
•Significant information system or merchandise delivery system malfunctions.
•Significant pricing changes.
•Stock splits, public or private securities/debt offerings, or changes in Company dividend policies or amounts.
•Significant changes in senior management or membership of the Board of Directors.
•Significant labor disputes or negotiations.
•Actual or threatened major litigation, investigations, or actions by governmental or tax authorities, or the resolution of such litigation or other matters.
•Accidents, natural or man-made disasters, or health and safety events or incidents that result (or may result) in closures of Company stores, distribution centers, or other facilities, or other significant events that may hamper Company operations.
B. “Nonpublic.” Material information is “nonpublic” if it has not been widely disseminated to the general public through a report filed with the SEC, posting on the Company website, or release through major newswire services, national news services, or financial news services. For the purpose of this Policy, information will be considered public after the close of trading on the first full trading day following the day of the Company’s widespread public release of the information.
C. Consult a Compliance Officer When in Doubt. Any employees or other persons who may be subject to this Policy and who are unsure whether the information that they possess is material or nonpublic must consult a Compliance Officer for guidance before trading in any Company securities.
VII. Employees May Not Disclose Material Nonpublic Information to Others or Make Recommendations Regarding Trading in Securities of the Company (or of Other Public Companies)
No employee or other person who is subject to this Policy may disclose material nonpublic information concerning the Company to any other person (including Family Members) where such information might be used by such person to his or her advantage in the trading of the securities of the Company (or of other public companies to which
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such information potentially relates), a practice commonly known as “tipping.” No employee or Family Member may make recommendations or express opinions as to trading in the Company’s securities (or other public company securities) while in possession of material nonpublic information, except that such persons may advise others not to trade in the Company’s securities, including where such trading might violate the law or this Policy.
VIII. Employees May Not Discuss the Company’s Securities or Material, Nonpublic Information on the Internet or Social Media, or Via Texting or Electronic Messaging
Employees are prohibited from participating in Internet discussions or posting on the Internet or on social media (including Facebook, Instagram, YouTube, TikTok, WhatsApp, X [formerly known as Twitter], or similar social network or sharing sites), or blogging, tweeting, or text messaging regarding the Company’s securities or material, nonpublic information relating to the Company (or relating to other publicly traded companies).
IX. Only Designated Company Spokespersons Are Authorized to Disclose Material Nonpublic Information
The Company is required under the federal securities laws and stock exchange listing rules to avoid the selective disclosure of material nonpublic information. The Company has established procedures for releasing material information in a manner that is designed to achieve broad dissemination of the information immediately upon its release. Employees may not, therefore, disclose material information to anyone outside the Company, including Family Members and friends, other than in accordance with those established procedures for the public release of information. Any inquiries from outsiders regarding material nonpublic information about the Company should be forwarded to a Compliance Officer or to designated officers responsible for investor relations.
X. Certain Types of Transactions Are Completely Prohibited
A. Short Sales. Short sales of the Company’s securities evidence an expectation on the part of the seller that the securities will decline in value, and therefore signal to the market that the seller has a lack of confidence in the Company or its short-term prospects. In addition, short sales may reduce the seller’s incentive to improve the Company’s performance, and create a conflict of interest by rewarding the seller if the value of the Company’s securities declines. Short sales of the Company’s securities by any employees, officers, directors, and consultants of the Company and its subsidiaries are prohibited by this Policy. In addition, Section 16(c) of the Exchange Act expressly prohibits executive officers and directors from engaging in short sales.
B. Publicly Traded Options. A transaction in traded options is, in effect, a bet on the short-term movement of the Company’s stock price and therefore creates the appearance that the participant is trading based on inside information. Transactions in options also may focus the participant’s attention on short-term performance at the expense of the Company’s long-term objectives. Transactions by employees, officers,
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directors, or consultants of the Company and its subsidiaries in puts, calls, or other derivative securities involving the Company’s stock, on a stock exchange or in any other organized market, are prohibited by this Policy. (Option positions arising from certain types of hedging transactions are governed by the section below captioned “Hedging Transactions.”)
C. Hedging Transactions. Certain forms of hedging or monetization transactions, and related financial instruments (including forward sale contracts, prepaid variable forward contracts, equity swaps, and collars (including zero-cost collars)), allow a party to lock in much of the value of his or her stock holdings, often in exchange for all or part of the potential for upside appreciation in the stock. These transactions allow the party to continue to own the covered securities, but without the full risks and rewards of ownership. When that occurs, the participant may no longer have the same objectives as the Company’s other shareholders. All such transactions by employees, officers, directors, and consultants of the Company and its subsidiaries, that hedge or offset, or are designed to hedge or offset, any decrease in the market value of the Company’s securities, and the purchase of any related financial instruments, are prohibited by this Policy. Exchange fund transactions, and the purchase of related financial instruments, that in substance are sale transactions (not a hedge) are permitted.
D. Margin Accounts and Pledges. Securities held in a margin account may be sold by the broker without the customer’s consent if the account value decreases and the customer fails to meet a margin call. Similarly, securities pledged (or hypothecated) as collateral for a loan may be sold in foreclosure if the borrower defaults on the loan. Because a margin sale or foreclosure sale may occur at a time when the pledgor is aware of material nonpublic information or is otherwise not permitted to trade in Company securities, Insiders are prohibited from both (a) holding Company securities in a margin account and (b) pledging Company securities as collateral for a loan, and other employees are strongly discouraged from engaging in such transactions involving Company securities.
XI. The Company May Suspend All Trading Activities by Designated Employees and Insiders
In order to avoid any questions regarding potential violations of securities laws, and to protect both employees and the Company from potential liability, from time to time the Company may impose a “blackout” period during which some or all Insiders and some or all of the Company’s other employees may not buy or sell the Company’s securities. A Compliance Officer will impose such a blackout period if, in his or her judgment, there exists nonpublic information or unclear or rapidly changing circumstances that would make trades by the Company’s employees (or certain Insiders or certain of the Company’s other employees) inappropriate in light of the risk that such trades could be viewed as violating applicable securities laws.
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XII. Violations of Insider Trading Laws or This Policy Can Result in Severe Consequences
A. Civil and Criminal Penalties. The consequences of prohibited insider trading or tipping can be severe. Persons violating insider trading or tipping rules may be required to disgorge the profit made or the loss avoided by the trading, pay civil penalties up to three times the profit made or loss avoided, and face private action for damages, as well as becoming subject to criminal penalties, including up to 20 years in prison and fines of up to $5 million. The Company and/or the supervisors of the person violating the rules may also be required to pay major civil or criminal penalties.
B. Company Discipline and Actions. Violation of this Policy or of federal or state insider trading laws by any director, officer, employee, or consultant may subject the director to removal proceedings, the officer or employee to disciplinary action by the Company, including termination for cause, and the consultant to contract termination.
C. Reporting Violations. Any person who violates this Policy or any federal or state laws governing insider trading, or who knows of any such violation by any other person, must report the violation immediately to a Compliance Officer. Upon learning of any such violation, a Compliance Officer, in consultation with the Company’s legal counsel, will determine whether the Company should release any material nonpublic information or whether the Company should report the violation to the SEC or other appropriate governmental authority, or take other appropriate action.
XIII. Every Individual Is Responsible
Every employee has an individual responsibility to comply with this Policy against illegal insider trading. An employee may, from time to time, be required to forego a proposed transaction in the Company’s securities, even if he or she planned to make the transaction before the material nonpublic information arose (or became known to the employee) and even though the employee believes that he or she may suffer an economic loss or forego anticipated profit by waiting.
XIV. This Policy Continues to Apply Following Termination of Employment
The Policy continues to apply to transactions in the Company’s securities even after termination of employment, board membership, or consulting service. If an employee is aware of material nonpublic information when his or her employment or other service relationship terminates, he or she may not trade in the Company’s securities until that information has become public or is no longer material. That often requires waiting until the next trading window opens.
XV. The Compliance Officers Are Available to Answer Questions About This Policy
Please direct all inquiries regarding any of the provisions or procedures of this Policy to a Compliance Officer.
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XVI. This Policy Is Subject to Revision
The Company may change the terms of this Policy from time to time to respond to developments in law and practice. The Company will take steps to inform all affected persons of any material change to this Policy.
The Compliance Officers will be responsible for monitoring and recommending any necessary or advisable modifications to the Insider Trading Policy, with oversight from the Board of Directors (or a designated committee of the Board of Directors). The Compliance Officers will provide notification of material changes, and will provide reports in regard to the Insider Trading Policy to the Board of Directors (or its designated committee) as appropriate.
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APPENDIX I
Special Restrictions on Transactions in Company Securities by
Executive Officers, Directors, and Access Persons
I. Overview
To minimize the risk of apparent or actual violations of the rules governing insider trading, the Company has adopted these special policies and restrictions relating to transactions in Company securities by Insiders. As with the other provisions of this Policy, Insiders are responsible for ensuring their compliance with this Appendix I, including restrictions on all trading during certain periods, by their Family Members and members of their households, and by trusts and other entities over which they exercise voting or investment control. Where appropriate, Insiders should provide each of those persons or entities with a copy of this Policy.
II. Trading Window
In addition to the restrictions that are applicable to all employees, any trading by an Insider who is subject to the Insider Trading Policy will be permitted only during an open “trading window” for such Insider. In addition to the times when the trading window is regularly scheduled to be closed, the Company may impose special trading window “blackout” periods at its discretion due to the existence or concern over the potential for emergence of material nonpublic information, such as due to changes in sales trends or forecasts, that is likely to be or become known among Insiders or subgroups of Insiders. Following termination of employment or other service, Insiders are required to comply with the trading window calendar as in effect at the time their termination occurs, through and until the Company’s next open trading window occurs, as well as any special blackout period in effect as to the Insider at the time of termination. Even when the trading window is open, Insiders and other Company personnel are prohibited from trading in the Company’s securities based on material nonpublic information. The Company’s Compliance Officers will advise Insiders when the trading window for them opens and closes.
III. Normal Trading Hours
No Insider is permitted to trade outside of the regular trading hours of the Nasdaq Stock Market (i.e., as of the adoption of this Policy, 9:30 a.m. to 4:00 p.m., East Coast Time). “After hours” trading by Insiders is prohibited.
IV. Hardship Exemptions
The Compliance Officers may, on a case by case basis, authorize a transaction in the Company’s securities outside of the trading window or during an otherwise closed trading period for an Insider due to financial or other hardship. Any request for a hardship exemption must be in writing and must describe the amount and nature of the proposed transaction and the circumstances of the hardship. (The request may be made as part of a pre-clearance request, so long as it is in writing.)
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The existence of the foregoing procedure does not in any way obligate the Compliance Officers to approve any hardship exemption requested by an Insider.
V. Individual Account Plan Blackout Periods
Certain trading restrictions apply during any “blackout period” that is applicable to any Company individual account plan in which participants may hold Company stock (such as the Company’s 401(k) Plan). For the purpose of such restrictions, a “blackout period” is a period in which the plan participants are temporarily restricted from making trades in Company stock. During any blackout period, directors and executive officers are prohibited from trading in shares of the Company’s stock that were acquired in connection with such directors’ or officers’ service or employment with the Company. Such trading restriction is required by law, and no hardship exemptions are available. The Company will notify directors and executive officers in the event of any blackout period.
VI. Reporting of Transactions
To facilitate timely reporting under Section 16 of the Exchange Act of Insider transactions in Company stock, Section 16 Insiders are required to (a) report the details of each transaction immediately after it is executed and (b) arrange for persons whose trades must be reported by the Section 16 Insider under Section 16 (such as immediate family members living in the Insider’s household) to immediately report, directly to the Company and to the Insider, the details of any transactions they have in the Company’s stock.
Transaction details to be reported include:
•Transaction date (trade date).
•Number of shares involved.
•Price per share at which the transaction was executed (before addition or deduction of brokerage commissions and other transaction fees).
•If the transaction was a stock option exercise, the specific option exercised.
•Contact information for the broker who executed the transaction.
The transaction details must be reported to a Compliance Officer, with copies to the designated Company personnel who regularly assist the Section 16 Insiders in preparing their Form 4s.
VII. Persons Subject to Section 16
Most purchases and sales of Company securities by directors and executive officers are subject to Section 16 of the Exchange Act, including the related reporting requirements. The Board of Directors or its designated committee will review and determine, at least annually, those individuals who are deemed to be executive officers for purposes of Section 16. An “executive officer” is generally defined as including the principal executive officer, any president, the principal financial officer, the principal accounting officer or controller, any
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vice president in charge of a principal business unit, division, or function, or any other officer or person who performs a comparable policy making function.
VIII. Form 4 Reporting
Under Section 16, most trades by Section 16 Insiders are subject to reporting on Form 4 within two business days following the trade date (which in the case of an open market trade is the date when the broker places the buy or sell order, not the date when the trade is settled). To facilitate timely reporting, all transactions that are subject to Section 16 must be reported to the Company immediately, or, with respect to transactions effected pursuant to a Rule 10b5-1 plan, on the day the Insider is advised of the terms of the transaction.
IX. Designated Employees Considered Insiders
The Compliance Officers, with oversight from the Board of Directors or its designated committee, will determine those individuals deemed to be “Insiders” for purposes of this Appendix I. Insiders shall include the Section 16 Insiders (persons subject to Section 16) and also such other persons as the Compliance Officers deem to be Insiders because they are Access Persons (which may vary depending on access to the nonpublic information in question). Generally, an Insider shall be any person who, by virtue of his or her position, is or is likely to be regularly in possession of material nonpublic information or performs an operational role, such as head of a division or business unit, that is material to the Company as a whole.
X. Special Guidelines for 10b5-1 Trading Plans
Notwithstanding the other provisions of this Policy, an Insider will not be deemed to have violated the Insider Trading Policy if he or she effects a transaction that meets all of the enumerated criteria below.
A. The transaction is made pursuant to a non-discretionary plan (the “Plan”) entered into in good faith that complies with all provisions of Rule 10b5-1(c) (the “Rule”), including, without limitation:
1. Each Plan must be in the form of a written plan or a written, binding contract or instructions specifying either:
a. the amount of securities to be purchased or sold and the price (which may be the market price or a limit price) at which and the date on which the securities are to be purchased or sold, or
b. a written formula or algorithm, or computer program, for determining the amount of securities to be purchased or sold and the price at which and the date on which the securities are to be purchased or sold.
2. The Plan must (expressly or by the manner in which it operates) prohibit the Insider and any other person who possesses material nonpublic information from exercising any subsequent influence over how, when, or whether to effect purchases or
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sales, and should state (and be structured to provide) that any person executing Plan transactions is not permitted to deviate from Plan instructions.
B. Each Plan must be approved by a Compliance Officer prior to any open market transactions under such Plan (but need not be approved during an open trading window, or prior to adoption by the Insider). The Company reserves the right to withhold approval of any Plan that a Compliance Officer determines, in his or her sole discretion:
1. fails to comply with the Rule or with interpretations of the SEC staff (including restrictions on the number of concurrent Plans that may be established by an Insider);
2. exposes the Company or the Insider to liability under any other applicable state or federal rule, regulation or law;
3. creates any appearance of impropriety;
4. fails to meet the guidelines established by the Company; or
5. otherwise fails to satisfy review by the Compliance Officer for any reason, such failure to be determined in the sole discretion of the Compliance Officer.
C. Any substantive modification to the Plan (i.e., any change to the amount, price, or timing of a purchase or sale) or deviation from the Plan (other than an elective termination) without prior approval of a Compliance Officer will result in a failure to comply with the Insider Trading Policy. Any such modification or deviation is subject to the approval of a Compliance Officer in accordance with Section B above. In addition, for Section 16 Insiders, any elective termination of the Plan must be promptly reported to a Compliance Officer to facilitate timely reporting.
The Insider may only substantively modify a Plan while not aware of any material nonpublic information about the Company or the securities covered by the Plan, and at a time when the Company’s trading window is open with respect to the Insider, and the Plan must provide that the first transaction following a substantive modification of the Plan will be effected no sooner than would be permissible under the applicable “Cooling-off Period” if the Insider were adopting a new trading plan at the time of the modification (i.e., such a modification is equivalent to termination of an existing plan and adoption of a new plan, for purposes of “Cooling-off Period” compliance). However, elective termination of a Plan by an Insider is permissible at any time.
D. Each Plan must be established:
•at a time when the Insider is not aware of material nonpublic information about the Company or the securities covered by the Plan;
•at a time when the trading window is open with respect to the Insider;
•in good faith and not as part of a plan or scheme to evade the insider trading rules; and
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•to provide that the first transaction under the Plan will occur no sooner than:
•for Section 16 Insiders: the later of (i) the expiration of a period of ninety (90) days after the date of adoption of the Plan by the Insider, (ii) any longer pre-transaction waiting period imposed by the Rule (or by SEC Staff interpretation), and (iii) the beginning of trading on the second trading day following the Company’s filing of its periodic report on Form 10-Q or (for the fourth fiscal quarter) Form 10-K for the completed fiscal quarter in which the Plan was adopted; provided, however, that the waiting period prior to the first transaction need not be longer than 120 days after the date of the adoption of the Plan; or
•for other Insiders (Access Person Insiders): the later of (i) the expiration of a period of thirty (30) days after the date of adoption of the Plan, (ii) any longer pre-transaction waiting period imposed by the Rule (or by SEC Staff interpretation), and (iii) the beginning of trading on the second trading day following the Company’s next public release of quarterly (or annual) earnings.
The foregoing required waiting periods before the first transaction are the “Cooling-off Period.”
E. Each Plan should provide (or the Insider should otherwise arrange for) appropriate mechanisms to ensure that the Insider complies with all rules and regulations, including Rule 144 and Section 16(a), including the timely filing of required forms or notices, applicable to securities transactions under the Plan by the Insider.
F. Each Plan should provide for automatic suspension or termination of the Plan in the sole discretion of the Company:
•to comply with a lock-up agreement required in connection with a securities issuance transaction in which the Company is a participant; or
•upon the occurrence of an event that would cause planned trades to violate the law; or
•upon the occurrence of other similar events.
Further, each Plan should provide for the suspension of all transactions under such Plan in the event that the Company, in its sole discretion, deems such suspension necessary and advisable, or for an equivalent mechanism to halt trading under the Plan.
For Section 16 Insiders, each Plan must include (and for other Insiders, the Plan should include, or the Insider should otherwise confirm to the Company) representations certifying that:
•As of the date the Plan is established, the Insider is not aware of any material nonpublic information concerning the Company or the securities covered by the Plan.
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•The Insider is entering into the Plan in good faith and not as part of a plan or scheme to evade compliance with the Rule or with federal or state securities laws.
Each Plan should include (or the Insider should otherwise confirm to the Company) the following representations and covenants of the Insider:
•While the Plan is in effect, the Insider agrees not to enter into or alter any corresponding or hedging transaction or position with respect to the securities covered by the Plan.
•The Insider agrees that he or she will not, directly or indirectly, communicate any material nonpublic information relating to the securities or the Company to any broker, dealer, financial advisor, trustee, or any other third party who is involved, directly or indirectly, in executing the Plan at any time while the Plan is in effect.
•If applicable, the Insider agrees not to take, and agrees to cause any person or entity with which the Insider would be required to aggregate sales of securities pursuant to paragraph (a)(2) or (e) of Rule 144 not to take, any action that would cause the sales made under the Plan not to meet all applicable requirements of Rule 144.
•The Insider agrees that any substantive modifications to the Plan must be made in good faith at a time when the Insider is not aware of any material nonpublic information concerning the Company or the securities covered by the Plan. (However, termination of a Plan is permissible at any time.)
•The Insider acknowledges and agrees that the Company may, as required by SEC rules (and otherwise in its sole discretion), make public disclosures regarding the Plan in any press release or filings with the SEC, such as the Company’s periodic reports on Form 10-K and Form 10-Q, proxy statement, Form 8-K, or other SEC filings, including, among other things, information as to the existence, adoption or termination of the Plan, the name and title of the Insider, and information as to the timing of the transactions, duration of the Plan, and the amount of securities to be purchased or sold.
G. None of the Company, the Board of Directors, the Compliance Officers, nor any of the Company’s officers, employees or other representatives shall be deemed, solely by their approval of an Insider’s Plan, to have represented that any Plan complies with the Rule, or to have assumed any liability or responsibility to the Insider or any other party if such Plan fails to comply with the Rule.
Rev. December 2024
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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 | Domiciled | Date of Incorporation | |||||||||
| Ross Procurement Inc. | Delaware | November 22, 2004 | |||||||||
| Ross Merchandising Inc. | Delaware | January 12, 2004 | |||||||||
| Ross Dress For Less, Inc. | Virginia | January 14, 2004 | |||||||||
| Retail Assurance Group, Inc. | Hawaii | October 15, 1991 | |||||||||
| Ross Distribution Company, LLC | Delaware | March 15, 2018 | |||||||||
EXHIBIT 23
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the incorporation by reference in Registration Statements Nos. 333-115836, 333-151116, 333-210465, and 333-218052 on Form S-8, of our report dated March 31, 2025, relating to the financial statements of Ross Stores, Inc. and subsidiaries, and the effectiveness of Ross Stores, Inc. and subsidiaries internal control over financial reporting appearing in the Annual Report on Form 10-K for the year ended February 1, 2025.
/s/DELOITTE & TOUCHE LLP
San Francisco, California
March 31, 2025
EXHIBIT 31.1
Ross Stores, Inc.
Certification of Chief Executive Officer
Pursuant to Sarbanes-Oxley Act Section 302(a)
I, James G. Conroy 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 31, 2025 | /s/James G. Conroy | ||||||
| James G. Conroy | ||||||||
| Chief Executive Officer | ||||||||
EXHIBIT 31.2
Ross Stores, Inc.
Certification of Chief Financial Officer
Pursuant to Sarbanes-Oxley Act Section 302(a)
I, Adam Orvos, 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 31, 2025 | /s/Adam Orvos | ||||||
| Adam Orvos | ||||||||
| Executive Vice President and Chief Financial Officer | ||||||||
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 February 1, 2025 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, James G. Conroy, 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 31, 2025 | /s/James G. Conroy | ||||||
| James G. Conroy | ||||||||
| Chief Executive Officer | ||||||||
EXHIBIT 32.2
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 February 1, 2025 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Adam Orvos, 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 31, 2025 | /s/Adam Orvos | ||||||
| Adam Orvos | ||||||||
| Executive Vice President and Chief Financial Officer | ||||||||