Ross Stores, Inc.

Good afternoon and welcome to the raw stores third quarter 2025 earnings release conference call the call be given prepared comments by management, followed by a question and answer session. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Before we get started, on behalf of raw stores, I would like to note that the comments made on this call will contain forward looking statements regarding expectations about future growth and financial results. including sales and earnings forecasts, new store openings, and other matters that are based on the company's current forecast of aspects of its future business. These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from historical performance or current expectations. Risk factors are included in today's press release in the company's fiscal 2024 Form 10-K and fiscal 2025 Form 10-Qs and 8-Ks on file with the SEC. And now I'd like to turn the call over to Jim Conroy, Chief Executive Officer.

Good afternoon. Joining me on our call today are Michael Hartshorn, Group President and Chief Operating Officer, Bill Sheehan, Executive Vice President and Chief Financial Officer, and Connie Cao, Senior Vice President, Investor Relations. As noted in today's press release, we are very pleased with our third quarter sales results, which accelerated from the prior quarter. Total sales for the period grew 10% to $5.6 billion, with comparable store sales increasing a strong 7%. Our merchants delivered a compelling assortment of brand name values, which led to broad-based growth across all major merchandise categories. Those assortments, coupled with our new marketing campaigns, drove excitement, higher customer engagement, and increased store traffic. We had an excellent back-to-school selling season with strong trends that continued through the balance of the quarter. Additionally, the stores and supply chain organizations executed extremely well to support the elevated sales and inventory flow. The strength in top line, coupled with our continued focus on expense control, resulted in an operating margin of 11.6% that was much stronger than expected. Earnings per share for the 13 weeks ended November 1st, 2025, were $1.58, a net income of $512 million. Included in this year's third quarter earnings is an approximate 5 cents per share negative impact from tariff-related costs. These results compare to $1.48 per share on net earnings of $489 million in the prior year period. For the first nine months, earnings per share were $4.61, on net earnings of $1.5 billion, compared to $4.53 per share on net income of $1.5 billion for the same period last year. Included in year-to-date 2025 earnings are an approximate $0.16 per share negative impact from tariff-related costs. Sales for the year-to-date period grew to $16.1 billion, with comparable store sales up 3% over last year. For the third quarter at Ross, cosmetics, shoes, and ladies were the strongest merchandise areas. By geography, we saw broad-based strength with the Southeast and Midwest performing the best. Beattie's discounts, strong value, and fashion offerings continued to resonate with its shoppers and delivered comp gains relatively similar to Ross for the period. At quarter end, total consolidated inventories were up 9% versus last year, and average store inventories were up 15% as we advanced the inventory build for the holiday season into the tail end of October. Pack-away merchandise represented 36% of total inventories compared to 38% last year. We feel very good about the health and levels of our inventory and are well-positioned to deliver a broad assortment of values this holiday selling season. During the third quarter, we opened 36 new Ross and four DDs discount stores. Similar to our summer opening group, we are pleased with the performance of our fall openings, particularly the results in the new markets, including the New York metro area. The openings in the third quarter completed our expansion program for 2025. For the year, we added a total of 90 locations comprised of 80 Ross and 10 DDs. We plan to close and or relocate 10 locations in the fourth quarter and expect to end the year with 1,903 Ross stores and 360 DeeDee's locations. At this point, I would like to provide an update on our branded strategy, which has now been fully embedded in our merchandising approach for more than a year. Over this period of time, the merchants have been laser focused on delivering high quality, branded bargains at compelling values. They've been able to deliver an assortment that spans good, better, and best brands to ensure that we are providing exceptional values to our diverse customer base. We would attribute a portion of the sequential improvement in the business to the successful implementation of the branded strategy. This strategy has particularly helped the ladies' business, which further accelerated this quarter and comped above the chain average. Additionally, the increased emphasis on brands has further strengthened our vendor partnerships and increased closeout opportunities. These efforts not only drove higher sales, but also helped us partially offset tariff impacts, resulting in better than expected merchandise margins for the third quarter. While tariffs uncertainties persist, we are encouraged by the exceptional product availability in the marketplace. This has enabled us to secure opportunistic buys that position us favorably for the holiday season. As a result, we now expect tariff-related costs in the fourth quarter to be negligible. From a pricing perspective, it is clear the consumer is prioritizing value and our updated assortment is driving stronger customer engagement. While pricing has increased across the retail environment, our commitment to delivering value remains unchanged. we will continue to maintain a strong value proposition relative to traditional retailers while working to mitigate the impact on our merchandise margin. Bill will now provide further details on our third quarter results and fourth quarter guidance.

Thank you, Jim. As previously stated, comparable store sales rose 7% in the quarter. The gain was a result of both higher transactions and a larger average basket size. Operating margin decreased by 35 basis points to 11.6%, mainly due to the impact of tariffs. Cost of goods sold increased by 35 basis points in the quarter. Distribution costs were higher by 60 basis points, primarily due to the opening of a new distribution center earlier this year and tariff-related processing costs. Merchandise margin deleveraged by 10 basis points while buying expenses were flat compared to the prior year. Partially offsetting the higher costs in the quarter were lower domestic freight and occupancy costs of 25 and 10 basis points respectively. SG&A costs were flat year over year despite the headwinds from CEO transition costs. During the quarter, we repurchased 1.7 million shares of common stock for an aggregate cost of $262 million. We remain on track to buy back a total of $1.05 billion in shares this year. Now let's discuss our fourth quarter guidance. We're encouraged by our business momentum as we enter the critical holiday season. As a result, for the 13 weeks ending January 31, 2026, we are raising our comparable store sales forecast to be up 3% to 4%, with earnings per share in the range of $1.77 to $1.85. This updated guidance range reflects approximately $0.03 earnings per share of unfavorable timing of pathway-related expenses that benefited the third quarter. Based on our year-to-date results and updated fourth quarter forecast, we are increasing our earnings per share guidance for fiscal 2025 to be in the range of $6.38 to $6.46. As for tariffs, we now forecast the fourth quarter impact to be negligible. leading to a full-year cost of approximately $0.16 per share. These estimates are based on the current level of tariffs. In addition, and as a reminder, 2024 fourth quarter and full-year earnings per share of $1.79 and $6.32 respectively included a benefit of approximately $0.14 in earnings per share related to the sale of a pack-away facility. The operating statement assumptions that support our fourth quarter guidance include the following. Total sales are projected to increase 6% to 8%. We expect operating margin to be in the range of 11.5% to 11.8% compared to 12.4% last year. Year-over-year change primarily reflects last year's benefit from the sale of a Peckaway facility that was worth about 105 basis points. Net interest income is estimated to be about $30 million. Our tax rate is expected to be approximately 24%. And weighted average saluted shares outstanding are projected to be about $322 million. Now I'll turn the call back to Jim for closing comments.