During fiscal 2005, $176 million in CapEx supported the addition of:
- 75 net new Ross locations;
- 10 dd''s DISCOUNTS stores;
- Te purchase of a new warehouse facility in Moreno Valley, California;
- And other various information technology and infrastructure investments.

During 2005, the company completed the two-year $350 million stock repurchase program, buying back a total of 6.4 million shares of common stock in 2005 for an aggregate purchase of $175 million.

The company ended the most recent year with a total of 144.1 million shares of common stock outstanding. In addition, in November 2005, the company’s Board of Directors authorized a new $400 million two-year stock repurchase program for 2006 and 2007 and approved a 20% increase in the company’s quarterly cash dividend.

The same-store sales in February grew 6% over the prior year, slightly ahead of the company’s expectations.

Businesses continued to perform slightly ahead of plan in March with same-store sales up 5% month-to-date. As a result, the management believes that the company is on track to meet or slightly exceed its forecast for comparable store gains of 1% to 2% in March.

The company’s sales plans reflect the holiday calendar shift with Easter moving from the last Sunday in March last year to the third Sunday in April this year. As a result, the company continues to project same-store sales gains of 7% to 8% in April.

First Half of Fiscal 2006 OUTLOOK

The company expects continued pressure on operating margin and earnings during the first half of fiscal 2006 from higher shrink and freight costs compared to the prior year until Ross Stores anniversaries the charge for shortage it took in the third quarter of 2005. As a result, the company is planning EPS growth before stock option expenses to be in the low double digit to high teen range compared to the comparable prior year periods in 2005 for both the first and second quarters.

For the 13 weeks ending April 29th, 2006, the company continues to project EPS in the range of 37 cents to 39 cents inclusive of projected non-cash charges for stock option expense equivalent to about 1 to 2 cents per share for the period. Excluding the new stock option expenses, projected first quarter EPS are 38 cents to 40 cents or 12% to 18% growth over the 34% in EPS for the 13 weeks ended April 30th, 2005.

Same-store sales for the second quarter are forecast to increase 3% to 4% and EPS for the 13 weeks ending July 29th, 2006, are projected to be in the range of 30 cents to 32 cents, which includes the impact of about 1 to 2 cents per share of stock option expense. Before stock option expense, EPS in the second quarter are forecast to increase 10% to 17% to 32 cents to 34 cents, compared to 29 cents in the prior year

Second Half of Fiscal 2006 OUTLOOK

For the second half the company is planning same-store sales gains of 3% to 4% in the third quarter and 2% to 3% in the fourth quarter. The company is looking for some continued improvement in EPS growth rate in the third quarter but is planning larger percentage increases in EPS during the fourth quarter. The 53rd week alone is forecast to add about 6 cents to 7 cents to EPS on top of the normal earnings growth expected during that period.

Fiscal 2006 OUTLOOK

- For the 52 weeks ending January 27th, 2007, the company continues to project same-store sales gains of 3% to 4% on top of a 6% increase in fiscal 2005.
- For the full fiscal 2006 or the 53 weeks ending February 3rd, 2007, the company projects that EPS will be in the range of $1.54 to $1.64, inclusive of projected non-cash charges for stock option expense equivalent to about 6 cents per share for the period.
- Excluding stock option expense, the projected EPS range for the 53 week in fiscal 2006 remains unchanged at $1.60 to $1.70.

The company has been focusing on addressing two key objectives:
- Strengthening its performance in the newer markets it has entered over the past few years, especially the Southeast.
- And increasing operating margins and overall returns.

The company’s first major new market expansion in over a decade began in 2001 when Ross Stores entered the Southeast region. By the end of 2005, the company operated 106 locations in numerous local markets throughout Georgia, North Carolina, South Carolina, Alabama, Mississippi, Louisiana, and Tennessee.

New Micro-Merchandising Initiatives

During 2006 and 2007, the company will be developing new tools and system enhancements to help it better understand different customer wants and needs at a more local level. These changes are expected to strengthen the company’s ability over time to plan, buy, and allocate merchandise more effectively not only in the Southeast but also in other markets like the Mid-Atlantic where sales productivity and store contribution are below average.

Concentrating on rolling out these new micro-merchandising initiatives over the next couple of years, the company expects to focus store growth only in the regions it already serves. As a result, Ross Stores continues to plan total net unit growth of about 8% in fiscal 2006, consisting of approximately 55 Ross and 6 dd''s stores, all in existing regions.

Key questions from the fourth quarter earnings call conducted by Ross Stores, Inc. on March 15, 2006.