ROSS STORES, INC. This section and other parts of this Form 10-Q contain forward-looking statements that involve risks and uncertainties. Our actual results may differ materially from the results discussed in the forward-looking statements. Factors that might cause such differences include, but are not limited to, those discussed below under the caption "Forward-Looking Statements" and also those in Part I, Item 1A (Risk Factors) of our Annual Report on Form 10-K for 2020. The following discussion should be read in conjunction with the condensed consolidated financial statements and notes thereto included elsewhere in this Quarterly Report on Form 10-Q, in our previous Quarterly Report on Form 10-Q for the first quarter of fiscal 2019, and in conjunction with the consolidated financial statements and notes thereto in our Annual Report on Form 10-K for 2020. All information is based on our fiscal calendar.
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 inthe United States , with 1,589 locations in 40 states, theDistrict of Columbia andGuam as ofMay 1, 2021 . 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 277 dd's DISCOUNTS stores in 21 states 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.
Results of Operations
Sales for the first quarter of fiscal 2021 benefited considerably from a combination of government stimulus payments, ongoing vaccine rollouts throughoutthe United States , easing of COVID restrictions on business hours and customer capacity, pent-up consumer demand, and strong execution of our merchandising strategies. During the quarter, we also experienced expense pressures from higher freight and wages, as well as ongoing COVID-related operating costs of approximately 35 basis points, the vast majority of which impacted our selling, general and administrative expenses ("SG&A"). It is difficult to predict the lasting impact from the factors that benefited our results for the first quarter of fiscal 2021, in particular the recent government stimulus payments. In addition, there continues to be uncertainty surrounding the COVID-19 pandemic, including its unknown duration, and the potential for future resurgences and new virus variants, and its potential impact on consumer demand. 17 -------------------------------------------------------------------------------- In this quarterly report, and in our reports throughout fiscal 2021, we will compare our results of operations to fiscal 2020 and also to fiscal 2019. We believe the extended closure of our operations in the spring of 2020, and the disruptions caused by COVID-19 throughout fiscal 2020, make fiscal 2019 a more useful and relevant basis for comparison in assessing our ongoing results of operations. The following table summarizes the financial results for the three month periods endedMay 1, 2021 ,May 2, 2020 , andMay 4, 2019 : Three Months Ended May 1, 2021 May 2, 2020 May 4, 2019 Sales Sales (millions) $ 4,516 $ 1,843 $ 3,797 Comparable store sales growth 13.0 % 1 n/a 2 2 % 3 Costs and expenses (as a percent of sales) Cost of goods sold 70.8 % 102.6 % 71.2 % Selling, general and administrative 15.0 % 22.5 % 14.7 % Interest expense (income), net 0.4 % 0.4 % (0.2 %) Earnings (loss) before taxes (as a percent of sales) 13.8 % (25.5 %) 14.3 % Net earnings (loss) (as a percent of sales) 10.6 % (16.6 %) 11.1 % 1 Amount shown is for the first quarter of fiscal 2021 compared to the first quarter of fiscal 2019. Comparable store sales for this purpose represents sales from stores that were open at the end of fiscal 2018, plus new stores opened in fiscal 2019, less stores closed in fiscal 2019 and fiscal 2020. 2 Given that stores were open for less than seven weeks of the 13-week period endedMay 2, 2020 , the comparable store sales metric is not meaningful. 3 Amount shown is for the first quarter of fiscal 2019 compared to the first quarter of fiscal 2018 for stores that have been open for more than 14 complete months. Stores. In response to the impacts and uncertainties from the COVID-19 pandemic, we planned to open approximately 60 new stores in fiscal 2021. Our opening plans for fiscal 2021, were set in 2020 during the onset of the pandemic when it was impossible to predict when the health crisis would subside. Looking forward to 2022, we expect to return to our historical annual opening program of approximately 100 new stores. Our longer term expansion 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. Three Months Ended Store Count May 1, 2021 May 2, 2020 May 4, 2019 Beginning of the period 1,859 1,805 1,717 Opened in the period 7 27 28 Closed in the period - - - End of the period 1,866 1,832 1,745 Sales. Sales for the three month period endedMay 1, 2021 increased$2.7 billion , or 145.1%, compared to the three month period endedMay 2, 2020 . This was primarily due to all store locations being open throughout the first quarter of fiscal 2021, compared to all store locations being closed for approximately 50 percent of the first quarter of fiscal 2020. Sales for the three month period endedMay 1, 2021 also benefited from the government stimulus payments, ongoing vaccine rollouts, easing of COVID restrictions, pent-up consumer demand, and strong execution of our merchandising strategies. Sales for the three month period endedMay 1, 2021 increased$719.4 million , or 18.9%, compared to the three month period endedMay 4, 2019 . This was primarily due to a 13% increase in comparable store sales (comparing the first quarter of fiscal 2021 to the same period in fiscal 2019) which was mainly driven by a combination of government stimulus payments, ongoing vaccine rollouts, easing of COVID restrictions, pent-up consumer demand, and strong execution of our 18 --------------------------------------------------------------------------------
merchandising strategies. Sales also increased due to the opening of 121 net new
stores between
Our sales mix for the three month periods endedMay 1, 2021 ,May 2, 2020 , andMay 4, 2019 is shown below: Three Months Ended May 1, 2021 May 2, 2020 1 May 4, 2019 Home Accents and Bed and Bath 27 % 27 % 25 % Ladies 24 % 25 % 27 % Accessories, Lingerie, Fine Jewelry, and Cosmetics 14 % 13 % 13 % Shoes 13 % 14 % 14 % Men's 13 % 12 % 13 % Children's 9 % 9 % 8 % Total 100 % 100 % 100 %
1 Sales mix for the three month period ended
We intend to address the competitive climate for off-price apparel and home goods by pursuing and refining our existing strategies and by continuing to strengthen our merchant organization, diversify our merchandise mix, and more fully develop our systems to improve regional and local merchandise offerings.
We are optimistic about our prospects for the remainder of fiscal 2021, based on our recent results and the ongoing improvements in the macro-economic environment, bolstered by vaccination progress and the easing of pandemic-related restrictions. However, it is difficult to predict the lasting impact from the factors that benefited our sales results for the first quarter of fiscal 2021, in particular the benefit from the recent government stimulus payments. We cannot be sure that our strategies and our store expansion program will result in a continuation of our historical sales growth, or an increase in net earnings. Cost of goods sold. Cost of goods sold for the three month period endedMay 1, 2021 increased$1.3 billion compared to the three month period endedMay 2, 2020 , primarily due to higher sales in the first quarter of fiscal 2021, given that all our store locations were open throughout the first quarter of fiscal 2021, whereas all our store locations were closed for approximately 50 percent of the first quarter of fiscal 2020. Cost of goods sold for the three month period endedMay 1, 2021 increased$496.7 million compared to the three month period endedMay 4, 2019 , primarily due to higher sales due to the opening of 121 net new stores betweenMay 4, 2019 andMay 1, 2021 , and a 13% increase in comparable store sales. Cost of goods sold as a percentage of sales for the three month period endedMay 1, 2021 decreased approximately 35 basis points compared to the three month period endedMay 4, 2019 , primarily due to an 85 basis point improvement in merchandise margin and leverage of 60 basis points in occupancy costs. These increases were partially offset by a 75 basis point increase in freight costs, mainly driven by ongoing industry-wide supply chain congestion, a 25 basis point increase in distribution expenses primarily due to higher wages, and a 10 basis point increase in buying costs. We expect higher supply chain costs to continue throughout fiscal 2021. Selling, general and administrative expenses. For the three month period endedMay 1, 2021 , selling, general and administrative expenses ("SG&A") increased$259.7 million compared to the three month period endedMay 2, 2020 . This increase was primarily due to all our store locations being open throughout the first quarter of fiscal 2021, compared to all our store locations being closed for approximately 50 percent of the first quarter of fiscal 2020. For the three month period endedMay 1, 2021 , SG&A increased$116.8 million compared to the three month period endedMay 4, 2019 , primarily due to higher sales due to the opening of 121 net new stores betweenMay 4, 2019 andMay 1, 2021 , a 13% increase in comparable store sales, net COVID-related operating expenses for supplies, cleaning, and payroll related to additional safety protocols, and higher incentive compensation costs due to better-than-expected results. Selling, general and administrative expenses as a percentage of sales for the three month period endedMay 1, 2021 increased 25 basis points compared to the three month period endedMay 4, 2019 , primarily due to net COVID-related 19 --------------------------------------------------------------------------------
operating expenses for supplies, cleaning, and payroll related to additional safety protocols, and to higher incentive compensation costs due to better-than-expected results. We expect our operating costs to continue to reflect ongoing COVID-related expenses and also higher wages.
Interest expense (income), net. Interest expense, net for the three month period endedMay 1, 2021 increased$12.4 million compared to the same period in the prior year. This increase was primarily due to higher interest expense on long-term debt due to the issuance of Senior Notes inApril 2020 andOctober 2020 (net of repurchases inOctober 2020 of a portion of the Senior Notes that were issued inApril 2020 ) and lower interest income due to lower interest rates, partially offset by the elimination of interest expense on short-term debt due to the repayment of our$800 million revolving credit facility inOctober 2020 and higher capitalized interest primarily related to the construction of ourBrookshire, Texas distribution center. Interest expense (income), net for the three month period endedMay 1, 2021 increased$24.7 million compared to the three month period endedMay 4, 2019 . This increase was primarily due to higher interest expense on long-term debt due to the issuance of Senior Notes inApril 2020 andOctober 2020 , and to lower interest income due to lower interest rates, partially offset by higher capitalized interest primarily related to the construction of ourBrookshire, Texas distribution center.
Interest expense (income), net for the three month periods ended
Three Months Ended
($000 ) May 1, 2021 May 2, 2020 May 4, 2019
Interest expense on long-term debt $ 22,194 $ 10,181 $ 3,283
Interest expense on short-term debt - 1,697 -
Other interest expense 330 278 313
Capitalized interest (3,239) (2,154) (765)
Interest income (236) (3,336) (8,466)
Interest expense (income), net $ 19,049 $ 6,666 $ (5,635)
Taxes on earnings (loss). Our effective tax rates for the three month periods
ended May 1, 2021 , May 2, 2020 , and May 4, 2019 were approximately 24%, 35%, and
22%, respectively. The decrease in the effective tax rate of 11% for the three
month period ended May 1, 2021 compared to the three month period ended May 2,
2020 was primarily due to fluctuations in pre-tax earnings (loss) and an
enhanced loss benefit from carrying back projected net operating losses from
fiscal 2020 to to fiscal 2015 which had a 35% U.S. federal tax rate. The
increase in the effective tax rate of 2% for the three month period ended May 1,
2021 compared to the three month period ended May 4, 2019 was primarily due to a
lower amount of tax credits recognized in the three month period ended May 1,
2021 compared to the three month period ended May 4, 2019 . 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 share-based compensation,
tax credits, and uncertain tax positions.
On March 27, 2020 , the CARES Act was signed into law. The CARES Act made several
significant changes to business tax provisions, including modifications for net
operating losses, employee retention credits, and deferral of employer payroll
tax payments. The modifications for net operating losses eliminate the taxable
income limitation for certain net operating losses and allow the carry back of
net operating losses arising in 2018, 2019, and 2020 to the five prior tax
years, respectively. Subsequently, the Consolidated Appropriations Act of 2021
("CAA") and the American Rescue Plan Act ("ARPA") were signed into law on
December 27, 2020 and March 11, 2021 , respectively. The CAA and ARPA made
several changes to business tax provisions, including increasing and extending
the employee retention credits through December 31, 2021 , extending certain
employment-related tax credits through December 31, 2025 , and limiting certain
executive compensation deductions, effective fiscal 2027.
Net earnings (loss). Net earnings as a percentage of sales for the three month
period ended May 1, 2021 was 10.6% compared to the net loss as a percentage of
sales of (16.6)% for the three month period ended May 2, 2020 . Net earnings as a
percentage of sales was higher primarily due to lower cost of goods sold and
lower SG&A expense as a percentage of sales, partially offset by higher taxes on
earnings and higher interest expense.
20
--------------------------------------------------------------------------------
Net earnings as a percentage of sales for the three month periods ended May 1,
2021 and May 4, 2019 was 10.6% and 11.1%, respectively. Net earnings as a
percentage of sales was lower primarily due to higher interest expense, higher
SG&A expense, and higher taxes on earnings, partially offset by lower cost of
goods sold.
Earnings (loss) per share. Diluted earnings per share for the three month period
ended May 1, 2021 was $1.34 , compared to diluted loss per share of $(0.87) , for
the three month period ended May 2, 2020 . The $2.21 increase in the diluted
earnings per share was primarily due to all our store locations being open
throughout the first quarter of fiscal 2021, compared to all our store locations
being closed for approximately 50 percent of the first quarter of fiscal 2020.
Diluted earnings per share for the three month periods ended May 1, 2021 and
May 4, 2019 were $1.34 and $1.15 , respectively. The 17% increase in diluted
earnings per share for the three month period ended May 1, 2021 , was primarily
attributable to 13% increase in net earnings and 4% from the reduction in
weighted-average diluted shares outstanding, largely due to stock repurchases
under our previous stock repurchase program.
Financial Condition
Liquidity and Capital Resources
Our 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, and for capital expenditures in connection with new and existing
stores, and investments in distribution centers, information systems, and buying
and corporate offices. We also use cash to pay dividends, to repay debt as it
becomes due, and to repurchase stock under active stock repurchase programs.
Three Months Ended
($000 ) May 1, 2021 May 2, 2020 May 4, 2019
Cash provided by (used in) operating activities
(136,937) (139,729) (95,112)
Cash (used in) provided by financing activities (142,834) 2,517,127 (459,437)
Net increase (decrease) in cash, cash
equivalents, and restricted cash and cash
equivalents $ 473,049 $ 1,318,956 $ (45,562)
In this report, we compare our cash flows from operating activities to fiscal
2020 and fiscal 2019, as we believe fiscal 2019 is a more useful and relevant
basis of comparison given that our stores were open for full 13-week periods in
fiscal 2021 and fiscal 2019. Our cash flows from investing and financing
activities are compared to fiscal 2020, given the continued construction of our
Brookshire, Texas distribution center and the significant financing actions we
took in fiscal 2020 to preserve our financial liquidity and enhance our
financial flexibility in response to the COVID-19 pandemic.
Operating Activities
Net cash provided by operating activities was$0.8 billion for the three month period endedMay 1, 2021 . This was primarily driven by net earnings excluding non-cash expenses for depreciation and amortization, and higher accounts payable leverage. Net cash used in operating activities was$1.1 billion for the three month period endedMay 2, 2020 . This was primarily driven by the net loss due to the lack of sales from the closing of all store locations starting onMarch 20, 2020 through the end of the first quarter of fiscal 2020 and merchandise payments for receipts prior to the shutdown of our operations. Net cash provided by operating activities was$0.5 billion for the three month period endedMay 4, 2019 and was primarily driven by net earnings excluding non-cash expenses for depreciation and amortization. The increase in cash flow from operating activities for the three month period endedMay 1, 2021 , compared to the same period in the prior year was primarily driven by net earnings in the current year versus a net loss due to the lack of sales from the closing of all store locations starting onMarch 20, 2020 through the end of the first quarter of fiscal 2020, and higher accounts payable leverage. Accounts payable leverage (defined as accounts payable divided by merchandise inventory) was 152%, 150%, and 40% as ofMay 1, 2021 ,January 30, 2021 , andMay 2, 2020 , respectively. The increase in accounts payable leverage from the prior year was primarily driven by extended payment terms and timing of receipts. 21 -------------------------------------------------------------------------------- The increase in cash flow from operating activities for the three month period endedMay 1, 2021 , compared to the three month period endedMay 4, 2019 was primarily driven by higher accounts payable leverage and higher net earnings. Accounts payable leverage was 152% and 71% as ofMay 1, 2021 andMay 4, 2019 , respectively. The increase in accounts payable leverage as ofMay 1, 2021 compared to as ofMay 4, 2019 was primarily driven by extended payment terms and timing of receipts. As a regular part of our business, packaway inventory levels will vary over time based on availability of compelling opportunities in the marketplace. 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 purchases, but typically packaway remains in storage 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 impact our operating cash flow. As ofMay 1, 2021 , packaway inventory was 34% of total inventory compared to 38% at the end of fiscal 2020, which reflects our use of a substantial amount of packaway merchandise to support our increased level of sales. As ofMay 2, 2020 , packaway inventory was 42% of total inventory compared to 46% at the end of fiscal 2019. As ofMay 4, 2019 , packaway inventory was 44% of total inventory compared to 46% at the end of fiscal 2018.
Investing Activities
Net cash used in investing activities was$136.9 million and$139.7 million for the three month periods endedMay 1, 2021 andMay 2, 2020 , respectively, and was related to our capital expenditures. Our capital expenditures include costs to build, expand, and improve distribution centers (primarily related to the ongoing construction of ourBrookshire, Texas distribution center); open new stores and improve existing stores; and for various other expenditures related to our information technology systems, buying and corporate offices. Capital expenditures for fiscal 2021 are projected to be approximately$700 million . Our planned capital expenditures are expected to be used for continued construction of ourBrookshire, Texas distribution center, costs for fixtures and leasehold improvements to open planned new Ross and dd's DISCOUNTS stores, investments in certain information technology systems, and for various other needed expenditures related to our stores, distribution centers, buying, and corporate offices. We expect to fund capital expenditures with available cash.
Financing Activities
Net cash used in financing activities was$142.8 million for the three month period endedMay 1, 2021 . Net cash provided by financing activities was$2.5 billion for the three month period endedMay 2, 2020 . The decrease in cash provided by financing activities for the three month period endedMay 1, 2021 , compared to the three month period endedMay 2, 2020 , was primarily due to the completion of our public debt offerings, net of refinancing costs, draw down on our$800 million revolving credit facility, and the suspension of our share repurchases in the first quarter of fiscal 2020. Revolving credit facilities. Our$800 million unsecured revolving credit facility expires inJuly 2024 , and contains a$300 million sublimit for issuance of standby letters of credit. The facility also contains an option allowing us to increase the size of our credit facility by up to an additional$300 million , with the agreement of the lenders. Interest on borrowings under this facility is based on LIBOR (or an alternate benchmark rate, if LIBOR is no longer available) plus an applicable margin and is payable quarterly and upon maturity. The revolving credit facility may be extended, at our option, for up to two additional one-year periods, subject to customary conditions.
In
InMay 2020 , we amended the$800 million revolving credit facility (the "Amended Credit Facility") to temporarily suspend for the second and third quarters of fiscal 2020 the Consolidated Adjusted Debt to EBITDAR ratio financial covenant, and to apply a transitional modification to that ratio effective in the fourth quarter of fiscal 2020. The Amended Credit Facility also established a new temporary minimum liquidity requirement effective for the first quarter of fiscal 2020 and through the end ofApril 2021 . As ofMay 1, 2021 , we were in compliance with these amended covenants. 22 --------------------------------------------------------------------------------
In
InMay 2020 , we entered into an additional$500 million 364-day senior revolving credit facility which was scheduled to expire inApril 2021 . InOctober 2020 , we terminated this senior revolving credit facility. We had no borrowings under that credit facility at any time. Senior notes. InApril 2020 , we issued an aggregate of$2.0 billion in unsecured senior notes in four tenors as follows:$700 million of 4.600% Senior Notes dueApril 2025 ,$400 million of 4.700% Senior Notes dueApril 2027 ,$400 million of 4.800% Senior Notes dueApril 2030 , and$500 million of 5.450% Senior Notes dueApril 2050 . InOctober 2020 , we accepted for repurchase approximately$775 million in aggregate principal amount of the senior notes issued inApril 2020 , pursuant to cash tender offers as follows:$351 million of the 2050 Notes,$266 million of the 2030 Notes, and$158 million of the 2027 Notes. We paid approximately$1.003 billion in aggregate consideration (including transaction costs, and accrued and unpaid interest) and recorded an approximately$240 million loss on the early extinguishment for the accepted senior notes. InOctober 2020 , we issued an aggregate of$1.0 billion in unsecured senior notes in two tenors as follows: 0.875% Senior Notes dueApril 2026 (the "2026 Notes") with an aggregate principal amount of$500 million and 1.875% Senior Notes dueApril 2031 (the "2031 Notes") with an aggregate principal amount of$500 million . Cash proceeds, net of discounts and other issuance costs, were approximately$987.2 million . Interest on the 2026 and 2031 Notes is payable semi-annually beginningApril 2021 . We used the net proceeds from the offering of the 2026 and 2031 Notes to fund the purchase of the accepted senior notes from our tender offers.
In
Other financing activities. InMarch 2019 , our Board of Directors approved a two-year$2.55 billion stock repurchase program through fiscal 2020. Due to the economic uncertainty stemming from the severe impact of the COVID-19 pandemic, we suspended our stock repurchase program inMarch 2020 , at which time we had repurchased$1.407 billion under the two-year$2.55 billion stock repurchase program. OnMay 19, 2021 , our Board of Directors authorized a new program to repurchase up to$1.5 billion of our common stock through fiscal 2022, with plans to buy back$650 million in fiscal 2021 and$850 million in fiscal 2022. We did not repurchase any shares of common stock for the three month period endedMay 1, 2021 . We repurchased 1.2 million shares of common stock for aggregate purchase price of approximately$132.5 million during the three month period endedMay 2, 2020 . We also acquired 0.4 million and 0.3 million shares of treasury stock under our employee stock equity compensation programs, for aggregate purchase prices of approximately$47.4 million and$32.3 million during the three month periods endedMay 1, 2021 andMay 2, 2020 , respectively. InMay 2021 , the Company's Board of Directors declared a cash dividend of$0.285 per common share, payable onJune 30, 2021 . OnMarch 2, 2021 , our Board of Directors declared a quarterly cash dividend of$0.285 per common share, payable onMarch 31, 2021 . Our most recent prior quarterly dividend was a quarterly cash dividend of$0.285 per common share declared by our Board of Directors inMarch 2020 . InMay 2020 , we temporarily suspended our quarterly dividends, due to the economic uncertainty stemming from the COVID-19 pandemic. Our Board of Directors declared quarterly cash dividends of$0.255 per common share in March, May, August, andNovember 2019 , respectively.
For the three month periods ended
Short-term trade credit represents a significant source of financing for
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, including lease and interest payment obligations.
23
--------------------------------------------------------------------------------
We estimate that existing cash and cash equivalent balances, cash flows from
operations, bank credit facility, and trade credit are adequate to meet our
operating cash needs and to fund our planned capital investments, repayment of
debt, common stock repurchases, and quarterly dividend payments for at least the
next 12 months.
Contractual Obligations and Off-Balance Sheet Arrangements
The table below presents our significant contractual obligations as ofMay 1, 2021 : Less than 1 - 3 3 - 5 After 5 ($000 ) one year years years years Total¹
Recorded contractual obligations:
Senior notes$ 65,000 $ -$ 1,450,000 $ 1,024,991 $ 2,539,991 Operating leases 626,273 1,192,873 779,504 579,022 3,177,672New York buying office ground lease2 5,883 14,066 14,178 938,666 972,793
Unrecorded contractual obligations:
Real estate obligations3 6,741 39,814 41,582 132,019 220,156 Interest payment obligations 84,560 160,631 115,775 279,202 640,168 Purchase obligations4 4,747,617 13,394 1,158 - 4,762,169
Total contractual obligations
1 We have a
2 Our New York buying office building is subject to a 99-year ground lease. 3 Minimum lease payments for leases signed that have not yet commenced. 4 Purchase obligations primarily consist of merchandise inventory purchase orders, commitments related to construction projects, store fixtures and supplies, and information technology services, transportation, and maintenance contracts.
Other than the unrecorded contractual obligations noted above, we do not have
any material off-balance sheet arrangements as of
Standby letters of credit and collateral trust. We use standby letters of credit outside of our revolving credit facility in addition to a funded trust to collateralize some of our insurance obligations. We have also used standby letters of credit outside of our revolving credit facility to collateralize some of our trade payable obligations. As ofMay 1, 2021 ,January 30, 2021 , andMay 2, 2020 , we had$3.3 million ,$15.3 million , and$4.2 million , respectively, in standby letters of credit outstanding and$56.5 million ,$56.1 million , and$56.6 million , respectively, in a collateral trust. The standby letters of credit are collateralized by restricted cash and the collateral trust consists of restricted cash, cash equivalents, and investments. Trade letters of credit. We had$18.4 million ,$16.3 million , and$5.9 million in trade letters of credit outstanding atMay 1, 2021 ,January 30, 2021 , andMay 2, 2020 , respectively.
Dividends. In
Critical Accounting Policies and Estimates
Management's Discussion and Analysis of Financial Condition and Results of Operations is based on our condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted inthe United States of America . The preparation of our condensed 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. The ongoing uncertainties and potential impacts from the COVID-19 pandemic increase the challenge of making these estimates; actual results could differ materially from our estimates. During the first quarter of fiscal 2021, there have been no significant changes to the critical accounting policies discussed in our Annual Report on Form 10-K for the year endedJanuary 30, 2021 . 24 --------------------------------------------------------------------------------
See Note A to the Condensed Consolidated Financial Statements - Summary of Significant Accounting Policies (Recently Adopted Accounting Standards) for information regarding our adoption of ASU 2019-12.
Forward-Looking Statements
This report may contain a number of forward-looking statements regarding, without limitation, the rapidly developing challenges and our plans and responses to the COVID-19 pandemic and related economic disruptions, including adjustments to our operations, planned new store growth, capital expenditures, 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," "looking ahead," and similar expressions identify forward-looking statements. Future impact from the ongoing COVID-19 pandemic, and other economic and industry trends that could potentially impact 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. Such risks are not limited to but may include: •The uncertainties and potential for the recurrence of significant business disruptions arising from the COVID-19 pandemic. •Unexpected changes in the level of consumer spending on, or preferences for, apparel and home-related merchandise, which could adversely affect us. •Impacts from the macro-economic environment, financial and credit markets, geopolitical conditions, pandemics, or public health and public safety issues, that affect consumer confidence and consumer disposable income. •Our need to effectively manage our inventories, markdowns, and inventory shortage in order to achieve our planned gross margins. •Competitive pressures in the apparel and home-related merchandise retailing industry. •Risks associated with selling and importing merchandise produced in other countries and from supply chain disruptions in other countries, including those due to COVID-19 closures. •Unseasonable weather that may affect shopping patterns and consumer demand for seasonal apparel and other merchandise. •Our dependence on the market availability, quantity, and quality of attractive brand name merchandise at desirable discounts, and on the ability of our buyers to purchase merchandise to enable us to offer customers a wide assortment of merchandise at competitive prices. •Information or data security breaches, including cyber-attacks on our transaction processing and computer information systems, which could result in theft or unauthorized disclosure of customer, credit card, employee, or other private and valuable information that we handle in the ordinary course of our business. •Disruptions in our supply chain or in our information systems that could impact our ability to process sales and to deliver product to our stores in a timely and cost-effective manner. •Our need to obtain acceptable new store sites with favorable consumer demographics to achieve our planned new store openings. •Our need to expand in existing markets and enter new geographic markets in order to achieve planned market penetration. •Consumer problems or legal issues involving the quality, safety, or authenticity of products we sell, which could harm our reputation, result in lost sales, and/or increase our costs. •An adverse outcome in various legal, regulatory, or tax matters that could increase our costs. •Damage to our corporate reputation or brands that could adversely affect our sales and operating results. •Our need to continually attract, train, and retain associates with the retail talent necessary to execute our off-price retail strategies. •Our need to effectively advertise and market our business. •Changes inU.S. tax, tariff, or trade policy regarding apparel and home-related merchandise produced in other countries, which could adversely affect our business. •Possible volatility in our revenues and earnings. •An additional public health or public safety crisis, demonstrations, natural or man-made disaster inCalifornia or in another region where we have a concentration of stores, offices, or a distribution center that could harm our business. •Our need to maintain sufficient liquidity to support our continuing operations and our new store openings. 25
--------------------------------------------------------------------------------
The factors underlying our forecasts 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.
© Edgar Online, source
