Ross Stores, Inc. (NASDAQ:ROST) Q4 2022 Earnings Call Transcript

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Dana Telsey: Got it. And then, Barbara, just on the category mix. What was the weakest? And what do you see as opportunities on the category side as we go through 2023? Thank you.

Barbara Rentler: The business pretty much performed at the same level. I mean, obviously, some things are better. I mean home and gifting with very good shoes was very good. If I look at shoes from a 2-year basis, the year before we had carrier issues, which also helped us to drive some sales this year. I think the key is to get the category mix balance to what the customer wants. And I think last year with the carrier issues and with some of the things that went on in our assortments, that we didn’t have that. So I think now it’s really identifying what she wants, making those move to ensure that we are delivering the products that she’s moving towards as things continue to evolve in her assortment and just being on target with that, making sure we’re making moves quick enough, fast enough and the advantage when there’s a lot of goods in the marketplace, it allows you to do more of these things and oftentimes, sometimes be able to make some bolder moves.

So I think that’s kind of how I’m thinking about it. I’m thinking about just getting our inventories and classifications in line and then more fine-tuning to what – if we were talking about this a few months ago, we would be saying people now want career pants versus casual, right? But I’m thinking more broader that with all the carriers that went on, delivery issues and everything else, that things were not exactly the way we would like them to have been even if we wanted them to be there. It just – it wasn’t balanced. So I think that’s our number one thing is getting ourselves back in line. We made a lot of those moves into the fourth quarter and getting ourselves repositioned to where we want to be. And then going again hand-in-hand with making sure we come in clean into the year clean from an inventory position and then giving ourselves the flexibility to go in the market and buy it the way the customer wants it and sees it.

Dana Telsey: Thank you.

Operator: And our next question comes from the line of Simeon Siegel with BMO Capital Markets. Please proceed with your question.

Simeon Siegel: Thanks. Hi. Good afternoon. Could you discuss what like-for-like AUR look like versus mix shift driven AUR maybe? And then a dumb question. I think interest income came in nicely higher this quarter. And if I heard correctly, I think you’re expecting a pretty nice jump or a nice number this year as well. Is that just a function of higher rates? And does it impact your capital return strategy? And maybe just given how large the cash balance is, any broader thoughts on your use of cash with all the moving pieces? Thank you.

Michael Hartshorn: Sure. The interest income is entirely driven by our cash balances. That’s invested in government-backed securities. So as interest rates have risen, we’re getting a benefit there. In terms of how we’re thinking about use of cash and I guess just general capital allocation, we will, as we always do, first invest in the business to support profitable growth. We also plan to pay down COVID-related debt that begins to mature over the next few years in 2024 and 2025 is when those first tranches mature. And then we’d expect to grow our shareholder payouts as the business grows, as I said, deliberately over time, and we do that in a very deliberate and reliable manner over time.

Barbara Rentler: And then in terms of our AUR, our AUR has been relatively flat despite all the different shifts and moving parts in the business. So some of that comes from valuing some areas differently or products differently in other businesses coming up because obviously, shoes has a higher AUR than some of our other businesses. So that’s really where we stand today, how we’re thinking about it.

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