Ross 2015 Annual Report Download - page 20

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We are subject to impacts from the macro-economic environment, financial and credit markets, and geopolitical
conditions that affect consumer confidence and consumer disposable income.
Consumer spending habits for the merchandise we sell are affected by many factors, including prevailing economic
conditions, recession and fears of recession, levels of unemployment, salaries and wage rates, housing costs, energy and
fuel costs, income tax rates and the timing of tax refunds, inflation, consumer confidence in future economic conditions,
consumer perceptions of personal well-being and security, availability of consumer credit, consumer debt levels, and
consumers’ disposable income. Adverse developments in any of these areas could reduce demand for our merchandise,
decrease our inventory turnover, cause greater markdowns, and negatively affect our sales and margins. All of our stores
are located in the United States, so we are especially susceptible to changes in the U.S. economy.
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 sales plans significantly differ from actual
demand, we may experience higher 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 varies by merchandise
category and by season, 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 meet 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.
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 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. And maintaining an overall pricing differential to department and specialty stores is key to our ability to attract
customers and sustain our sales and gross margins. Our opportunistic buying places considerable discretion on 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 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. Shortages or disruptions in the availability to us of high quality merchandise would likely have a
material adverse effect on our sales and margins.
Data security breaches, including cyber-attacks on our transaction processing and computer information systems,
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.
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 data security for those transactions.
Some 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. Cyber criminals may attempt to penetrate our information systems to misappropriate customer or business information,
including but not limited to credit/debit card, personnel, or trade information. Despite security measures we have in place, our
facilities and systems (or those of third-party service providers) may be vulnerable to security breaches, acts of vandalism,
computer viruses, misplaced or lost data, programming and/or human errors, or other similar events. It is also possible that
an associate within our Company or a third party we do business with may purposefully or inadvertently cause a security
breach involving such information. The increasing sophistication of cyber criminals and advances in computer capabilities