This is a summary of the third quarter fiscal 2007 earnings conference call conducted by Ross Stores, Inc. (ROST: chart) on November 20, 2007.

Management:
CEO: Michael Balmuth
Chairman: Norman Ferber
CFO: John Call
CAO: Michael O''Sullivan
COO: Gary Cribb
IR: Kelly Loughnot

Key Investor Issues:

- The company reported earnings per share for the 13 weeks ended November 3 2007 of 36 cents, up 16% compared to 31 cents for the 13 weeks ended October 28 2006.
- Net earnings for the quarter were $48.7 million compared to $43.9 million for the prior year period.
- Sales for the 13 weeks ended November 3 2007 were $1.468 billion, up 8% over the third quarter of fiscal 2006.
- Comparable store sales for the third quarter of 2007 grew 1% on top of a 4% gain in the prior-year period.

Financial Highlights

Earnings per share for the nine months ended November 3 2007 also rose 16% to $1.21 from $1.04 for the nine months ended October 28 2006.

- Year-to-date net earnings were $166.6 million compared to $148.5 million for the prior-year period.
- Sales for the nine months ended Nov. 3 2007 were $4.324 billion, up 9% from a year ago.
- Comparable store sales year-to-date grew 1% on top of a 5% gain in the first nine months of 2006.
- Comparable store sales were within the forecasted range for the third quarter, despite the challenging macroeconomic climate and unseasonably warm weather across the country in September and October.

Geographic trends for the quarter were broadbased.

- The strongest regions were the Northwest and Texas, where same-store sales grew in the mid single-digits.
- California comparable store sales were flat.
- The best performing merchandise departments for the quarter were dresses, home and shoes.

Third quarter operating margin increased about 15 basis points.

- Total gross margin, inclusive of buying and distribution costs, expanded by about 45 basis points, partially offset by a 30 basis point increase in selling, general and administrative costs.
- Merchandise gross margin for the third quarter was better than expected and relatively flat to last year, even with same-store sales that were below forecast in September and October.

These results benefited from the steps the company took at the beginning of the quarter to lower inventories and drive faster in-store turns, which gained traction as Ross Stores moved through the period.

The company also completed its annual physical inventory of stores during the quarter with its shrink results showing a slight improvement over the amount reserved for. The management estimates that better than planned shortage added about 1 cent in earnings per share to the third quarter results.

Cost of goods sold in the quarter also benefited from a 25 basis point decline in distribution expenses, due mainly to improved productivity.

Other favorable operating margin trends included a slight improvement in freight costs and tight control of corporate expenses. These positive results were partially offset by an increase in occupancy and store costs as a percent of sales, driven mainly by higher pre-opening rent compared to the prior year; an increase in the minimum wage; and a deleveraging effect of the 1% increase in comparable store sales during the period.

Total consolidated inventories were up about 5% over the prior year.

This was mainly a result of the growth in new stores, partially offset by average in-store inventories that were down about 9% from the prior year at the end of the period. Packaway was about 30% of total inventories, compared to 31% in the prior year.

The company added 24 new Ross locations during the quarter and a net 70 year-to-date, for a total of 841 stores in 27 states.

The company also opened seven dd''s DISCOUNTS in the quarter for 26 new locations in 2007. Ross Stores now has a total of 52 dd''s DISCOUNTS in California, Florida, Texas and Arizona.

The original 26 dd''s locations are all in California. These stores generated solid comparable sales gains during the first nine months of the year that were in line with plan.

The company is disappointed with the overall sales performance of the new dd''s stores that were opened in 2007.