Ross Stores Inc. (NASDAQ:ROST)

Current Income Tax Expense

The current income tax expense exhibited a fluctuating trend over the periods analyzed. It started at a high level of approximately $677,205 thousand in early 2017, increased slightly to $712,870 thousand in early 2018, then significantly declined to $431,642 thousand in early 2019. This downward movement was followed by a moderate recovery to $471,351 thousand in early 2020. However, there was a sharp decrease to $48,727 thousand in early 2021, before rising again to $520,176 thousand in early 2022. This volatility indicates varying taxable income levels or changes in tax rates or policies during the periods.

Deferred Income Tax Expense

The deferred income tax expense showed greater variability and less predictability. It was negative at the start, with -$8,703 thousand in early 2017 and a more substantial negative of -$34,903 thousand in early 2018, suggesting deferred tax benefits or reductions. In early 2019 and 2020, the values reversed to positive figures of $31,777 thousand and $32,009 thousand respectively, indicating deferred tax liabilities or increased tax obligations in the future. This pattern reversed again with a negative deferred tax expense of -$27,812 thousand in early 2021, followed by a positive amount of $15,775 thousand in early 2022. These fluctuations may reflect changes in temporary differences, tax planning strategies, or adjustments due to changes in tax legislation or estimates.

Total Provision for Income Taxes

The total provision, representing the sum of current and deferred income tax expenses, followed a somewhat stable trend with some notable exceptions. It was $668,502 thousand in early 2017 and decreased slightly to $677,967 thousand in early 2018. There was a sharp decrease to $463,419 thousand in early 2019, followed by a moderate increase to $503,360 thousand in early 2020. In early 2021, the total provision drastically dropped to $20,915 thousand, mirroring the decrease observed in current taxes. By early 2022, the provision rose again to $535,951 thousand. The drastic dip in 2021 stands out as an anomaly, likely driven primarily by lower current tax expense and significant deferred tax benefits during that period.

Summary Insights

The overall income tax expenses, both current and deferred, display considerable variability, influenced by a combination of changes in taxable income, tax rates, and adjustments in deferred tax positions. The year 2021 is particularly distinctive due to the sharp decline in tax expenses, suggesting an exceptional circumstance such as a tax credit, a loss carryback, or tax legislation impact. The reconciliation between current and deferred tax expenses highlights the dynamic nature of the company's tax situation, requiring ongoing attention to tax planning and compliance.

Federal Income Taxes at the Statutory Rate

The statutory federal income tax rate decreased from 35% in 2017 to 21% by 2019 and remained stable at that level through 2022.

State Income Taxes, Net of Federal Benefit

State income taxes showed a gradual increase from 2% in 2017 to 4.1% in 2021, followed by a decline to 3.2% in 2022, indicating some fluctuation but a slight overall upward trend within the period.

Hiring Tax Credits

Hiring tax credits were introduced in 2019 as a negative percentage, initially at -0.5%, remaining relatively low in 2020 and 2022, but experienced a notable increase in magnitude to -5.4% in 2021. This indicates a significant temporary impact on tax rates in that year.

Tax Audit Settlements

Tax audit settlements appeared in 2019 and 2020 with negative impacts of -1.3% and -0.5%, respectively, but were not present before or after these years, suggesting isolated adjustments during this period.

Other, Net

A minor negative effect of -0.1% was recorded in 2019, with no subsequent entries, indicating a limited and non-recurring impact in this category.

Impact of the Tax Act on Deferred Taxes

There was a notable negative impact of -3% recorded in 2018 only, implying a one-time adjustment related to tax legislation changes during that year.

Effective Income Tax Rate

The effective income tax rate declined significantly from 37% in 2017 to 22.6% in 2019, then fluctuated moderately, reaching a low of 19.7% in 2021 before rising to 23.7% in 2022. This overall downward trend corresponds with the reduction in the statutory federal rate and fluctuating state taxes and tax credits.

The financial data over the reported periods reveals several notable trends in various liability and asset categories as well as tax-related accounts. The accrued liabilities show a consistent downward trend from 2017 through 2021, declining from 71,796 thousand US dollars to 30,415 thousand US dollars, followed by a slight increase in 2022 to 34,211 thousand US dollars. This decrease suggests efforts to manage and reduce short-term obligations, although the recent uptick may indicate emerging liabilities that require monitoring.

Deferred compensation balances fluctuate moderately, with a decrease in 2018 followed by steady increases from 2019 to 2022, ultimately reaching 38,685 thousand US dollars, indicating potentially growing commitments related to employee compensation plans. Stock-based compensation shows slight volatility but overall experiences growth from 44,865 thousand US dollars in 2017 to 45,840 thousand US dollars in 2022, reflecting increased or sustained stock-based payment expenses.

Deferred rent is reported only through 2019, demonstrating a declining trend from 25,221 thousand US dollars to 19,824 thousand US dollars, after which no data is available. State taxes and credits decrease considerably from 28,484 thousand US dollars in 2017 to a low of 10,926 thousand US dollars in 2021 but partially recover in 2022 to 18,501 thousand US dollars, highlighting some variability in state tax obligations or credits over time.

Employee benefits show fluctuation with values declining sharply from 23,987 thousand US dollars in 2017 to 15,242 thousand US dollars in 2018, rising subsequently to a peak of 37,779 thousand US dollars in 2021, then declining to 28,430 thousand US dollars in 2022. This pattern suggests varying levels of employee-related expenses or accruals across the years.

Operating lease liabilities and related assets, not reported until 2020, appear in significant amounts, with lease liabilities slightly increasing from 797,467 thousand US dollars in 2020 to 829,946 thousand US dollars in 2021 before declining to 801,186 thousand US dollars in 2022. Correspondingly, operating lease assets show a large negative balance, consistent with right-of-use assets recognized under lease accounting standards, and these values remain relatively stable over the last three periods.

Other liabilities fluctuate with a small positive balance initially, followed by a negative balance in subsequent years, ending with a negative 14,595 thousand US dollars in 2022, suggesting some reclassification or variations in miscellaneous items over time. The "Other" category among assets or liabilities (distinct entries) increases progressively from 8,223 thousand US dollars in 2017 to 9,632 thousand US dollars in 2022, indicating growing miscellaneous asset or liability balances.

Depreciation consistently increases in magnitude (more negative) from -313,526 thousand US dollars in 2017 to -293,065 thousand US dollars in 2022, though with some fluctuations, indicating ongoing asset wearing and capital usage that affects net book values annually. Merchandise inventory values remain negative and relatively stable, indicating consistent inventory investment or valuation over the years.

Supplies also maintain a consistent negative value, increasing slightly from -13,418 thousand US dollars in 2017 to -12,280 thousand US dollars in 2022, reflecting steady holding or use of supplies.

Regarding deferred tax items, gross deferred tax assets decline substantially from 238,677 thousand US dollars in 2017 to about 165,762 thousand US dollars in 2019, then surge dramatically to over 943,000 thousand US dollars in 2020, remaining stable through 2022. The valuation allowance associated with these assets generally declines in magnitude, indicating a reduced likelihood of needing to reserve against deferred tax assets. Deferred tax liabilities display a significant increase in negative balance beginning in 2020, jumping from -285,431 thousand US dollars in 2019 to over -1,100,000 thousand US dollars thereafter, largely offsetting deferred tax assets net, which remain negative but fluctuate moderately.

In summary, the company's liabilities show consistent management and reduction in certain short-term components alongside large and stable operating lease obligations reflecting significant lease commitments. Employee-related liabilities and stock-based compensation demonstrate growth or fluctuations, possibly indicating changes in workforce or compensation policies. Deferred tax accounts experience dramatic changes starting in 2020, likely related to adjustments in tax positions or accounting standards. Overall, while certain liabilities decrease, substantial lease and tax-related balances suggest ongoing operating complexities and financial commitments.

The deferred tax liabilities of the company exhibit variability over the examined six-year period. Starting at approximately 121.4 million USD in early 2017, the figure experienced a notable decline in 2018 to roughly 85.8 million USD, indicating a significant reduction during that period.

Following this decrease, deferred tax liabilities increased markedly in 2019, reaching about 124.3 million USD, and continued to rise throughout 2020, peaking near 149.7 million USD. This upward trajectory suggests a rising tax obligation or recognition of future tax liabilities during these consecutive years.

In 2021, the deferred tax liabilities decreased again to approximately 121.9 million USD, indicating a downward adjustment, before rising somewhat in 2022 to nearly 137.6 million USD. Overall, the data demonstrate fluctuations with a general pattern of decline, recovery, peak, reduction, and moderate increase over the six-year span.

Summary of Trends

2017 to 2018

Significant decrease in deferred tax liabilities.

2018 to 2020

Continued increase, peaking in 2020.

2020 to 2021

Decrease to earlier levels.

2021 to 2022

Moderate increase noted.

Liabilities

The reported total liabilities exhibited a generally increasing trend from 2,561,334 thousand US$ in January 2017 to 9,580,206 thousand US$ in January 2022. A significant increase occurred between February 2019 and February 2020, where liabilities more than doubled from approximately 2.77 billion to nearly 6 billion US$. Adjusted total liabilities followed a similar trajectory, rising from around 2.44 billion US$ in 2017 to approximately 9.44 billion US$ by 2022, with the same substantial increase noted between 2019 and 2020. Throughout the periods, adjusted liabilities remained consistently slightly lower than the reported figures.

Stockholders’ Equity

Reported stockholders’ equity displayed a steady increase from approximately 2.75 billion US$ in 2017 to just over 4 billion US$ in 2022. The growth was relatively gradual until 2021, where equity slightly decreased before rebounding significantly in 2022. Adjusted stockholders’ equity followed the same trend but was consistently higher than the reported equity, ranging from about 2.87 billion US$ in 2017 to nearly 4.20 billion US$ in 2022. The adjusted values suggest an upward revision or different accounting treatment that bolstered equity figures compared to reported numbers.

Net Earnings

Reported net earnings increased steadily from 1.12 billion US$ in 2017 to a peak of about 1.66 billion US$ in 2020, followed by a dramatic decline to 85 million US$ in 2021, and then a robust recovery to approximately 1.72 billion US$ in 2022. Adjusted net earnings mirrored this pattern, with a steady rise to nearly 1.69 billion US$ in 2020, a more severe drop to 57 million US$ in 2021, and a rebound to roughly 1.74 billion US$ in 2022. This volatility in 2021 may indicate extraordinary events impacting earnings, with adjustments exacerbating the decline before normalizing in the next period.

Overall Trends and Insights

The data reveals substantial growth in both liabilities and stockholders’ equity over the five-year span, indicating expansion and possibly increased leverage. The adjustment of figures typically results in higher equity and slightly lower liabilities, suggesting conservative reporting or tax-related reclassifications aimed at presenting a healthier financial position. The net earnings exhibit stability and growth except for the abrupt downturn in 2021, which hints at an exceptional adverse impact during that year. The swift recovery in 2022 demonstrates resilience or effective corrective measures.

The analysis of the reported and deferred income tax adjusted financial data reveals several notable trends in profitability, financial leverage, and return measures over the six-year period.

Net Profit Margin

The reported net profit margin exhibited a generally upward trend from 8.69% in 2017 to a peak of 10.59% in 2019, followed by a slight decline to 10.36% in 2020. However, in the fiscal year 2021, there was a significant drop to 0.68%, before partially recovering to 9.11% in 2022. The adjusted net profit margin followed a similar pattern, peaking at 10.81% in 2019 and 10.56% in 2020, with a sharp decline to 0.46% in 2021 and a rebound to 9.19% in 2022. These fluctuations in 2021 reflect an unusual event or external factor significantly impacting profitability.

Financial Leverage

Reported financial leverage showed a gradual decline from 1.93 in 2017 to 1.84 in 2019, suggesting a modest reduction in debt relative to equity during this time. Starting in 2020, there was a marked increase to 2.78, reaching a peak at 3.86 in 2021, followed by a slight decrease to 3.36 in 2022. Adjusted financial leverage follows a similar pattern, declining from 1.85 in 2017 to 1.77 in 2019, then increasing to 2.66 in 2020, peaking at 3.73 in 2021, and slightly declining to 3.25 in 2022. This rising leverage in the latter years may indicate increased borrowing or a strategic shift toward greater financial risk, potentially linked to the profitability changes observed.

Return on Equity (ROE)

Reported ROE increased steadily from 40.67% in 2017 to 49.44% in 2020, indicating improved efficiency in generating profit from equity. However, in 2021 there was a drastic decline to 2.59%, before recovering to 42.43% in 2022. Adjusted ROE similarly rose from 38.65% in 2017 to 48.25% in 2020, dropped to 1.69% in 2021, and rebounded to 41.41% in 2022. This pattern mirrors net profit margin trends and underlines the significant financial stress or extraordinary event during 2021, which heavily impaired equity returns.

Return on Assets (ROA)

Reported ROA grew from 21.05% in 2017 to a high of 26.14% in 2019, but then declined sharply to 17.77% in 2020 and plummeted to 0.67% in 2021 before partially recovering to 12.63% in 2022. Adjusted ROA showed a similar progression, rising to 26.66% in 2019, declining to 18.11% in 2020, dropping further to 0.45% in 2021, and increasing to 12.74% in 2022. The decline in asset profitability in 2021 is consistent across both reported and adjusted data, reflecting an unfavorable operating environment or abnormal charges impacting asset efficiency.

Overall, the data depicts a generally positive performance trend from 2017 through 2019, with improvements in profitability and returns. The fiscal year 2021 stands out as an anomaly marked by sharp declines in margin, returns, and profitability metrics, concurrent with elevated financial leverage levels. The subsequent recovery in 2022 suggests a partial normalization of financial performance, though not fully returning to prior peak levels. The parallel trends observed in both reported and adjusted figures confirm the reliability of these patterns, highlighting that the tax-related adjustments do not materially alter the core financial insights.

Net Earnings Trend

Reported net earnings exhibited a consistent upward trajectory from 2017 through 2020, increasing from approximately 1.12 billion USD to about 1.66 billion USD. A significant decline occurred in 2021, where earnings dropped sharply to around 85 million USD. In 2022, reported net earnings rebounded substantially, reaching approximately 1.72 billion USD, surpassing previous highs.

Adjusted Net Earnings

Adjusted net earnings followed a similar pattern to reported net earnings, rising steadily from about 1.11 billion USD in 2017 to nearly 1.69 billion USD in 2020. A pronounced decrease occurred in 2021, with adjusted earnings falling to roughly 58 million USD, even lower than the reported figure for that year. In 2022, adjusted net earnings recovered robustly to approximately 1.74 billion USD, exceeding the 2020 peak.

Reported Net Profit Margin

The reported net profit margin showed growth from 8.69% in 2017 to a peak of 10.59% in 2019, stabilizing at around 10.36% in 2020. In 2021, there was a drastic contraction to 0.68%, indicating extreme pressure on profitability. By 2022, the margin improved to 9.11%, though it remained below the pre-2021 levels.

Adjusted Net Profit Margin

Adjusted net profit margin trends mirrored those of the reported margins, increasing from 8.62% in 2017 to a high of 10.81% in 2019, and reaching 10.56% in 2020. The margin collapsed further in 2021 to 0.46%, indicating even deeper erosion of profitability when adjustments are considered. A recovery to 9.19% was observed in 2022, close to but slightly below the reported margin for the same year.

Overall Insights

Both reported and adjusted metrics reflect a period of steady growth in earnings and profitability up to 2020, followed by a severe downturn in 2021, likely due to extraordinary factors impacting financial performance. The 2021 decline is markedly sharper in adjusted figures, suggesting significant adjustments or one-time items affecting that year's results. A strong recovery in 2022 is evident in all measures, indicating a rebound in operational performance. However, profit margins in 2022 have not fully returned to the pre-2021 peak levels, pointing to ongoing challenges or a changed operating environment.

Stockholders’ Equity

The reported stockholders' equity demonstrates a consistent upward trend from 2,748,017 US$ thousands in January 2017 to 4,060,050 US$ thousands in January 2022. The adjusted stockholders' equity follows a similar pattern, increasing from 2,869,402 US$ thousands to 4,197,692 US$ thousands over the same period. Both reported and adjusted figures show steady growth, with a slight dip in reported stockholders’ equity noted in January 2021 before resuming an upward trajectory. Overall, equity values have increased significantly, indicating strengthening capitalization.

Financial Leverage

The reported financial leverage ratio starts at 1.93 in January 2017 and initially decreases to 1.84 by February 2019, followed by a marked increase to a peak of 3.86 in January 2021 before decreasing slightly to 3.36 in January 2022. The adjusted financial leverage ratio exhibits a comparable pattern, declining from 1.85 to 1.77 between January 2017 and February 2019, then rising to 3.73 in January 2021 and dropping to 3.25 in January 2022. The initial decrease suggests a period of reduced reliance on debt, but the substantial increase beginning in 2020 indicates heightened leverage, possibly reflecting increased borrowing or changes in the capital structure. The slight decline in 2022 may indicate some deleveraging or capital restructuring efforts.

Comparisons Between Reported and Adjusted Metrics

Adjusted equity values consistently exceed reported equity across all years, suggesting adjustments primarily increase the reported equity base after accounting for deferred tax effects. The adjusted financial leverage ratios are consistently lower than the reported ratios, implying that adjustments reduce perceived leverage, likely by increasing equity or reclassifying liabilities. The trends in both reported and adjusted figures move in parallel, confirming that deferred tax adjustments have a steady impact but do not alter the overall trend direction.

The financial data over the six-year period reveals several notable trends in net earnings, stockholders’ equity, and return on equity (ROE), both in reported and adjusted terms.

Net Earnings

Reported net earnings demonstrate a consistent upward trajectory from 2017 through 2020, increasing from approximately $1.12 billion to $1.66 billion. However, a significant decline is observed in 2021, where reported net earnings drop drastically to around $85 million, before recovering sharply to about $1.72 billion in 2022.

The adjusted net earnings follow a similar pattern, rising steadily from approximately $1.11 billion in 2017 to $1.69 billion in 2020. The adjusted figures also show a substantial dip in 2021, falling to roughly $57.5 million, with a subsequent strong rebound to $1.74 billion in 2022. This pattern suggests that extraordinary items or adjustments had a minimal effect on the observed earnings trend, as the reported and adjusted figures closely align.

Stockholders’ Equity

Reported stockholders’ equity exhibits a general increase from about $2.75 billion in 2017 to $3.36 billion in 2020, followed by a slight decrease to around $3.29 billion in 2021. In 2022, there is a marked increase to approximately $4.06 billion, representing the highest value in the observed period.

Adjusted stockholders’ equity also shows a similar upward trend, rising from approximately $2.87 billion in 2017 to $3.51 billion in 2020, with a moderate decline to $3.41 billion in 2021. The subsequent jump to nearly $4.20 billion in 2022 surpasses prior years, indicating substantial equity growth in the latest period.

Return on Equity (ROE)

Reported ROE improves steadily from 40.67% in 2017 to a peak of 49.44% in 2020, highlighting increasing profitability relative to equity. In 2021, however, reported ROE plunges sharply to 2.59%, reflecting the pronounced earnings decline that year. The ROE rebounds to 42.43% in 2022, though it does not fully regain its prior peak levels.

Adjusted ROE mirrors the reported figures but with slightly lower percentages. It rises from 38.65% in 2017 to 48.25% in 2020, before falling to a low of 1.69% in 2021, and then recovering to 41.41% in 2022. This pattern underscores the impact of the earnings downturn on equity returns and a degree of resilience in the subsequent recovery.

Overall, the data indicate robust growth in net earnings, equity, and profitability through 2020, followed by a notable and sharp deterioration in 2021 across all metrics. The subsequent year shows a significant recovery, suggesting that the 2021 decline may be attributable to extraordinary or one-time factors rather than a sustained downturn. The close alignment between reported and adjusted figures throughout the period suggests that adjustments for deferred income taxes had limited effect on the overall financial performance trends.

Net Earnings

Reported net earnings showed a general upward trend from 2017 to 2020, increasing from approximately 1,117,654 thousand US dollars to 1,660,928 thousand US dollars. However, a sharp decline occurred in 2021, dropping drastically to 85,382 thousand US dollars. This was followed by a strong recovery in 2022, reaching 1,722,589 thousand US dollars, the highest value within the period.

Adjusted net earnings mirrored this trend, rising steadily from 1,108,951 thousand US dollars in 2017 to 1,692,937 thousand US dollars in 2020. Similar to reported values, there was a significant drop in 2021 to 57,570 thousand US dollars. The adjusted net earnings rebounded in 2022 to 1,738,364 thousand US dollars, exceeding previous highs.

Return on Assets (ROA)

Reported ROA experienced growth from 21.05% in 2017 to a peak of 26.14% in 2019. A notable decline followed in 2020, with ROA falling to 17.77%, and a more pronounced drop occurred in 2021, reaching a very low 0.67%. The ROA improved again in 2022 but remained below earlier levels at 12.63%.

Adjusted ROA trends were consistent with reported ROA, rising from 20.89% in 2017 to a peak of 26.66% in 2019. The metric declined to 18.11% in 2020 and further plunged to 0.45% in 2021. In 2022, adjusted ROA increased to 12.74%, indicating partial recovery but staying well below the peak years.

Insights

The data reveals a period of stable growth in both earnings and ROA up to 2019, suggesting operational improvement or favorable market conditions. The sharp declines in 2021 indicate an unusual downturn, which could reflect external challenges or exceptional factors impacting the business. The subsequent rebound in 2022 suggests recovery and resilience, though ROA levels have not returned to their prior peak levels, which may indicate continued challenges in asset utilization or profitability efficiency.