Ross Stores (ROST)

We believe that our ability to effectively execute certain off-price buying strategies is a key factor in our success. Our buyers use a number of methods that enable us to offer our customers brand-name and fashion merchandise at strong everyday discounts relative to department and specialty stores for Ross and moderate department and discount stores for dd’s DISCOUNTS. By purchasing later in the merchandise buying cycle than department and specialty stores, we are able to take advantage of imbalances between retailers’ demand for products and manufacturers’ supply of those products.

Unlike most department and specialty stores, we typically do not require that manufacturers provide promotional allowances, co-op advertising allowances, return privileges, split shipments, drop shipments to stores or delayed deliveries of merchandise. For most orders, only one delivery is made to one of our four distribution centers. These flexible requirements further enable our buyers to obtain significant discounts on in-season purchases.

The vast majority of the merchandise that we offer in all of our stores is acquired through opportunistic purchases created by manufacturer overruns and canceled orders both during and at the end of a season. These buys are referred to as "close-out" and "packaway" purchases. Close-outs can be shipped to stores in-season, allowing us to get in-season goods into our stores at lower prices. Packaway merchandise is purchased with the intent that it will be stored in our warehouses until a later date, which may even be the beginning of the same selling season in the following year. Packaway purchases are an effective method of increasing the percentage of prestige and national brands at competitive savings within our merchandise assortments. Packaway merchandise is mainly fashion basics and, therefore, not usually affected by shifts in fashion trends.

In fiscal 2007, we continued our emphasis on this important sourcing strategy in response to compelling opportunities available in the marketplace. Packaway accounted for approximately 38% of total inventories as of February 2, 2008 and February 3, 2007. We believe the strong discounts we are able to offer on packaway merchandise are one of the key drivers of our business results.

We are currently working to develop and roll-out additional information system enhancements and process changes to improve our merchandising capabilities. These new tools are designed to strengthen our ability to plan, buy and allocate at a more local versus regional level. The long-term objective of these investments is to be able to fine tune our merchandise offerings to address more localized customer preferences and thereby gradually increase sales productivity and gross profit margins in both newer and existing regions and markets.

Our buying offices are located in New York City and Los Angeles, the nation's two largest apparel markets. These strategic locations allow our buyers to be in the market on a daily basis, sourcing opportunities and negotiating purchases with vendors and manufacturers. These locations also enable our buyers to strengthen vendor relationships -- a key element in the success of our off-price buying strategies.

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We believe that our ability to
effectively execute certain off-price buying strategies is a key factor in our
success. Our buyers use a number of methods that enable us to offer our
customers brand-name and fashion merchandise at strong everyday discounts
relative to department and specialty stores for Ross and moderate department and
discount stores for dd’s DISCOUNTS. By purchasing later in the merchandise
buying cycle than department and specialty stores, we are able to take advantage
of imbalances between retailers’ demand for products and manufacturers’ supply
of those products.

Unlike most department and
specialty stores, we typically do not require that manufacturers provide
promotional allowances, co-op advertising allowances, return privileges, split
shipments, drop shipments to stores or delayed deliveries of merchandise. For
most orders, only one delivery is made to one of our four distribution centers.
These flexible requirements further enable our buyers to obtain significant
discounts on in-season purchases.

The vast majority of the
merchandise that we offer in all of our stores is acquired through opportunistic
purchases created by manufacturer overruns and canceled orders both during and
at the end of a season. These buys are referred to as "close-out" and "packaway"
purchases. Close-outs can be shipped to stores in-season, allowing us to get
in-season goods into our stores at lower prices. Packaway merchandise is
purchased with the intent that it will be stored in our warehouses until a later
date, which may even be the beginning of the same selling season in the
following year. Packaway purchases are an effective method of increasing the
percentage of prestige and national brands at competitive savings within our
merchandise assortments. Packaway merchandise is mainly fashion basics and,
therefore, not usually affected by shifts in fashion trends.

In fiscal 2007, we continued our
emphasis on this important sourcing strategy in response to compelling
opportunities available in the marketplace. Packaway accounted for approximately
38% of total inventories as of February 2, 2008 and February 3, 2007. We believe
the strong discounts we are able to offer on packaway merchandise are one of the
key drivers of our business results.

We are currently working to
develop and roll-out additional information system enhancements and process
changes to improve our merchandising capabilities. These new tools are designed
to strengthen our ability to plan, buy and allocate at a more local versus
regional level. The long-term objective of these investments is to be able to
fine tune our merchandise offerings to address more localized customer
preferences and thereby gradually increase sales productivity and gross profit
margins in both newer and existing regions and markets.

Our buying offices are located in
New York City and Los Angeles, the nation's two largest apparel markets. These
strategic locations allow our buyers to be in the market on a daily basis,
sourcing opportunities and negotiating purchases with vendors and manufacturers.
These locations also enable our buyers to strengthen vendor relationships -- a
key element in the success of our off-price buying strategies.

2

We believe that our ability to effectively execute certain off-price buying strategies is a key factor in our success. Our buyers use a number of methods that enable us to offer our customers brand-name and fashion merchandise at strong everyday discounts relative to department and specialty stores for Ross and moderate department and discount stores for dd’s DISCOUNTS. By purchasing later in the merchandise buying cycle than department and specialty stores, we are able to take advantage of imbalances between retailers’ demand for products and manufacturers’ supply of those products.

Unlike most department and specialty stores, we typically do not require that manufacturers provide promotional and markdown allowances, return privileges, split shipments, drop shipments to stores or delayed deliveries of merchandise. For most orders, only one delivery is made to one of our four distribution centers. These flexible requirements further enable our buyers to obtain significant discounts on in-season purchases.

The vast majority of the merchandise that we offer in all of our stores is acquired through opportunistic purchases created by manufacturer overruns and canceled orders both during and at the end of a season. These buys are referred to as "close-out" and "packaway" purchases. Close-outs can be shipped to stores in-season, allowing us to get in-season goods in our stores at lower prices. Packaway merchandise is purchased with the intent that it will be stored in our warehouses until a later date, which may even be the beginning of the same selling season in the following year. Packaway purchases are an effective method of increasing the percentage of prestige and national brands at competitive savings within our merchandise assortments. Packaway merchandise is mainly fashion basics and, therefore, not usually affected by shifts in fashion trends.

In fiscal 2006, we continued our emphasis on this important sourcing strategy in response to compelling opportunities available in the marketplace. Packaway accounted for approximately 38% of total inventories as of February 3, 2007, compared to 41% at the end of the prior year. We believe the strong discounts we are able to offer on packaway merchandise are a key driver of our business.

We are currently working to improve our analytical capabilities for merchandise planning, buying and allocation through the development of new processes and systems enhancements that are expected over the next few years to address more localized customer preferences. The long-term objective of these investments is to finetune our merchandise offerings at a more local level to improve sales productivity and gross profit margins. Once fully implemented, these new analytical capabilities and systems enhancements are also expected to provide us with the tools to improve, over time, store sales productivity and profitability in both newer and existing regions and markets.

Our buying offices are located in New York City and Los Angeles, the nation's two largest apparel markets. These strategic locations allow our buyers to be in the market on a daily basis, sourcing opportunities and negotiating purchases with vendors and manufacturers. These locations also enable our buyers to strengthen vendor relationships -- a key element in the success of our off-price buying strategies.

We have a total of approximately 300 merchants for Ross and dd’s DISCOUNTS combined, although the two buying organizations are separate and distinct. These buying resources include merchandise management, buyers and assistant buyers. Ross and dd’s DISCOUNTS buyers have an average of about 13 years of experience, including merchandising positions with other retailers such as Bloomingdale's, Burlington Coat Factory, Dayton Hudson, Foot Locker, Kohl’s, Lechters, Lord & Taylor, Macy's, Marshalls, Nordstrom, Robinsons/May, Sterns, T.J. Maxx and Value City. We believe that the investment we have made over the years in our merchandise organization enables our merchants to spend more time in the market developing and nurturing relationships with a wide array of manufacturers and vendors, enhancing our ability to continue to procure the most desirable brands and fashions at competitive discounts.  

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