ROST 10-K & 10-Q changes, risk factors and insider trading

We are subject to impacts from changes in the macroeconomic environment, financialgovernment andregulation creditor markets,policy, geopolitical conditions, and governmentfinancial regulationand orcredit policy.markets. Continuing inflation, tariff increases (or threats of increases), potential supply chain disruptions, and other external events may have significant negative effects on our costs, and also on consumer confidence, shopping behavior, and spending, which may adversely affect our sales and profitability.

Elevated inflation, rapidly changing and increased tariffs on goods imported into the United States, other government regulation or policy and regulatory changes (including trade and tariff changes and threats of changes),changes, geopolitical conflicts, bank failures, federal government shutdowns, public health crises,crises (including pandemics), and other potential, adverse developments and related uncertainties, could reduce demand for our merchandise, disrupt our buying patterns, increase our cost of goods, freight,create limits in merchandise availability, cause shipping delays and payroll,increase freight costs, decrease our inventory turnover, cause greater markdowns, and negatively affect our sales and margins. All of our stores are located in the United States and its territories, and while we directly import only a small portion of our merchandise, more than half of the goods we sell originate from China, so we are especially susceptible to changes in the U.S. economy and trade policy.policy in the U.S. (particularly toward China).

Consumer spending levels and shopping behaviors for the merchandise we sell are affected by many external macroeconomic factors. ElevatedIn inflation,addition to consumer sensitivity to the price points and value differentiation we offer on the merchandise we sell, elevated consumer costs of living for other goods and services (including increased fuel and energy costs, food prices, interest rates, and housing costs,costs), relative wage rates, unemployment levels, availability of consumer credit, consumer debt levels, income tax rates and the timing of tax refunds, and various government policies and practices (including those with respect to immigration), and the resulting effects on consumers’ disposable income and consumer confidence in future economic conditions all have an impact on consumer spending habits for our merchandise.

Changes and uncertainty in U.S. trade or tax policy regarding apparelapparel, home-related merchandise, shoes, and home-relatedother merchandisegoods we sell produced in other countries could adversely affect our business.

A predominant portion of the apparelapparel, home-related merchandise, shoes, and other goods we sell is originally manufactured in other countries.countries, including China. While we directly import only a small portion of our merchandise, more than half of the goods we sell originate from China. The U.S. government has indicated a willingness to significantly change existing trade policies.policies, and has imposed increased tariffs on goods imported into the United States, in particular on goods produced in China. This exposes us to risks of disruption and significant cost increases in our established patterns for sourcing our merchandisemerchandise, and creates increased uncertainties in planning our sourcing strategies and forecasting our margins. Changes in tariffs, quotas, trade relationships, or tax provisions that reduce the supply or increase the relative cost of goods produced in China and other countries could significantly increase our cost of goods and/or increase our effective tax rate. Although such changes would have implications across the entire industry,retail sector, we may fail to effectively adapt and manage the adjustments in sourcing strategy that would be necessary in response to those changes. In addition to the general uncertainty and overall risk from potential changes in laws and policies, as we make business decisions in the face of uncertainty as to potential changes, we may incorrectly anticipate the outcomes, miss out on business opportunities, or fail to effectively adapt our business strategies and manage the adjustments that are necessary in response to those changes. These risks could adversely affect our revenues and expenses, increase our effective tax rates, and reduce our profitability and market share.

Competitive pressures and the pace of change in the apparel and home-related merchandise retailing industry are high.

The retail industry is highly competitive and the marketplace is fragmented, as many different retailers compete for market share by utilizing a variety of store and online formats and merchandising strategies. We expect competition to increase in the future. There are limited economic barriers for others to enter the off-price retail sector. We compete for customers, associates, store locations, and merchandise with other off-price retailers, traditional department stores, mass merchandisers, specialty stores, online and catalog businesses, and other local, regional, and national retailers. Our retail competitors constantly adjust their pricing, business models and strategies, and promotional activity (particularly during holiday periods) in response to changing market conditions or their own financial condition. The substantial sales growth in e-commerce and the increasing use of consumer data analytics has also encouraged the entry of many new competitors, new business models, and an increase in competition from established companies looking for ways to create successful online and in person shopping alternatives. While our business is exclusively in brick-and-mortar stores, consumer e-commerce spending continues to increase. Advancements in technology (including artificial intelligence or other emerging technologies) will present opportunities to inform merchandising, pricing, assortment, and other key business decisions; however, there are costs, risks and potential adverse consequences from premature adoption or over-reliance on those emerging technologies. At the same time, if competitors successfully implement these capabilities more quickly or effectively than we do, our competitive position could be adversely affected. Intense pressures from our competitors, our inability to adapt effectively and quickly to a changing competitive landscape, or a failure to effectively execute our off-price model, could reduce demand for our merchandise, decrease our inventory turnover, cause us to take greater markdowns, and negatively affect our sales and margins.

Unexpected changes in the level of consumer spending on or preferences for apparel and home-related merchandise could adversely affect us.

Opportunistic buying, leantightly managed inventory levels, and frequent inventory turns are critical elements of our off-price business strategy. Maintaining an overall pricing differential to our competitors is also key to our ability to attract customers and sustain our sales and gross margins. Our opportunistic buying places considerable discretion with 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 will 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. To the extent that certain of our vendors decide not to sell to us or go out of business, the amount of high quality merchandise available to us could also be materially reduced. Because a significant portion of the apparel and other goods we sell is originally manufactured in other countries, constraints on the availability of shipping capacity, changes in transportation or tariff costs, trade relationships or tax policies, geopolitical conflicts, natural disasters, or public health issues, that reduce the supply or increase the relative cost of imported goods, could also result in disruptions to our supply relationships. Cost increases, shortages, delays, or disruptions in the availability to us of high quality, value-priced merchandise could have a material adverse effect on our sales and margins.

Successful growth requires us to find appropriate real estate sites in our targeted market areas. We compete with other retailers and businesses for acceptable store locations. For the purpose of identifying locations, we rely on consumer demographics. While we believe consumer demographics are helpful indicators of acceptable store locations, we recognize that this information cannot predict future consumer preferences and buying trends with complete accuracy. Time frames for negotiations and store development vary from location to location and can be subject to unforeseen delays or unexpected cancellations. We may not be able to open new stores or, if opened, operate those new stores profitably. Construction and other delays in store openings could have a negative impact on our business and operating results. Additionally, when our existing stores near the end of their lease term, we may not be able to successfully renegotiate ourthe currentfuture lease termsterms, which could negatively impact our operating results. New stores may not achieve the same sales or profit levels as our existing storesstores, and adding stores to existing markets may adversely affect the sales and profitability of other existing stores. If we cannot acquire sites on attractive terms, it could limit our ability to grow or adversely affect the economics of our new stores in various markets.

Customer traffic and demand for our merchandise is influenced by our advertising and marketing activities, the name recognition and reputation of our brands, and the location of our stores. Although we use aan increasing variety of marketing and advertising mediums to attract customers to our stores, particularly through a mix of traditional and streaming television, digital channels (including social media), and new store grand openings, our competitors may spend more or use different approaches, which could provide them with a competitive advantage. Our advertising and other promotional programs may not be effective or may be perceived negatively, or could require increased expenditures, any of which could adversely affect sales or increase costs.

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 is principally driven by the product mix and seasonality of the merchandise, and its relation to our store merchandise assortment plans, 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 align with 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.

Despite security measures we have in place, and our efforts to prevent, monitor, and mitigate attacks and errors, our facilities and systems (or those of third-party service providers we utilize or connect to) may be vulnerable to security breaches, acts of vandalism, computer viruses, misplaced or lost data, programming and/or human errors, phishing, ransomware attacks, and similar fraudulent attacks, or other similar events. It is also possible that an associate within our Company, or at a third party we do business with, may purposefully or inadvertently cause a security breach involving such information. The increasing sophistication of cybercriminals, the increased potential for cyberattacks, the advances in computer capabilities and artificial intelligence (“AI”),intelligence, and remote access increases these risks. A breach of our information or data security, a system shut down or other response we may take, or our failure or delay in detecting and mitigating a system breach and a loss of personal or business information, could result in damage to our reputation, loss of customer confidence, violation (or alleged violation) of applicable laws (including laws relating to consumer data protection and privacy, and required notifications of data security breaches), and expose us to civil claims, litigation, and regulatory action, and to unanticipated costs and disruption of our operations.

A disruption within our logistics or supply chain network could adversely affect our ability to timely and efficiently transport merchandise to our stores or our distribution centers, which could impair our ability to meet customer demand for products and result in lost sales or increased supply chain costs. Such disruptions may result from public health issues such as pandemics, cyberattacks, damage or destruction to our distribution centers, equipment failures, weather-related events, natural disasters, power outages, fires, trade restrictions, tariffs, third-party strikes or ineffective cross-dock operations, work stoppages or slowdowns, shipping capacity constraints, supply or shipping interruptions, or other factors beyond our control. Any such disruptions could negatively impact our financial performance or financial condition.

Our reputation is partially based on perceptions of various subjective qualities and overall integrity. Any incident that erodes the trust or confidence of our customers or the general public could adversely affect our reputation and business, particularly if the incident results in significant adverse publicity or governmental inquiry. Such an incident could also include alleged acts or omissions by, or situations involving, our vendors (or their contractors or subcontractors), the landlords for our stores, or our associates outside of work, and may pertain to social or political issues or protests largely unrelated to our business. Similarly, our responses to events or crises and our position (or perceived lack of position) on environmental, social, and governance (“ESG”) matters, such as sustainability, corporate social responsibility, diversity, equality, and inclusion (“DE&I”),inclusion, responsible sourcing, and any perceived lack of transparency about those matters could harm our reputation, receive negative feedback from stakeholders, including our customers and investors, and could adversely affect our sales.

We have a concentration of store locations in the states of California, Texas, and Florida; together those states include almost 50% of our stores. More thanApproximately half of our distribution center and warehouse capacity, approximately 22% of our stores, and our corporate headquarters, are located in California. Natural or other disasters, such as wildfires, earthquakes, hurricanes, tornadoes, floods, or other extreme weather and climate conditions, or fires, explosions, and acts of war or terrorism, or public health issues, in any of our markets could disrupt our operations or our supply chain, or could shut down, damage, or destroy our stores or distribution facilities.

Ross Stores, Inc. operates two brands of off-price retail apparel and home fashion stores—Ross Dress for Less® (“Ross”) and dd’s DISCOUNTS®. Ross is the largest off-price apparel and home fashion chain in the United States, with 1,8311,904 locations in 4344 states, the District of Columbia, Guam, and Guam,Puerto Rico as of FebruaryJanuary 1,31, 2025.2026. Ross offers first-quality, in-season, brand name brand and designer apparel, accessories, footwear, and home fashions for the entire family at savings of 20% to 60% off department and specialty store regular prices every day. We also operate 355363 dd’s DISCOUNTS stores in 22 states as of FebruaryJanuary 1,31, 20252026 that feature a more moderately-priced assortment of first-quality, in-season, name brandin-season apparel, accessories, footwear, and home fashions for the entire family at savings of 20% to 70% off moderate department and discount store regular prices every day.

The fiscal years ended January 31, 2026, February 1, 2025, and February 3, 2024, and January 28, 20232024 are referred to as fiscal 2025, fiscal 2024, and fiscal 2023, respectively. Fiscal 2025 and fiscal2024 2022,were respectively.each 52-week years. Fiscal 2023 was a 53-week year. Fiscal 2024 and 2022 were each 52-week years.

Sales. Sales for fiscal 20242025 increased $752.3approximately $1,621 million, or 3.7%,8%, compared to the prior year. This was primarily due to the 3%5% increase in comparable store sales of approximately $961 million and thean openingincrease in non-comparable store sales of 77 net new stores during fiscal 2024. Sales for fiscal 2023 included approximately $308$660 millionmillion. fromThe the5% additionalincrease weekin ofcomparable store sales duewas todriven theby 53rdan week.approximate 3% increase in basket and 2% increase in traffic.

Cost of goods sold. Cost of goods sold in fiscal 20242025 increased $458.9approximately $1,187 million compared to the prior yearyear, primarily due to the 3% comparable store sales increase andin higher sales from the opening of 77 net new stores during fiscal 2024.sales.

Cost of goods sold as a percentage of sales for fiscal 20242025 decreasedincreased approximately 4010 basis points from fiscal 20232024, primarily due to a 4525 basis point decreaseincrease in buyingdistribution costs mainly due to lowerthe incentivedeleveraging compensationeffect expense,from athe 45opening of our eighth distribution center in Buckeye, Arizona in May 2025. Merchandise margin decreased 20 basis pointpoints decreaseprimarily indue distributionto costs, and a 30 basis point decrease in domestic freighttariff-related costs. Partially offsetting these itemshigher wascosts awere 60lower basisdomestic pointfreight decreasecosts in merchandise margin primarily due to our continued efforts to offer more sharply priced branded bargains and aof 20 basis pointpoints, increaselower buying costs of 10 basis points, and 5 basis points of leverage in occupancy costs.

Selling, general and administrative expenses. For fiscal 2024,2025, selling, general and administrative expenses (“SG&A”) increased $15.5approximately $313 million compared to the prior year. In December 2024, we completed the sale of a packaway warehouse facility and recognized a pre-tax gain on sale of $61.6 million. This sale, along with lower incentive compensation expense, partially offset the increase in SG&A which wasyear, primarily drivendue byto thehigher openingstore-related of 77 net new stores during fiscal 2024.costs.

In December 2024, we completed the sale of a packaway warehouse facility and recognized a pre-tax gain on sale of $61.6 million. SG&A as a percentage of sales for fiscal 20242025 decreasedincreased 5025 basis points compared to fiscal 2023,2024, primarily due to the gain recognized from the previously mentioned packaway facilitythis sale andin lowerfiscal incentive compensation expense.2024.

Operating income. Operating income as a percentage of sales for fiscal 20242025 increaseddecreased 90by 35 basis points compared to fiscal 2023,2024, primarilyas dueboth toSG&A lowerand cost of goods sold andincreased loweras SG&Aa expenses.percentage of sales period-over-period.

The table below shows the components of interest (income) expense,income, net for fiscal 2025, 2024, 2023, and 20222023:

Taxes on earnings. Our effective tax raterates for fiscal 2025, 2024, 2023, and 20222023 were approximately 24.5%, 24.2%, and 24.2%, respectively. The increase in the effective tax rate compared to the prior year was approximatelyprimarily 24%.due to the tax effects associated with stock-based compensation. Our effective tax rate represents the applicable combined federal and state statutory rates reduced by the federal benefit of state taxes deductible on federal returns. Our effective tax rate is impacted by changes in tax law and accounting guidance, location of new stores, level of earnings, tax effects associated with stock-based compensation, and the resolution of tax positions with various tax authorities.

Earnings per share. Diluted earnings per share in fiscal 20242025 was $6.32$6.61 compared to $5.56$6.32 in the prior year. Fiscal 2024 earnings include a per share benefit of approximately $0.14 from the sale of the packaway warehouse facility. Fiscal 2023 earnings include a per share benefit of approximately $0.20 from the 53rd week. The $0.76$0.29, or 5%, increase in diluted earnings per share in fiscal 20242025 was primarily attributable to a 12%3% increase in net earnings and a 2% reduction in weighted-average diluted shares outstanding largely due to stock repurchases under our stock repurchase program.

The primary sources of funds for our business activities are cash flows from operations and short-term trade credit. Our primary ongoing cash requirements are for merchandise inventory purchases, payroll, operating and variable lease costs, taxes, capital expenditures related to our new and existing stores, and investments in distribution centers, information systems, and buying and corporate offices. We also use cash to repurchase stock under ouractive stock repurchase programs, pay dividends, and repay debt as it becomes due.due, and pay dividends. The $500 million principal amount of our 0.875% Senior Notes is due in April 2026. In SeptemberApril 2024,2025, we repaid at maturity the$700 million of Senior Notes, and in September 2024 we repaid at maturity $250 million principal amount of the 3.375% Senior Notes. As of February 1, 2025, we had $700 million principal amount of 4.600% Senior Notes that will reach maturity in 2025.

AccountsThe approximately $670 million increase in cash provided by operating activities in fiscal 2025 compared to fiscal 2024 was primarily driven by higher accounts payable leverage (defined as accountsAccounts payable divided by merchandiseMerchandise inventory), lower taxes paid, lower incentive bonus payments, and higher net earnings. Accounts payable leverage was 87%91% and 89%87% as of FebruaryJanuary 1,31, 20252026 and February 3,1, 2024,2025, respectively. The decreaseincrease in accounts payable leverage in fiscal 2024 compared to fiscal 2023 was primarily due to the timing of inventory receipts and related payments versus lastthe prior year.

Net cash used in investing activities was $637approximately million, $763 million, and $654$819 million in fiscal 2024, 2023, and 2022, respectively, and was2025, primarily related to our capital expenditures. InNet cash used in investing activities was approximately $637 million in fiscal 2024, primarily related to our capital expenditures wereexpenditures, partially offset by cash proceeds from the sale of the packaway warehouse facility. Our capital expenditures include costs to build, expand, and improve distribution centers, open new stores and improve existing stores, build, expand, and improve distribution centers, and for various other expenditures related to our information technology systems and buying and corporate offices.

The decreaseapproximately $182 million increase in cash used in investing activities in fiscal 20242025 compared to fiscal 20232024 was primarily due to lowerhigher capital expenditures in fiscalthe 2024current year related to the construction of our new Buckeye, Arizonanext distribution center in Randleman, North Carolina, and cash proceeds received in the prior year from the sale of the packaway facility, partially offset by the purchase of land and the start of construction for our next distribution center.facility.

Capital expenditures for fiscal 20252026 are projected to be approximately $855$1.1 million.billion. Our planned capital expenditures for fiscal 20252026 are forinclude costs to open new stores and improve existing stores, investments in our supply chain to support long-term growth, including construction of our next distribution centers, investments in our information technology systems, and for various other expenditures related to our stores, distribution centers, and buying and corporate offices. We expect to fund capital expenditures with available cash. The increase in our planned capital expenditures for fiscal 20252026 compared to fiscal 20242025 is primarily driven by investments in new stores and existing stores, investments in our next distribution centers, new and existing store improvements, and various investments in our information technology systems.

Net cash used in financing activities was $1.9approximately billion,$2,342 $1.4 billion, and $1.4 billionmillion in fiscal 2024, 2023, and 2022, respectively,2025, primarily resulting from stock repurchases under our stock repurchase programprogram, the repayment at maturity of $700 million of Senior Notes in April 2025, and dividend payments. InNet cash used in financing activities was approximately $1,859 million in fiscal 2024, weprimarily repaidresulting from stock repurchases under our stock repurchase program, dividend payments, and the repayment at maturity of $250 million principal amount of the 3.375% Senior Notes in September 2024.

Revolving credit facilities. WeIn have2025, we entered into a new, $1.3 billion senior unsecured revolving credit facility (the “2025 Credit Facility”)., which replaced our previous $1.3 billion unsecured credit facility. As of FebruaryJanuary 1,31, 2025,2026, we had no borrowings or standby letters of credit outstanding under the 2025 Credit Facility, theour $1.3 billion2025 Credit Facility remained in place and available, and we were in compliance with the financial covenant. Refer to Note D: Debt in the Notes to Consolidated Financial Statements for additional information.

Senior notes. As of FebruaryJanuary 1,31, 2025,2026, we had approximately $2.2$1.5 billion of outstanding unsecured Senior Notes, of which $699.7approximately $500 million was classified within Current Liabilities on our Consolidated Balance Sheet. Refer to Note D: Debt in the Notes to Consolidated Financial Statements for additional information.

Ross Stores, Inc. operates two brands of off-price retail apparel and home fashion stores—Ross Dress for Less® (“Ross”) and dd’s DISCOUNTS®. Ross is the largest off-price apparel and home fashion chain in the United States, with 1,9171,952 locations in 44 states, the District of Columbia, Guam, and Puerto Rico as of MayAugust 2,1, 2026. Ross offers first-quality, in-season, brand name and designer apparel, accessories, footwear, and home fashions for the entire family at savings of 20% to 60% off department and specialty store regular prices every day. We also operate 365376 dd’s DISCOUNTS stores in 23 states as of MayAugust 2,1, 2026 that feature a more moderately-priced assortment of first-quality, in-season apparel, accessories, footwear, and home fashions for the entire family at savings of 20% to 70% off moderate department and discount store regular prices every day.

Financial results for the firstsecond quarter of fiscal 2026 were as follows:

•Sales were $6,010$6,265 million, compared to $4,985$5,529 million in the firstsecond quarter of fiscal 2025.

•Operating income was $804$1,104 million, which included a benefit of approximately $253 million related to refunds of IEEPA tariffs paid, compared to $606$638 million in the firstsecond quarter of fiscal 2025.

•Operating income as a percentage of sales was 13.4%,17.6%, compared to 12.2%11.5% in the firstsecond quarter of fiscal 2025.

•Net incomeearnings was $650$851 million, compared to $479$508 million in the firstsecond quarter of fiscal 2025.

•Diluted earnings per share were $2.02,$2.66, compared to $1.47$1.56 in the firstsecond quarter of fiscal 2025.

The following table summarizes the stores opened and closed during the three and six month periods ended MayAugust 2,1, 2026 and MayAugust 3,2, 2025:

The following table summarizes our financial results for the three and six month periods ended MayAugust 2,1, 2026 and MayAugust 3,2, 2025:

Sales. Sales for the three month period ended MayAugust 2,1, 2026 increased by approximately $1,026$736 million, or 21%,13%, compared to the three month period ended MayAugust 3,2, 2025. This was primarily due to the 17%10% increase in comp store sales of $841$534 million and an increase in non-comp store sales of $185$202 million. The 17%10% increase in comp store sales was primarily driven by an approximately 11%7% increase in traffic and 6%3% increase in basket.

Cost of goods sold. Cost of goods soldSales for the threesix month period ended MayAugust 2,1, 2026 increased by approximately $649$1,761 millionmillion, or 17%, compared to the threesix month period ended MayAugust 3,2, 2025,2025. This was primarily due to the 13% increase in sales.comp store sales of $1,375 million and an increase in non-comp store sales of $386 million. The 13% increase in comp store sales was primarily driven by an approximately 9% increase in traffic and 4% increase in basket.

SG&A as a percentageCost of salesgoods sold. Cost of goods sold for the three and six month periodperiods ended MayAugust 2,1, 2026 increased by approximately 25$143 basismillion pointsand $792 million, respectively, compared to the three and six month periodperiods ended MayAugust 3,2, 2025, primarily due to higherthe incentiveincrease compensationin expense.sales. The increase was partially offset by the recovery of approximately $253 million of IEEPA tariffs during the three months ended August 1, 2026.

InterestSelling, income,general net.and administrative expenses. For the three and six month periodperiods ended MayAugust 2,1, 2026, interestselling, income,general netand wasadministrative relativelyexpenses flat(“SG&A”) increased by approximately $127 million and $306 million, respectively, compared to the three and six month periodperiods ended MayAugust 3,2, 2025, asprimarily showndue into thehigher tablestore-related below:costs.

Taxes on earnings. Our effective tax rates for the three month periods ended MayAugust 2,1, 2026 and MayAugust 3,2, 2025 were approximately 22.4%25.0% and 25.2%,24.2%, respectively. The decreaseincrease of 2.8%0.8% in the effective tax rate for the firstthree quartermonth ofperiod fiscalended August 1, 2026 compared to the firstthree quartermonth period ended August 2, 2025 was primarily due to the resolution of fiscaltax positions with various tax authorities. Our effective tax rates for the six month periods ended August 1, 2026 and August 2, 2025 were approximately 23.9% and 24.7%, respectively. The decrease of 0.8% in the effective tax rate for the six month period ended August 1, 2026 compared to the six month period ended August 2, 2025 was primarily due to the tax effects associated with stock-based compensation. Our effective tax rate represents the applicable combined federal and state statutory rates reduced by the federal benefit of state taxes deductible on federal returns. Our effective tax rate is impacted by changes in tax laws and accounting guidance, location of new stores, level of earnings, tax effects associated with stock-based compensation, and the resolution of tax positions with various tax authorities.

Earnings per share. Diluted earnings per share for the three month period ended MayAugust 2,1, 2026 was $2.02$2.66 compared to $1.47$1.56 for the three month period ended MayAugust 3,2, 2025. The $0.55,$1.10, or 37%,71%, increase in diluted earnings per share for the three month period ended MayAugust 2,1, 2026 was primarily attributable to an approximately 36%68% increase in net earnings and 1%an approximately 3% reduction in weighted-average diluted shares outstanding, largely due to stock repurchases under our stock repurchase program.

The primary sources of funds for our business activities are cash flows from operations and short-term trade credit. Our primary ongoing cash requirements are for merchandise inventory purchases, payroll, operating and variable lease costs, taxes, capital expenditures related to our new and existing stores, and investments in distribution centers, information systems, and buying and corporate offices. We also use cash to repurchase stock under active stock repurchase programs, repay debt as it becomes due, and pay dividends. In April 2026, we repaid at maturity $500 million of Senior Notes, and in April 2025, we repaid at maturity $700 million of Senior Notes. As of MayAugust 2,1, 2026, we had $242 million principal amount of Senior Notes that will reach maturity in 2027.

Our cash flows for the threesix month periods ended MayAugust 2,1, 2026 and MayAugust 3,2, 2025, are summarized in the table below:

Net cash provided by operating activities for the threesix month period ended MayAugust 2,1, 2026 increased by approximately $426$634 million compared to the threesix month period ended MayAugust 3,2, 2025, primarily due to higher net earnings, higher accounts payable leverage (defined as Accounts payable divided by Merchandise inventory),earnings and higher current year incentive compensation accruals. Accounts payable leverage was 89% and 81%85% as of MayAugust 2,1, 2026 and MayAugust 3,2, 2025, respectively. The increase in accounts payable leverage was primarily due to the timing of inventory receipts and related payments versus last year.2025.

Changes in packaway inventory levels affect our operating cash flow. As of MayAugust 2,1, 2026, January 31, 2026, and MayAugust 3,2, 2025 packaway inventory was 36%, 37%, and 41%38% of total inventory, respectively.

Net cash used in investing activities for the threesix month period ended MayAugust 2,1, 2026 wasincreased relativelyby flatapproximately $51 million compared to the threesix month period ended MayAugust 3,2, 2025.2025, due to higher capital expenditures primarily related to the opening of new stores.

Net cash used in financing activities for the threesix month period ended MayAugust 2,1, 2026 decreasedwas byrelatively approximately $60 millionflat compared to the threesix month period ended MayAugust 3,2, 2025, primarily due to lower Senior Notes repayments, partially offset by higher stock purchased for tax withholding, and higher stock repurchases under our stock repurchase program.2025.

Revolving credit facility. As of MayAugust 2,1, 2026, we had no borrowings or standby letters of credit outstanding under the Credit Facility, and we were in compliance with the financial covenant. Refer to Note E: Debt in the Notes to Condensed Consolidated Financial Statements for additional information.

Senior notes. As of MayAugust 2,1, 2026, we had approximately $1.0 billion of outstanding Senior Notes, of which $241$241.5 million was classified in Current Liabilities on our Condensed Consolidated Balance Sheet for the period ended May 2, 2026.Sheet. Refer to Note E: Debt in the Notes to Condensed Consolidated Financial Statements for additional information.

Stock Repurchases. In March 2026, our Board of Directors approved a new, two-year program to repurchase up to $2.55 billion of our common stock through January 29, 2028. During the threesix month period ended MayAugust 2,1, 2026, we repurchased 1.52.9 million shares of common stock for $318.7$637.5 million (excluding excise tax) under this program. Refer to Note A: Summary of Significant Accounting Policies in the Notes to the Condensed Consolidated Financial Statements for additional information relating to our stock repurchase program.

Dividends. On MayAugust 20,19, 2026, our Board of Directors declared a quarterly cash dividend of $0.4450 per common share, payable on JuneSeptember 30, 2026.

Our Board of Directors declared a quarterly cash dividend of $0.4450 per common share in March and May 2026. Our Board of Directors declared a quarterly cash dividend of $0.4050 per common share in March, May, August, and November 2025.

For the threesix month periods ended MayAugust 2,1, 2026 and MayAugust 3,2, 2025, we paid cash dividends of $143.6$286.2 million and $133.3$265.6 million, respectively.

We ended the firstsecond quarter of fiscal 2026 with $4.1$4.3 billion of unrestricted cash balances, which were held primarily in bank deposits, money market mutual funds, and U.S. Government and agency securities across a highly diversified set of banks and other financial institutions. We also have $1.3 billion available under our Credit Facility. We estimate that existing cash and cash equivalent balances, cash flows from operations, our Credit Facility, and trade credit are adequate to meet our operating cash needs and to fund our common stock repurchases, planned capital investments, quarterly dividend payments, debt repayments, and interest payments, for at least the next 12 months.

As of MayAugust 2,1, 2026, there have been no material changes to our contractual obligations as disclosed in our Annual Report on Form 10-K as of January 31, 2026, other than those which occur in the ordinary course of business.

During the firstsecond quarter of fiscal 2026, there were no significant changes to the critical accounting estimates discussed in our Annual Report on Form 10-K for the year ended January 31, 2026.

•Adverse changes in the macroeconomic environment, government regulations and policies, geopolitical conditions,conditions and conflicts, and financial and credit markets.

•ContinuingIncreased inflationcosts of fuel and other consumer necessities, continuing inflation, and other external economic eventstrends and trendsevents may have significant negative effects on our costs, and also on consumer confidence, shopping behavior, and spending.spending, and also on our costs.

•Tariff increases (or threats of increases), and other changes and uncertainty in U.S. trade or tax policy regarding apparel, home-related merchandise, shoes, and other goods we sell that isare produced in other countries.

Other risk factors are set forth in our filings with the Securities and Exchange Commission including our Annual Report on Form 10-K for the year ended January 31, 2026 and fiscal 2026 Form 8-Ks and 10-Q on file with the Securities and Exchange Commission. The factors underlying our forecasts and plans are dynamic and subject to change. As a result, any forecasts or forward-looking statements speak only as of the date they are given and do not necessarily reflect our outlook at any other point in time. We disclaim any obligation to update or revise these forward-looking statements.