Good morning. Welcome to the Ross Stores’ 4th Quarter and Fiscal 2005 Earnings Release Conference Call. All lines have been placed on mute to prevent any background noise. The call will begin with prepared comments by Michael Balmuth, Vice Chairman, President, and Chief Executive Officer, followed by a question and answer session. If you would like to ask a question during this time, please press “*” and then the no “1” on your telephone keypad. To withdraw your question, press “#.” If you should experience difficulties during today’s call, please press “*” and then “0” and operator will assist you. As a reminder, today’s call is being recorded. At this time, I would like to turn the call over to Michael Balmuth, Vice Chairman, President, and Chief Executive Officer.

Good morning. Joining me on our call today are Norman Ferber, Chairman of the Board; Gary Cribb, Executive Vice President and Chief Operations Officer; Michael O’Sullivan, Executive Vice President and Chief Administrative Officer; John Call, Senior Vice President and Chief Financial Officer; and Katie Loughnot, Vice President of Investor Relations. We’ll begin our call today with a brief review of our 4th Quarter and Fiscal 2005 results followed by a discussion of our longer range plans and objectives. Afterwards, we’ll be happy to respond to any questions you may have. Before we begin, I want to note that our comments on this call will contain forward-looking statements regarding expectations of our future growth and financial results and other matters that are based on management’s current forecast of aspects of the company’s future business. These forward-looking statements are subject to risks and uncertainties that could cause our actual results to differ materially from historical results or current expectations. These risk factors are detailed without limitation in today’s press release and the company’s SEC filings including the 2004 Form 10-K, the 2005 Form 10-Qs, and the 2005 and 2006 Form 8-Ks. Today, we report that our earnings per share for the 13 weeks ended January 28, 2006, rose 40% to $0.49 compared to $0.35 for the 13 weeks ended January 29, 2005. Net earnings for the 4th Quarter ended January 28, 2006, increased 37% to $71 million compared to $51.8 million for the 13 weeks ended January 29, 2005. For the Fiscal 2005 year ended, January 28, 2006, net earnings totalled $199.6 million compared to net earnings of $169.9 million for the prior year. Earnings per share rose 14% to a $1.36 compared to $1.19 for Fiscal 2004 before the non-cash free tax charge of approximately $15.8 million or $0.06 cents per…

Thank you. At this time, I would like to remind everyone. If you would like to ask a question, press “*” and then “1” on your telephone keypad. We’ll pause for just a moment to compile the Q&A roster. Your first question is coming from Jeff Black of Lehman Brothers.

Thank you very much. Congratulations on a good Quarter. I guess, Michael, I had a question about the real estate strategy, specifically as it relates to your analysis of new markets, and to what extent do we think there could be real estate issues involved in terms of the sites you’ve collected? Where are the ideal locations for Ross? Have we moved somewhat out of that ideal location and demographic in the Southeast or do you think that’s just not part of the issue in this whole merchandising?

We’ve looked at this very closely, and we’re very confident that the issues are not real estate; they’re not anything else for merchandise. We’ve discussed this, spent a lot of time on it, and we have an action plan to resolve it over the next several years.

Okay great, that’s it from me. Thanks.

Thank you. Your next question is from Jeffrey Klinefelter of Piper Jaffray.

Yes, just a couple of quick questions, one on the sort of the changing landscape here with respect to department stores and other major change in terms of consolidation. When you talk at all about what sort of opportunity this presents, short-term this year as those stores consolidate but also more kind of medium-term in terms of the types of brands that you’ll have access to and potentially even be able to partner up with a little bit more directly than you would have historically, and I want to follow up on the store shrink.

Obviously, the landscape is changing. As we look at this year, on a short-term basis, it’s a bit of a negative as Federated closes some locations when one’s going out of business sales and they exploited that in January and continue it in the 1st Quarter. So, it is a negative. The positive is that there has been inventory as May company resources, which many of those also are Federated resources, have additional product. Additionally, it creates a situation where I think our sector becomes more important to the marketplace. So, there aren’t specific vendors that I would discuss, but I’d say across the board, it enhances the relationships that our sector would have in the marketplace.

Okay great. And this is a quick followup, store shrink, you recognize as an issue obviously after that last physical inventory and I know you’re planning to do another one in May, any initiatives or anything you can talk about that you have been pursuing or implementing to improve that in between these two physical inventories, to give us a sense for how much it’s improved?

Jeff, this is John. Relative to when we’ll place the next physical, it will be the 3rd Quarter and not the 2nd Quarter. So, we will take a full store inventory again in the 3rd Quarter this year.

Jeffrey, this is Gary. Relative to the measures we’ve taken, as there are numerous measures, first of all we believe that some of the shrink was related to our systems issue and distribution issues that we’ve had in the past, and we believe that that’s all behind us today. Relative to the in-store shrink, we have implemented a number of measures focussed on both internal and external shortage and are implementing these initiatives focussed on an end-store level, so it’s a store-by-store basis.

Is there any way that you’ve been able to measure to date — I know it’s early — but have you been able to measure any improvement?

We believe that we’re focused in the right areas and are seeing a result accordingly, but we really won’t be able to tell until we take the full store inventory.

Okay, so there will be no count until sometime in the 3rd Quarter, right?

That’s right.

Okay, thank you.

Thank you. Your next question is from Kimberly Greenberger of Citigroup.

Great, thank you, good morning. John, I was hoping you could help us understand a little bit more about the growth margin improvement in the Quarter, the 185 basis points. If you could talk about the contribution from improved merchandise margins as opposed to occupancy leverage and distribution center expenses; that would be helpful? And then if you could talk about your current distribution center capacity, you’ve got the 3 DCs plus the warehouse now, how do you feel you’re positioned? Do you in fact have some excess capacity and when do you think you might be in a position to utilize the full resources of distribution you have at this point? And lastly, if you could just talk about engineered standards, if they’ve been finalized or are they being rolled out, just a status update on that and that would be helpful? Thanks.

Sure, Kimberly, I’ll take the first part of that question. As you mentioned, growth margin for the Quarter was up 185 basis points, which benefited from 100 basis points improvement in merchandise growth margin inclusive of about 70 basis points of higher shrink in trade. Distribution costs improved by about 30 basis points and we have about 55 basis points of leverage in occupancy…

Kimberly, Gary here. Relative to the DC’s, we really have 4 DC’s and we mentioned the warehouse that we have in Marino Valley, but we believe we have enough capacity to take us really beyond 2007, and any future plans will really depend on what growth looks like after 2006.

And an update on the engineered standards?

Engineered standards are going exactly as we planned. We completed the rollout in January. We’re seeing the gradual improvement that we had planned all along, anticipate it over the next couple of years, we’ll continue to see that same type of improvement.

Great, thank you.

Thank you. Your next question is from Paul Lejuez of Credit-Suisse.

Hey guys Paul here. Could you just remind us for ’05 the gross margin went flattish the last year, but putting together the pieces of the puzzle how we got there in merchandise margins, the DC and the leverage? And then, can you also talk about if there are any specific challenges that you’re currently seeing in the DC’s? We know that you’ve had some trouble leveraging those costs; are there any particular issues that you’re having currently?

Paul, I’ll take the first piece on the elements of gross margin. Gross margin for the year was down about 15 basis points. Components to that, gross margin was up 60 basis points due to some of the issues; we talked about transitional issues, markdown issues, and shrink issues.

Merchandise margins… John G. Call, Senior Vice President & Chief Financial Officer: Yeah, earlier in the ’05 year. Occupancy, however, levered withdrawing costs of about 45 basis points, which gave the 15 basis points.

On the question on DCs, we’re really not facing any dramatic issues. I think, as I said earlier, we’re on track with achieving results that we’ve anticipated with engineered standards. Now, anytime you’re dealing with individuals, it’s about really making sure that they have a good understanding of the project and a good understanding of what’s expected, and we’ll continue to address those challenges as we move forward.

Have you seen big turnover in the DCs?

Our turnover is right in line with what we’ve seen historically and what we plan on. It’s right in line with expectations.

Okay, thanks, good luck.

Thank you. Your next question is from Richard Jaffe of Stifel Nicolaus. Richard Jaffe, Stifel Nicolaus & Company, Inc.: Thanks very much. A question on dd’s DISCOUNT, and I’ve guess you’ve mentioned of improving the economics. Keeping it on the price points in your differentiation of Ross to dd’s and what do you think will be the key opportunities to improve the economics there?

The biggest issue is probably about 12-15% differential on average price between the two companies, and it creates the obvious problems in moving more units, selling more units, processing more units throughout the whole network. So, there are cost issues there that we’re working through and trying to come up with actually better ways to run the business than we have. The second part of the question was? Richard Jaffe, Stifel Nicolaus & Company, Inc.: I guess, Ross’ price point is about 12 and dd’s is about 10, is that a good ballpark?

No, actually Richard, Ross’ average selling price point is more around 10 and dd’s will be on top of that. Richard Jaffe, Stifel Nicolaus & Company, Inc.: About 15% below that?

Yes. Richard Jaffe, Stifel Nicolaus & Company, Inc.: I guess, looking at the real estate for dd’s, clustering an opportunity to keep the stores in the same market for shipping, for trade benefits, for management benefits, is that part of the plan?

We plan to keep it in the same markets because we think there are opportunities in those markets, that’s our strategy corporately, we want to stay in existing markets. We see no reason to expand beyond existing markets there, and I want to qualify that average price point, differentials is between 10 and 15. Richard Jaffe, Stifel Nicolaus & Company, Inc.: 10 and 15%?

Yeah, right. Richard Jaffe, Stifel Nicolaus & Company, Inc.: Thank you.

Thank you. Your next question is from Michelle Clark of Morgan Stanley.

Hi guys, good morning. Given the slowdown in inventory shortage that we’re seeing in the wholesale channel, has that been a positive impact for pricing for you?

Could you repeat that please?

Yeah, so if you take a look at inventory shortage was in the wholesale channel, those have been slowing, we’re just wondering if that has any positive impact from the pricing that you’re receiving?

Usually it would.

Okay, thanks.

Thank you. Your next question is from Margaret Mager of Goldman Sachs. Margaret Mager, Goldman Sachs & Co: Hi. I have a couple actually. First of all, on the same-store sales for March, I think you said it was running up 1-2%, is that right so far?

No what we said is March is up 5%. Margaret Mager, Goldman Sachs & Co: Okay. Now, what is the impact of Easter on March?

Well, essentially while we’re going to push a lot of sales into April and we have broadcasted 4th of March to be up 1-2% and April to be up 7-8%. So, it’s fairly significant. Margaret Mager, Goldman Sachs & Co: Okay, so it looks like a 3-point sling?

Yes, a couple of points. Margaret Mager, Goldman Sachs & Co: Alright. Can I just ask about the remainder on the shrink issue, was that pilferage in your store from employees, customers, or was there a booked physical inventory reconciliation issue?

I think we had a little of both. We believe that a portion of the shrink was related to our systems and distribution channels that we experienced in the past. We understand that, we believe that’s completely behind us now, and then we also quantify how much of it really was in-store-related shrink, both internal and external, and clearly are targeting both of those issues. Margaret Mager, Goldman Sachs & Co: Could you talk about what kind of percentage shrink was running at? John G. Call, Senior Vice President & Chief Financial Officer: Yeah, we haven’t talked about exactly where shrink was running. Historically, it has been below that retail average of 2. We know shrink for the year, for ’05, was about 35 basis points. Margaret Mager, Goldman Sachs & Co: On the system changes that you want to make to address localization of merchandising in your Southeast stores, can you give any more color on that, especially in light of a lot of the challenges you’ve had with your systems feasibly merchandizing more broadly across Ross? What would make you guys feel comfortable that you’ll won’t have further issues as you change something in your system related to that localization? Can you talk about how you’re going to do this in any more detail, and also help us understand why it won’t result in another glitch? Michael B. O’Sullivan, Executive Vice President & Chief Administrative Officer: This is Michael O’Sullivan, Margaret. I’m going to answer that in two ways. The first is, the objective of what we want to do is make sure that the merchandise assortment in each store is more tailored to that particular store’s needs and trends; that’s the objective. We are frankly looking through the different ways of doing that and obviously looking at…

We’re focused on fixing our issues in the company and staying on the course that John outlined, and that is more important to us than establishing a short-term benchmark. We’re extremely focused on a short list of priorities that’s right for this company. Margaret Mager, Goldman Sachs & Co: Okay, thank you all.

Thank you. Your next question is from Marni Shapiro of Merrill Lynch.

Hey guys, congratulations on a great quarter. Could you talk a little bit…I’m looking at merchandise trends, a little bit of what’s happening at Ross, if issues continue to remain, do you believe that’s coming into margins with shrinks even, and then the difference between trends that you’re seeing at DD’s versus Ross Stores? And then, finally, one last thing, as you are looking into these new markets, you talked about concerns for merchandise regionally versus urban-suburban more specifically, have you started kind of filling out the layers there, any input you can give us?

Okay. The early spring is really consistent with where we were last year, juniors and shoes continue to lead the pack. The home business will come out of the box very strong. The home getting much stronger is really the biggest difference from where we were trend wise coming into the year. I don’t think that trends are very different in dd’s as it relates to juniors and shoes. Okay, they both are very, very strong; the young businesses now in DD’s are a little bit stronger than they are at Ross.

Meaning this is for children? John G. Call, Senior Vice President & Chief Financial Officer: Children, I’d say young men, it’s stronger there too. And the third part of your question was?

But as you’re in these new regions, you’ve said that you were merchandising your stores by region versus urban, suburban, and a lot of things like that…have you think you’ve figured out already…

For some reason you’re breaking up as you were asking that last part of the question twice.

I’m sorry about that. I was curious if you’ve sort of figured anything out in those medium urban stores versus suburban stores, some of the differences that you’re timing, any inputs we could have? Michael B. O’Sullivan, Executive Vice President & Chief Administrative Officer: This is Michael O’Sullivan Marni. The plan that we share at this point — it’s not all about assortment first — is just a portion of our assortment that we think we need to customize depending on where the store is, and it’s not just urban versus sort of rural, it is a whole mix of other things in terms of other demographics. So, these are all the number of things that we’re looking at and the ____has just sort of prioritized those.

Okay, great, thanks guys.

Thank you. Your next question is from Patrick McKeever of Sun Trust Robinson Humphrey.

Thanks very much. Just a question on the 53rd week adding between $0.06 and $0.07 per share to EPS in Fiscal 2006, why is that so significant, it seems significant to me anyway relative to what we’re expecting elsewhere?

Yeah, if you look at what we think that last week of sales will do, I don’t think it’s out of the ordinary going out at 53rd week. Five years ago it was kind of similar dimensions.

Okay, fair enough. Back to the Southeast, in terms of adjusting the merchandise assortment, why, Michael, you said you thought that would take maybe two to three years before you kind of got it right, why would it take so long? Is that just in an effort to be very conservative and pilot various changes and so forth? Michael B. O’Sullivan, Executive Vice President & Chief Administrative Officer: This is Michael O’Sullivan. In an open price business, there are different constraints in terms of supply and matching up that supply with the trends that we see in the stores is not a trivial thing to do. So, there is some complexity around it and we’re working through those complexities. I think we’ll be 24 months before we’re at a position where we’re actually seeing benefits from that.

And how fast are you turning inventories at the store level?

We’re turning at historical levels, we turned those inventories around six times.

Okay, and then just one last question on the buying side of things with your key competitor out talking about refocusing on core off-price disciplines and buying closer to need and so forth, have you seen any change in the buying landscape as it relates to the competition to buy the better merchandize that’s out there?

Not really. You know, we’ve always met up with TJX and our suppliers, we still meet with them, and nothing that we see materially different.

That’s great, thank you.

Thank you. We have a few more participants in the queue, but as a reminder, if you would like to ask a question, press “*” and then the “1” on your telephone keypad. Your next question is from Ben Strom of Variant Research.

Hi, thank you. Just in addition to the planning at the local level here, and I guess you just said about 24 months to see the benefits from that, are there any other initiatives you have for improving the new stores like local marketing events or increasing local advertising, etc.?

No, we’ve gone through this before and we’ve looked at troubled regions, our conclusion has always been its merchandise, and we feel our marketing levels are appropriate and really are not the key driver as we see it in our price. We’re comfortable with our marketing levels, we’re not comfortable with what we’re putting in these stores, and the customers are comfortable with that, and it’s the apparent option today that we look at. In our price, our opinion is that if you put the right merchandise in the store you’ll succeed. It’s not a marketing drive.

So there are areas of the…O’Sullivan also certainly said that this portions that when you look at urban versus suburban, can you elaborate on that at all, where the starting point is then, is it on the women’s side or men’s?

It really runs across the board and it’s not as simple as urban as suburban. If you think about, we have a region and I’ll use the Southeast. You’ll find the South-East and you think of Mississippi and you think of any urban section or a downtown area in the Atlanta market, there are different wants and needs of those customers, and we’re sorting them out differently enough right now. They need to be much more localized. Both customers are very good customers and they want different types of clothing, and our current processes and systems don’t make that an easy thing for us to do, and it’s very important if anything we take on in regards to localized merchandizing that we’re not disrupting our whole business flow. So, just buying differently for one region really is taking on changes of processes in the company, and that takes time and that’s what we want to do with a lot of care and not try and rambler something in and have a blow up.

Great, just lastly on the real estate, can you elaborate on where the new stores, the 55 Ross Stores, is there any region you’re predominantly planning 55 stores?

The same that was reflected last year on a percentage term basis.

And ’07, did you say anything about ’07, the growth rates there?

No, we haven’t talked about that.

Okay, thank you.

Thank you. Your next question is from David Mann of Johnson Rice. David Mann, Johnson Rice & Company: Hi, thank you. In terms of the growth potential you have in existing markets, can you give us a sense of what that is relative to the number of stores you have now?

We think we have significant potential to grow in the markets where we are today, which is why that’s where we’re focused today over the next couple of years with our real estate strategy. David Mann, Johnson Rice & Company: And the growth you’re talking about, like in the 55 stores, will some of those go into the markets where you’re seeing some underperforming stores?

Yes, we’ll continue to in-fill those markets. We think that of achieving skills is important for us to achieve our goals. David Mann, Johnson Rice & Company: In terms of that, can you just comment generally about the traffic trend in those relatively underperforming markets versus the other markets? Is there an issue of name recognition or need for more advertising?

No, in the information we’ve looked at, we don’t see that we have a name recognition problem in total. What we do have is an assortment issue. So, our opinion and our information is not that we have trouble getting people into our store or they don’t know who we are. David Mann, Johnson Rice & Company: Okay. Back in the late 90’s when you had issues in the Mid-Atlantic, you sort of talked about the relative sales productivity issues versus that underperforming market in the rest of the chain, can you just give us an idea in the Southeast how much underperforming it is relative to let’s say the $300 per square foot the chain was feeling?

Yeah, let’s say an average store got 100% of square feet, is somewhere in the mid 70’s around that. When we had the issue in the Mid-Atlantic I think it was kind of a similar level. David Mann, Johnson Rice & Company: I’m sorry, I didn’t catch that John.

In the Mid-Atlantic that you were referring to back in the late 90’s, I believe, I think that started in the kind of 80’s, is my recollection. David Mann, Johnson Rice & Company: 80% of the average sales productivity?

Yeah. David Mann, Johnson Rice & Company: Okay, so they’re running probably less than 250 a foot?

Yes. David Mann, Johnson Rice & Company: Okay, thank you very much.

Thank you. You next question is from Dana Telsey of Telsey Advisory.

Good afternoon everyone. Can you talk a little bit about category regionalization? Given that you mentioned that stores need to have more specificity in some the regions, what are you doing on the buyer’s front for that, given that you’ve always added some new buyers each year? How is that going to look this year and in what categories? And lastly on the CapEx front, anything changing with the new stores that you’re opening, how much of cost to open the size or the look of the stores that you’re finding given some the consumer studies that you’re doing? Thank you.

Okay, on the first part of the question, we’re not planning any extraordinary growth of buyers this year. We don’t do that. We’re still working through a lot of our issues here. A lot of what we’re working on will be more in allocation and planning, and certainly there will be some new buyers along the way, but nothing extraordinary this year at all.

Can you repeat the second part of the question?

On the CapEx in terms of the new stores, anything changing in the size, the look, the cost to open the new stores that you’ve found from some of the studies that you’ve been doing.

I would say that there really aren’t any changes. We anticipate that we’ll use the similar model prototype that you’ve seen over the last few years.

And in terms of CapEx, what about any remodels of existing stores this year coming up?

As we go through our CapEx, we will continue to refresh stores for rest room refurbs and dressing room refurbs, no remodels per se, but touchups along the way, similar to what we’ve done over the past several years. We didn’t quite keep a trend _____. And I would add that we’re not really remodeling stores per se. We are in a constant state of refreshing, whether it’s replacement of older outdated fixtures or we have a new demand, or increased flexibility. You’ll see us across the chain this year and next year continuing to refresh our stores.

Thank you.

Thank you. That does conclude today’s question and answer session. I would like to hand the floor back over to Michael Balmuth.

Thank you all and have a good day.

Thank you. This does conclude today’s teleconference. You may now disconnect your line and have a wonderful day.