Michael Balmuth - Vice Chairman and Chief Executive Officer Michael O'Sullivan - President and Chief Operating Officer John Call - Chief Financial Officer, Principal Accounting Officer and Senior Vice President

Dana Telsey - Telsey Advisory Group Sean Naughton - Piper Jaffray Richard Jaffe - Stifel, Nicolaus & Co., Inc. David Mann - Johnson Rice & Company, L.L.C. Jeff Black - Citigroup Inc Stacy Pak - Prudential Mark Montagna - Avondale Partners, LLC Adrianne Shapira - Goldman Sachs Group Inc. Tracy Kogan - Credit Suisse Patrick McKeever - MKM Partners LLC Marni Shapiro - The Retail Tracker Rob Wilson - Tiburon Research David Weiner - Deutsche Bank AG Evren Kopelman - Wells Fargo Securities, LLC Laura Champine - Cowen and Company, LLC

Good morning. Welcome to the Ross Stores Fourth Quarter and Fiscal Year 2010 Earnings Release Conference Call. The call will begin with prepared comments by Michael Balmuth, Vice Chairman and Chief Executive Officer, followed by a question-and-answer session. [Operator Instructions] At this time, I would like to turn the call over to Mr. Balmuth.

Good morning. Joining me on our call today are Norman Ferber, Chairman of the Board; Michael O'Sullivan, President and Chief Operating Officer; Gary Cribb, Executive Vice President, Stores and Loss Prevention; John Call, Senior Vice President and Chief Financial Officer; and Bobbi Chaville, Senior Director, Investor Relations. We'll begin today with the review of our fourth quarter and 2010 performance, followed by our outlook for 2011. Afterwards, we'll be happy to respond to any questions you may have. Before we start, I want to note that our comments on this call will contain forward-looking statements regarding expectations about 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 management's current expectations. These risk factors are detailed in today's press release and our fiscal 2009 Form 10-K, fiscal 2010 Form 10-Qs and fiscal 2010 and 2011 Form 8-Ks on file with the SEC. Earnings per share for the 13 weeks ended January 29, 2011 were $1.37, up from $1.16 for the 13 weeks ended January 30, 2010. These results represent a strong 18% increase on top of an exceptional 53% gain in the fourth quarter of 2009. Net earnings for the fourth quarter grew to a record $161.8 million, up 13% from $142.9 million for the fourth quarter of 2009. For the 52 weeks ended January 29, 2011, earnings per share were $4.63, up a robust 31% on top of a 52% gain in fiscal 2009. Net earnings for fiscal 2010 increased 25% to a record $554.8 million. Fourth quarter sales rose 8% to $2,145,000,000, with comparable store sales up a solid 4% on top of a 10% gain in the prior year. For the full year, total sales grew 9% to $7,866,000,000, with same-store sales up 5% on top of a 6% increase in 2009. Our better than expected sales for both the quarter and the year benefited from healthy traffic to our stores, as an increasing number of shoppers continue to be attracted to our great values. The best performing merchandise areas for the quarter were Juniors and Dresses with mid-teen and low double-digit percentage gains, respectively. For the full year, the strongest businesses were Dresses, Home and Shoes, all with low double-digit same-store sales increases. Geographic trends were broad-based with all regions posting positive same-store sales increases for both the quarter and the year on top of healthy gains in 2009. The stand out was Florida, with a low double-digit percentage gain in comparable store sales for both the fourth quarter and the full year. We are extremely pleased with our sales and earnings gains for 2010 that were well ahead of our expectations. This strong growth is even more notable considering that it was on top of very large increases in the prior year. These results demonstrate that we continue to benefit from our favorable position as a value retailer, as well as the efficient execution of our off-price strategies. Earnings before interest and taxes for the 2010 fourth quarter grew to 12.3% of sales, up about 60 basis points on top of an exceptional 260 basis point increase in the prior year. Our improved profit margin for the quarter was due to a 105 basis point decline in cost of goods sold, partially offset by a 45 basis point increase in selling, general and administrative costs. For fiscal 2010, operating margin rose to a record 11.5%, up 140 basis points on top of a 250 basis point gain in fiscal 2009. This higher level of profitability was driven by a 130 basis point increase in gross margin combined with a 10 basis point reduction in selling, general and administrative expenses. The key factors contributing to our improved profitability for the year were much higher merchandise gross margin, lower shortage costs and leverage on operating expenses from the solid gain in same-store sales. John will provide some additional color on operating margin trends in a few minutes. On average, in-store inventories were down in the low double-digit percentage range throughout 2010 on top of a mid-teen percentage decline in 2009. We ended 2010 with selling store inventories down about 10%. Operating our business with much lower in-store inventories has stimulated sales by increasing the percentage of fresh and desirable name-brand bargains that our customers see when they shop our stores. By exceeding our sales targets with leaner inventories, we also realized significantly faster turns in 2010, which resulted in much lower markdowns as a percent of sales. For 2011, we are planning further reductions of in-store inventories with average levels targeted down in the mid-single digit percentage range compared to 2010. Turning to our store expansion program. We added 50 net new stores in 2010, including 35 Ross Dress for Less and 15 dd's DISCOUNTS locations. We are pleased to report that the progress made at dd's DISCOUNTS over the past few years enabled this young business to make a slight contribution to total pretax earnings in 2010 before corporate expense allocations. These results compare to a relatively neutral impact in 2009 and a 35 basis points drag in 2008. As planned, we accelerated new store growth at dd's DISCOUNTS in 2010, adding 15 locations including four in two new states: Nevada and Georgia. We ended the year with 67 dd's in six states. Comparable stores at dd's posted respectable gains for both the fourth quarter and the full year on top of exceedingly strong increases in 2009. Similar to Ross, dd's has also benefited from our ability to deliver a faster flow of fresh and exciting products to our stores while operating on lower inventory levels. As a result, merchandise gross margin grew significantly in 2010 on top of record levels during 2009. We believe that dd's DISCOUNTS performance reflects that its value-focused merchandise offerings continue to resonate with its target customers despite the fact that this demographic has been hard hit by high unemployment and other economic pressures. Looking ahead, we plan to further accelerate dd's growth in 2011 with 20 new locations. Long term, we continue to believe that dd's DISCOUNTS can grow into a chain of about 500 stores. Now let's talk about our financial condition. Our balance sheet remained very healthy with cash and short-term investment of $837 million at fiscal year end. Our higher cash balance benefited primarily from much better than expected earnings, as well as reduced working capital needs from operating our stores with lower inventories. Our consistently strong cash flows enabled us to continue to enhance stockholder returns through both our dividend and stock repurchase programs. After internally financing both our working capital and capital expenditure requirements, we used available cash in 2010 to buy back $88 million of common stock in the fourth quarter and $375 million for the fiscal year. This allowed us to retire about 1.4 million and 6.7 million shares during the fourth quarter and full year, respectively. We announced last month that our Board of Directors approved our new repurchase program for up to $900 million of common stock over the next two years through fiscal 2012. This new authorization, which represented approximately 12% of our total market capitalization at the time of the announcement, replace the $375 million remaining under the prior two years $750 million stock repurchase program approved in January 2010. The Board also raised the quarterly cash dividend to $0.22 per share, up 38% on top of a 45% increase in the prior year. Our largest stock repurchase authorization and substantial increase in the quarterly cash dividend demonstrate our confidence in the company's ongoing ability to generate significant amounts of excess cash after self-funding the capital needs of our business. We have repurchased stock as planned every year since 1993 and also have raised our quarterly cash dividend annually since 1994. This consistent record of returning excess cash reflects our unwavering commitment to enhancing stockholder value and returns. Now I'd like to review the 2011 targets we communicated with our January sales release in early February. For the 2011 fiscal year, we are increasing our unit growth as planned and expect to open a total of 80 locations consisting of approximately 60 Ross and 20 dd's DISCOUNTS. We are also excited to announce our initial entry into Illinois and Arkansas for Ross Dress for Less. About 15 of the 80 new locations planned for 2011 will open in these new markets during the latter part of the year. As we get closer to the opening dates, we will be able to provide more details. Comparable store sales in 2011 are forecasted to grow 1% to 2% on top of 5% and 6% gains in 2010 and 2009, respectively. Based on these assumptions for unit growth and same-store sales, we are projecting earnings per share in 2011 to increase 6% to 10% to $4.90 to $5.10 from $4.63 in 2010. It's important to remember that this forecasted earnings per share growth is on top of two consecutive years of extraordinary earnings per share increases, 31% in 2010 and 52% in 2009. Our 2011 guidance assumptions also take into consideration the recent trend of higher sourcing costs, especially in China. Although we expect product costs and price point to rise at traditional retailers, as well as for a number of merchandise categories in our own stores, we remain confident in our continued ability to offer compelling values. As a result, while some customers may initially resist slightly higher prices on certain items, overall, we believe our stores will remain an attractive destination for shoppers seeking bargains. To maximize our opportunities during this potentially challenging period, we plan to operate the business on even leaner selling store inventories. This should allow us to turn our merchandise even faster and further reduce markdowns as a percent of sales. We believe this will help offset cost pressures and enable us to achieve relatively flat merchandise gross margin in 2011. Additionally, during the fourth quarter of 2010, we took advantage of a very large amount of compelling packaway opportunities. Packaway purchases typically offer the strongest discounts available on name-brand products. This is merchandise acquired at outstanding values that will flow to our stores throughout 2011. While it is currently unknown how inventory plan addendas and mainstream retailers may impact its availability in the off-price channel, in the past, increased uncertainty and disruptions to the flow of product have created opportunities for us. As an off-pricer, we purchase product much closer to need than traditional retailers and source goods from thousands of different manufacturers and vendors. During 2011, we are managing our open-to-buy plans even more tightly. This helps ensure that we will have plenty of liquidity to react quickly to close out opportunities. It will also enable us to respond to fluctuations in merchandise availability and if appropriate, shift inventory from one category or department to another. This flexible business model has allowed us to manage through difficult retail climates in the past. We believe it will also give us the ability to navigate successfully through this situation. Now I'll turn the call over to John to review our financial results and the operating statement details of our guidance.

Thank you, Michael. As Michael discussed, our fourth quarter operating margin increased by 60 basis points on top of a 260 point gain last year. A 105 basis point reduction in cost of goods sold was partially offset by a 45 basis point increase in selling, general and administrative costs as a percent of sales. Let me provide some additional color on these margin trends. Merchandise margin increased a better than expected 15 basis points on top of a very substantial 195 basis point gain last year. Shrink and freight improved by about 10 basis points each, while occupancy levered by about 20 basis points. The remainder of the improvement in cost of goods sold was primarily due to lower buying expenses as a percent of sales, mainly driven by the timing of incentive costs versus last year. Selling, general and administrative expenses as a percent of sales rose 45 basis points. Store operating expenses rose by about five basis points, reflecting investments we made in staffing to improve our customer shopping experience during the important holiday period. The balance of the increase in SG&A as a percent of sales primarily reflects the timing difference related to benefit costs versus the prior year. Now I'll spend a few moments summarizing the underlying assumptions that support our 2011 EPS target. A more detailed version is available in the written transcript of our January sales release recorded comments in the Investors section of our corporate website. Our fiscal year 2011 earnings per share forecast of $4.90 to $5.10 is based on projected sales growth of 5% to 6% over the prior year. This top line growth is forecast to be driven by a 7% increase in the number of stores, and 1% to 2% growth in same-store sales on top of a 5% and 6% gains, respectively, in 2010 and 2009. As Michael noted, our projected store growth for 2011 includes about 60 new or relocated Ross Dress for Less and 20 dd's DISCOUNTS locations. As usual, these projections do not reflect our plans to close a number of older or relocated stores. While we have achieved huge gains in profit margins over the past few years, we believe that the current levels of record high profitability are sustainable. As a result, we are projecting flattish operating margin of 11.4% to 11.6% for fiscal 2011 versus 2010. Again, merchandise gross margin in 2011 is targeted to be relatively flat versus the prior year. That said, reported gross margin is projected to decline slightly mainly due to our forecast of somewhat higher packaway-related distribution costs and some slightly leveraging of occupancy expenses based on our assumption of 1% to 2% growth in same-store sales. We expect that modest margin pressure to be offset by somewhat lower selling, general and administrative costs as a percent of sales, mainly due to a decline in incentive costs versus 2010. Net interest expense is expected to be about $9 million. Our tax rate is planned to be approximately 38% to 39%. And we expect an approximate 3% to 4% decline in average diluted shares to about $115 million. Our first quarter guidance that we issued at the beginning of February was for same-store sales to be flat to up 1% on top of a very strong 10% gain in last year's first quarter, making it our toughest quarterly sales comparison of the year. We also projected earnings per share to be in the range of $1.27 to $1.32, up 9% to 14% from $1.16 in the first quarter of 2010. We recently reported better-than-expected same-store sales of up 3% in February, compared to our forecast of flat to up 1%. This was also on top of an outstanding 1% increase last year. While we are encouraged by the solid start to the year, February is the smallest month of the quarter for both sales and earnings with a much more important March, April selling period ahead of us. There is also a holiday shift that results in all of our pre-Easter sales coming in April this year versus March in 2010. Calendar shifts like this from one year to the next makes it difficult to accurately predict our sales trends until we get through April. As a result, earlier this month, we reiterated our forecast for same-store sales to be down 2% to 3% in March and up 4% to 5% in April. Now I'll turn the call back to Michael for some closing comments.

Thank you, John. To sum up, despite very tough prior year comparisons, we were able to achieve robust growth in both sales and earnings during 2010 that was significantly above our expectations. Looking ahead, we believe that our steadfast focus on diligently executing our off-price strategies will enable us to continue to deliver compelling bargains and solid results in 2011 and beyond. The biggest driver of our improved profitability has been much higher merchandise gross margin, resulting from better buying and the significant reductions we have made in average selling store inventories. Today, selling store inventories are more than 30% lower than they were just three years ago. Off-price buying is and always will be our most important business strategy, and we remain committed to making ongoing investments in our merchandise organization and increasing our vendor network to maximize our access to the best opportunities in the marketplace for product. The system divestments and new planning and allocation processes we rolled out in 2009 also continue to help us do a better job of getting the right merchandise to the right store at the right time. This is an internal process that we believe will enable us to build on our successes and continue to enhance sales productivity and profitability going forward. Planning and allocating at a much more detailed level is more important than ever today, especially with less inventory in our stores. Our record results have also benefited from the implementation of a number of initiatives on the operating side of our business. These include our shortage control program, which has resulted in record low levels of shrink along with the numerous productivity enhancements and efficiencies we have put in place throughout the company to drive down costs in our distribution centers, stores organization and back office functions. As a result of these changes, we believe that current levels of annual operating margins are sustainable going forward. This gives us the confidence to continue to target, over the longer term, solid average annual earnings per share growth of 10% to 15%. The formula for achieving this is a combination of unit growth, annual increases in same-store sales and ongoing reductions in diluted shares from our stock repurchase programs. At this point, we'd like to open up the call and respond to any questions you may have.

[Operator Instructions] And your first question comes from the line of Paul Lejuez from Nomura Securities. Tracy Kogan - Credit Suisse: It's Tracy Kogan filling in for Paul. I had a couple questions. First, if you could talk about when you expect to see a reduction in your packaway levels? Are you still seeing the oppor -- very attractive opportunities continuing now? And then secondly, I was hoping you could tell us if you have any Ross stores in similar demographic markets to any dd's stores? And if so, how the performance of dd's compares to Ross in those markets?

On the packaway levels, our packaway levels will come down when the bargains are less in the marketplace and it's purely a function of that. And the current situation is very good from a buying end. So I'm not sure that's going to happen that quickly. Michael O'Sullivan: And then on your second question, Tracy, about Ross stores and dd's stores, typically dd's are in somewhat different locations and different kinds of malls. They tend to be in lower income areas or ethnic areas, and those are the markets where dd's does very well. Tracy Kogan - Credit Suisse: So you don't have any Ross Stores in any of these lower demographic type markets? Those are exclusively dd's? Michael O'Sullivan: Yes, we do, in that we have a sprinkling. We have -- obviously, we have 1,000 stores, and we have a sprinkling of Ross Stores that have similar demographics. But obviously, dd's is targeted in that customer base whereas Ross is targeted at a slightly higher income customer compared with dd's.

Your next question comes from the line of Laura Champine from Cowen and Company. Laura Champine - Cowen and Company, LLC: Just to follow-on the packaway. You mentioned, Mike, that your best values happen with packaway. Does that also include better margins for Ross? And if you're comfortable quantifying that, that would be great.

There are better margins within the categories that each packaway falls in. If there's more availability at higher end brands, the margins are obviously not quite as good as moderate brands in our stores. So -- but relative to a specific category, the margins are better and the brand content is usually very strong. Laura Champine - Cowen and Company, LLC: And then lastly, you mentioned that you're entering Illinois and Arkansas this year, can you comment on what specific markets you'll be putting stores in this year? Michael O'Sullivan: Not at this point because of the space that we're going to be entering. In fact, we're still finalizing specific locations.

Your next question comes from the line of Marni Shapiro from The Retail Tracker. Marni Shapiro - The Retail Tracker: If you won't mind, can you talk a little bit -- it sounds like your traffic has been really good, and I was wondering if you could talk a little bit about the metrics around traffic, your average basket? And then if you could talk a little bit about if you've seen any changes in the shoppers, maybe even anecdotally coming into your stores, are they young or old? Are you seeing more families? Anything that you've seen that's changed over the last year?

So Marni, I'll give you the metrics on traffic. So the full comp was based on low double-digit -- excuse me, low single-digit increase in traffic and a low single-digit increase in the basket. So on all, pretty evenly spread between the traffic and increase in the basket to direct the full comp. Michael O'Sullivan: Marni, on your second part of your question, we have done quite a lot of work to understand what's driven that additional traffic and what those customers look like. And I have to tell, they look very similar to the customers we have. In fact, some of that traffic is existing customers shopping Ross more often than they used to.

Your next question comes from the line of Adrianne Shapira from Goldman Sachs. Adrianne Shapira - Goldman Sachs Group Inc.: A few questions. First, just on the packaway. It sounds that the step up, you mentioned it should benefit throughout the year. I'm just wondering if you can recall specifically, is it more spring merchandise, fall merchandise? How should we be thinking about that step up in the packaway position today?

I think you should think of that as being spread fairly smoothly. Adrianne Shapira - Goldman Sachs Group Inc.: Okay. So the strength in terms of February wasn't necessarily a function of some of the benefits of the increase in packaway?

Not necessarily, no. Adrianne Shapira - Goldman Sachs Group Inc.: Okay. Any -- in terms of month-to-date trends, anything you're willing to share with us? Obviously, you're still heading into the Easter shift. We're obviously hearing some encouraging data from retailers, as the weather has been more accommodating. Any updated thoughts on month-to-date trends?

I would love to, but the answer is no. Adrianne Shapira - Goldman Sachs Group Inc.: Okay. Then my next question is just on the inventory. It seems that, obviously, we've seeing the benefits of taking that selling inventory down 30% over the last three years, but the store size hasn't really shrunk commensurately. I'm just wondering if you could help us think about how we should be thinking about either, how you're thinking about the store size going forward or even potential new categories to ensure productivity remains strong. Michael O'Sullivan: Sure. Adrianne, I think both of those are opportunities. Certainly, by taking down the inventories, we've made the store more shoppable. But we're also -- we've also created more space in the store, which gives us flexibility to do either of the things you just described. Obviously, if we see additional categories that we want to expand into, we have the opportunity now to develop the space in the store. And similarly, if we see slightly smaller boxes in terms of locations that we'd like to move into, we can do that, too. So both of those things are on the cards over the next few years. Adrianne Shapira - Goldman Sachs Group Inc.: Okay. Any more specifics on the categories that you're not in that perhaps seem to present opportunity? Michael O'Sullivan: No, not at this point. We -- you probably know that we're always experimenting. We're always looking for categories, and that will continue. I wouldn't want to be more specific than that right now. Adrianne Shapira - Goldman Sachs Group Inc.: Okay. And then just lastly on -- obviously, we thought you made a nice decision to shut down AJWright. Maybe just give us your thoughts in terms of -- obviously, you're going ahead with dd's. Does that present a greater opportunity in terms of real estate? How should we be thinking about that as they stepped away from that demographic? Michael O'Sullivan: So I would say, very little impact. Frankly, what happened between those businesses geographically was tiny. So from a realistic point of view, really not material. From a supply point of view in the long term, I would say it's always a good thing for us if there are fewer competitors in the market.

Your next question comes from the line of Mark Montagna from Avondale Partners. Mark Montagna - Avondale Partners, LLC: Just a question about the benefit costs. You said that in the fourth quarter there was a timing difference in benefits. Did that, by any chance, pull any of the benefit expense from the first quarter into the fourth quarter or was it a shift from third into fourth quarter?

No, it was a shift throughout the year, Mark. We just insured a portion of our benefits and we make quarterly estimates and reserve around those estimates. And last year, the impact to the fourth quarter quite frankly was a 20 basis point benefit. This year, it was a 20 basis point drag. So that's how we came up -- that's what derived the 40 basis points on a year-over-year basis. So it's simply quarterly timing. There was nothing from ’11 that was pulled into '10. And for '10, the benefit costs were relatively flat. Mark Montagna - Avondale Partners, LLC: Okay. Then just the last question I have is, the benefits you've got from inventory shortage in 2010, can you tell me -- tell us what the basis point benefit was for the full year?

Actually, in the third quarter, I think it was about 100 basis points where we benefited from the stores. Going through 2011, we'll probably benefit 10 to 15 basis points from quarter based on lower year rates, based on the results we had in 2010.

Your next question comes from the line of Stacy Pak with Barclays Capital. Stacy Pak - Prudential: I wanted to circle back to the inventory because when I just look at the total number, up 24-ish versus sales of eight, it looks really high. And I know you're talking about taking -- watching it closely in-store. But I'm just wondering, philosophically, why are you taking so much packaway? It seems to me you've had so much margin gain from lower inventory. And the balance sheet inventory being higher seems like it would hurt turn and working capital and things like that. So are you worried about inventory availability? And what are you seeing in terms of cost inflation now? So I'm just wanting you to talk about more about that on the packaway. Michael O'Sullivan: Stacy, let me start by just drawing a strong distinction between packaway inventory and in-store inventory. We're using markdowns on the in-store inventories. It's accepted by the customer and in our view, has a limited shelf life. So that's what we've been managing very tightly over the last few years. When we talk about inventories being down by a third, that's what we mean. Packaway inventory is quite different. It's great opportunities that we found in the market from a supply point of view, and we decided to take advantage of those opportunities and pack them away for future flow to the stores. So the two things are quite distinct, and we continue to pursue a policy of very tight in-store inventories, which we think will serve us well. And we've got those to -- actually been in quite fortunate position in Q4 in terms of being able to build up a pretty strong and I think very attractive packaway inventory. But I would call that distinction between those two.

And I'll just add in, the packaway is typically the best bargains in our stores. And we think whenever we see brands of the quality and styles of the quality that we're able to packaway, we're confident it's a very good thing for our business. And relative to cost inflation, we have not seen a lot for spring, okay? But certainly, there is some coming out based on the cost increases coming out of China as we move into the back half of the year.

Your next question comes from the line of Jeff Black with Citigroup. Jeff Black - Citigroup Inc: Can we follow on the same train of thought with the cost inflation? And just remind us how you're planning differently to maybe when we saw these periods in the past? Packaway should shield you from being able to or needing to raise price on a lot of things. But what is the ability to raise price vis-a-vis the department stores and the other guys who intend to do this? Is that sort of a one-for-one or do you think you have a more limited ability to do that given that demographic you serve?

First of all, packaway is really a small percentage even though it's climbed above total inventory. It's a small percentage of our total flow out to stores for the year. Your second part of your question asked about, could you repeat the specific part of that? I know the topic, but please repeat the specific part. Jeff Black - Citigroup Inc: Well, I guess what I'm wondering is if department stores raise prices x percent, what is your experience with your ability to take prices up? Is it on a one-for-one basis or is it something less given the demographic you serve?

I think one thing to consider is there has not been an apparel inflation for a long, long time. So I don't think any experience that any of us would have on apparel inflation would be material. It's really years and years. But so we're monitoring the situation closely. Department stores are experimenting today with some higher price points. And basically, over time, we're in a value business that has the -- if we create the value differential between ourselves and other mainstream retailers, be it department or specialty stores, we’ll be fine. There is an adjustment period that, I think, retail might go through. We'll see. But over time, we're in a value business which is defined by differential from mainstream retailers.

Your next question comes from the line of David Weiner from Deutsche Bank. David Weiner - Deutsche Bank AG: Just two questions, if I may. The first, as you move your Ross Stores into some new markets, I think you mentioned Illinois and I think it was Arkansas was the other one. Can you talk about how you’ll advertise ahead of that? Assumedly, maybe your name recognition isn't what it's going to be in your existing markets, so maybe talk about how you prepare for that and then how that may impact the P&L? And then the second question, I think in the past, you've given some sense of what the SG&A and occupancy breakeven point is for the year, and what the sensitivity of a 100 -- a 1% comp change is around that to total margin? Michael O'Sullivan: David, I'll take the first question on marketing in new stores. We certainly will be marketing in new markets that we're entering to build our wares. But I would say, yes, marketing is one of a number of things that we're doing. We'll have time to prepare a new market entry. We've done a lot of work around the assortment as well. And obviously, in our real estate group, we're doing a lot of work around selecting the right locations. But marketing is one piece of it. In terms of what impact that might have on the P&L, immaterial. The -- given that, I think in Michael's remarks, he made a point that the number of stores in new markets will be around about 1.5% of our overall store base. That's 15 stores or so. So the marketing in that market really isn't going to have much impact on the P&L, certainly not noticeable.

And then on your second question, David, on our leverage point. Typically, SG&A will lever around a three for the year. We're trying to do slightly better than that in 2011. Our guidance indicates that we'll get a little bit of leverage out of G&A on 1% to 2% comp, and that's based on lower incentive cost plan for 2011 around that comp.

Your next question comes from the line of David Mann with Johnson Rice. David Mann - Johnson Rice & Company, L.L.C.: Can you tell us what you're seeing in terms of the rents on some of these new stores? How that compares to the existing base?

Sorry, Dave. Just repeat that question. David Mann - Johnson Rice & Company, L.L.C.: I'm curious, the rents that you're seeing on some of the new leases that you're signing, how that compares to sort of your history. Michael O'Sullivan: Yes, sure. In the last couple of years, clearly, the retail real estate market has softened somewhat. So we did see 18, 24 months ago, we saw rents improve a little bit. So they've stabilized and we're getting some benefit now, but that's how I would characterize it. David Mann - Johnson Rice & Company, L.L.C.: Okay. And then in terms of the reductions that you're taking in inventories at the store level, are there some stores in the store base where you feel like you've already maximized that, and so now you're -- that you're not taking the inventories down or is that pretty much across the board that you're doing that? Michael O'Sullivan: It's just across the board. David Mann - Johnson Rice & Company, L.L.C.: Okay. And then one last question. On longer-term operating margin potential, I guess you keep raising the bar on yourself. Can you give us a sense if we look out several years, what kind of potential you might -- growth in operating margin we might expect? Michael O'Sullivan: Well, over the last few years, I would say that there are really three things that have driven our operating margin improvement. There's a lot of offense that we're taking because of the tighter inventory control. There's the improved shrink that we've referred to several times. And then there's expense leverage from higher sales. On the first two of those, the lower markdowns and the improved shrink, we think maybe there's a little more room to squeeze out a little more on both of those. And then on the third, expense leverage. It all depends on what happens with sales. So we feel good about our current margin level and maybe there's a little bit of upside in it.

Your next question comes from the line of Patrick McKeever from MKM Partners. Patrick McKeever - MKM Partners LLC: Just a question on the entry into Illinois and Arkansas. Why not more of a broader, more aggressive entry into the Midwest? And of those new 15 stores in Illinois and Arkansas, will any of those be dd's DISCOUNTS or are those all Ross Stores? Michael O'Sullivan: Okay. Patrick, on the second part of your question first, they’ll be Ross, not dd's. And then on the first part of your question, why not a broader strategy? We -- Ross, historically, has always concentrated on building its share in each market over time. So if you look at the print of the company in terms of where we have stores, we've built strength and that actually helps to drive our performance. So in terms of expansion, we're kind of thinking along the same lines, that we should be quite focused on specific markets and then gradually expand over time. And that's the approach we're taking in the Midwest. We’ve always had that sort of approach. Patrick McKeever - MKM Partners LLC: Right. I was just thinking when you went into the Southeast, my recollection is you went into more than one major market initially. But understood. And then just a quick one on micro-merchandising, what is the plan there for 2011? And have you gotten to a point where you can quantify the impact of your micro-merchandising effort on sales and margins? And how might you tie micro-merchandising in with the guidance or with the comments that you could -- that you think you can sustain that 11.5% operating margin? Michael O'Sullivan: Well, micro-merchandising has now been running for about 18 months. And the real thought behind micro-merchandising is to plan and trend our business at a more local level, which really means that we should be able to drive faster turns. And clearly, in 2010, we were able to drive faster turns and we think at least a portion of that is micro-merchandising. We can't really quantify that. I don't think there's a number I can give you on that. But should it help us in 2011 and for that matter in 2012? It should. And it should also help prospecting new markets and it should allow us to sort of get the assortment in line more rapidly than we otherwise would've been able to. So we think we will have benefits this year and beyond.

Your next question comes from the line of Sean Naughton from Piper Jaffray. Sean Naughton - Piper Jaffray: First, on the gross margin. You guys have obviously seen a very nice expansion due to mostly merchandise margin. Can you talk about -- and I know a lot of that has been from the inventory reduction. But can you talk about any benefit that you're receiving from mix of merchandise in the store? Has that contributed at all to merchandise margin?

On the mix, Sean, the mix is -- it's fairly constant. We won't draw that out of the major contributed increase in merchandise margin. It's really based on lowering inventories, quicker turns, lower markdowns and actually pretty good volumes -- very good volumes. Sean Naughton - Piper Jaffray: Okay. So the increase in the percentage of your total business in Home and Home Accents, that's pretty similar margin to some of the other pieces of the business as well?

It's not materially moving us. Sean Naughton - Piper Jaffray: Okay. And then secondly, in terms of the SG&A outlook. I think in 2006, you were able to be at about a leverage of about 15.5% in terms of -- as related to sales. Is that a low point or can you actually drive SG&A on a rate basis lower than that with these reduced incentive comp numbers?

Sean, we -- as I've said before, on the 1% or 2% comp, we can drive out some leverage in SG&A. It's been a fairly constant number. We're continually working at it. There are programs in the company that continue to cost out the business and actually help them [indiscernible]. Sean Naughton - Piper Jaffray: And then I guess lastly, in terms of timing throughout the year. Should we continue to expect share repurchases done on a quarterly basis pretty consistent with the two-year plan you guys have demonstrated over the last few years? And then secondly, the CapEx spending throughout the year, John, is it relatively consistent with some of these new distribution center initiatives that you have for 2011?

Yes. Initially, on the share buyback, we would anticipate that’d be executed similar to how we've executed in the past, which would be consistent even over the year. As far as CapEx goes, it is pretty even throughout the year. Having said that, a little less in the fourth quarter as all the stores have been built into the fourth quarter. So it will fall off for the fourth quarter. But other than that, fairly even throughout the year.

Our next question comes from the line of Richard Jaffe from Stifel, Nicolaus. Richard Jaffe - Stifel, Nicolaus & Co., Inc.: I'm wondering how the micro-merchandising initiatives are going to play into the new markets. Obviously, there've been a couple of years in implementation and I would guess that this is sort of a key step for you guys. Could you elaborate? Michael O'Sullivan: Sure, Richard. Yes, the thought behind micro merchandising is to better predict what each store should be able to sell based upon its trend and to slow inventory based upon what that trend looks like and what that prediction is. When we previously enter new markets, we didn't have that kind of capability. So it took us a while to figure out how to back fill each store and install product. With micro-merchandising, we should be able to do a better job with that. And that means that we should be able to basically align the assortment between what the customer is looking for in the new market, which over time, I think will help us develop our business in the new market more rapidly and more successfully.

Your next question comes from the line of Rob Wilson with Tiburon Research. Rob Wilson - Tiburon Research: Yes. I hate to come back to the packaway question, but just two specific questions. Are you able to tell us the differential in merchandise margin between packaway and regular in-store inventory? And if you're not able to maybe give us a basis point range there, maybe you could tell us whether it's material or not? And second, is there going to be an impact on shrink or your increased levels of packaway in 2011? Michael O'Sullivan: Okay. On the first part, no, we wouldn't comment on the margin differential between packaway and the flow of product. But the other point I'd make on that though is, as Michael mentioned earlier, packaway is some of the best products that we have in the store, so it would actually have a sales impact as well as any potential margin impact in 2010. And then there really isn't any -- I can't think of any link between shrink, which I think was your second question in packaway. There really isn't any. Rob Wilson - Tiburon Research: So you wouldn't characterize that merchandise margin differential as material?

It's not material. Rob Wilson - Tiburon Research: Okay, fair enough. And one final question. When I looked back in your history at your levels at packaway, this is the highest level, if I'm not mistaken. Maybe your memory goes back much further than mine. Why have we not seen this in the past?

Well, we've had this level of packaway level inventory before, okay? And we know how to manage it, we know how to buy it, we know how to manage it, we know how to flow it and we view it as a real plus. Rob Wilson - Tiburon Research: And can you remind us when you may have had it in the past?

Around 2000 or so.

Your next question comes from the line of Evren Kopelman with Wells Fargo Securities. Evren Kopelman - Wells Fargo Securities, LLC: Two questions. One is on your 1% to 2% comp guidance for this year, does that assume any higher ticket opportunity given the kind of expected rise in apparel prices at the full price stores? And if it does include some, maybe how much? The second question is, when we look at your guidance for comps versus sales, it looks like you have a four-point difference which is actually less than what you delivered last year even though the square footage growth is higher. Maybe talk about, does that still -- does that mean you're assuming lower new store productivity or does it have something to do with the flow of new store openings throughout the year?

So the first question, Evren, had to do with comp and average retail movement of the comp? Evren Kopelman - Wells Fargo Securities, LLC: Right. The comp guidance assume a higher average ticket because of a potential opportunity with the rising prices around you? And if so, how much?

The comp is really predicated on traffic as opposed to any increase in average ticket. Michael O'Sullivan: And then on your second point about guidance and sales, I think it's really a factor of we actually have more new store openings this year versus last year. And that's the differential we were taking out in the number.

And new stores don’t perform at the level of our existing base in year one.

Your next question comes from the line of Dana Telsey from Telsey Advisory Group. Dana Telsey - Telsey Advisory Group: Can you talk a little bit about dd's, what you're seeing there, especially given what's happening in the macro environment? And the packaways that you do have, is there any greater proportion that's allocated to dd's? Do they benefit as much as Ross does? Michael O'Sullivan: Okay. On the first part of your question, Dana, dd's did well last year. It had good comp growth on top of extraordinary comp growth and actually, it's comp growth got stronger in Q4. But actually one of the most remarkable things about dd's last year was its margin expansion, that we pursued a similar approach with dd's in terms of growing inventories as we had at Ross, and that actually had very, very good results in terms of margin. And I should also say it probably contributed to the comp as well because we had fresher goods in front of the customer. Packaway?

And dd's packaway is up and remember, it's a less branded business, so we probably -- my belief is it’s not up as much was Ross’.

There appears to be no further questions at this time. I'll turn it back for closing remarks.

Well, thank you all for joining us today and for your interest in Ross Stores. Have a great day.

Ladies and gentlemen, this concludes today's conference call. You may now disconnect.