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 David Mann - Johnson Rice & Company, L.L.C. Richard Jaffe - Stifel, Nicolaus & Co., Inc. Stacy Pak - Prudential Jeff Black - Citigroup Inc Paul Lejuez - Nomura Securities Co. Ltd. Mark Montagna - Avondale Partners, LLC Adrianne Shapira - Goldman Sachs Group Inc. Brian Tunick - JP Morgan Chase & Co Marni Shapiro - The Retail Tracker Roxanne Meyer - UBS Investment Bank Jeffery Stein - Soleil Securities Group, Inc. David Weiner - Deutsche Bank AG Kimberly Greenberger - Morgan Stanley Evren Kopelman - Wells Fargo Securities, LLC Laura Champine - Cowen and Company, LLC

Good morning, and welcome to the Ross Stores First Quarter 2011 Earnings Release Conference Call. The call will begin with prepared comments by management, followed by a question-and-answer session. [Operator Instructions] Before we get started, on behalf of Ross Stores, I would like to note that the comments made on this call will contain forward-looking statements regarding expectations about future growth and financial results, including sales and earnings forecasts and other matters that are based on the company's current forecast of aspects of its future business. These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from historical performance or current expectations. Risk factors are included in today's press release and the company's fiscal 2010 Form 10-K and 2011 Form 8-Ks on file with the SEC. Now I'd like to turn the call over to Michael Balmuth, Vice Chairman and Chief Executive Officer.

Good morning. Thank you for joining us today. Also on our call 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 of Investor Relations. We'll begin with a brief review of our first quarter performance, followed by our outlook for the second quarter and fiscal year. Afterwards, we'll be happy to respond to any questions you may have. Today we reported first quarter earnings per share of $1.48, up from $1.16 per share for the 2010 first quarter. These results represent a robust 28% increase on top of an exceptional 61% gain in the prior year. Net earnings for the current year quarter grew 22% to $173 million, up from $142.3 million last year. Our 2011 first quarter sales increased 7% to $2,075,000,000 with comparable store sales up 3% on top of an outstanding 10% gain in the prior year. Both sales and earnings in the first quarter were better than expected, with solid gains on top of very tough prior year comparisons. These results were mainly driven by our ongoing ability to deliver a wide array of compelling name-brand bargains to today's value-focused customers while operating our business on leaner in-store inventories. Dresses, Shoes and Home were the top performing merchandise categories with same-store sales gains in the mid-single to low-double-digit percentage range, while Florida and Texas were the strongest regions, also posting high single to low-double-digit increases in comparable store sales. Operating margin grew about 160 basis points to a record 13.7% due to a 130 basis point increase in gross margin and a 30 basis point improvement in selling, general and administrative costs as a percent of sales. John will provide some additional details in a few minutes. As we ended the first quarter, total consolidated inventories were up 29%. This increase was driven by higher packaway that was about 48% of total inventories, up from 33% at this time last year as our buyers continued to find great deals in the marketplace. Packaway as a percent of total inventory is somewhat higher today than in the past due to the significant reduction in selling store inventories. Packaway, however, as a percent of sales is similar to average levels over the past 5 years. Average selling store inventories were down about 8% at quarter-end versus the prior year. We are still targeting in-store inventories to decline in the mid-single-digit percentage range over the balance of the year compared to 2010. Let's turn now to our store expansion program. We are excited about our growth plans for 2011, which include our first major new market entry since we entered the Southeast almost a decade ago. We remain on track to open a total of about 60 Ross and 20 dd's DISCOUNTS locations for the full year, including, as previously reported, our initial entry into Illinois and Arkansas, with about 15 stores in the fall of this year. I am pleased to report that dd's DISCOUNTS also achieved above planned sales and gross margin in the first quarter. Like Ross, dd's continues to benefit from our ability to flow a larger percentage of fresh product to our stores by operating on lower inventory levels. The ongoing solid gains in sales and profitability at dd's also reflect that its value-focused merchandise offerings are resonating well with its customers. Based on our first quarter results and outlook for the balance of the year, we continue to expect dd's DISCOUNTS to generate solid growth in its pretax earnings for 2011. Now John will provide some additional color on our first quarter results and details on our guidance for the second quarter.

Thank you. Our 3% comparable store sales gain in the first quarter was driven by a low-single-digit growth in both the number of transactions and the size of the average basket. Again, operating margin improved by about 160 basis points in the quarter to 13.7%, driven by a 130 basis point increase in gross margin and a 30 basis point decline in selling, general and administrative costs as a percent of sales. Merchandise margin increased about 95 basis points, mainly due to lower than prior markdowns resulting from above planned sales and faster turns. The merchandise margin improvement also includes a 15 basis point benefit from a somewhat lower shortage accrual compared to last year. Occupancy and distribution costs were also lower than expected, contributing about 25 and 20 basis points, respectively, to operating margin. Partially offsetting these improvements was a 25 basis point increase in freight costs, mainly due to higher fuel prices. The 30 basis point decline in selling, general and administrative costs and the percent of sales was due about equally to a combination of leverage, comps to [ph] operating costs, and general and administrative expenses. Our tax rate remains unchanged from last year's first quarter, while our buyback program drove a 5% decline in diluted shares outstanding for the period. During the quarter, we repurchased 1.6 million shares of common stock for an aggregate purchase price of $112 million. We continued to return a significant amount of our excess cash to stockholders through our dividend and stock repurchase programs. Earlier this year, we announced a 2-year, $900 million stock repurchase program for 2011 and 2012 and raised our cash dividend by 38%. We remain on track to complete approximately $450 million, or about half of our current authorization, by the end of 2011. Let's turn now to our second quarter guidance. For the 13 weeks ending July 30, 2011, we are forecasting same-store sales to increase 2% to 3% on top of the 4% gain in the prior year. Second quarter 2011 earnings per share are forecasted to be in the range of $1.15 to $1.20. This represents projected EPS growth of 7% to 12%, on top of 30% and 52% gains in the second quarters of 2010 and 2009, respectively. Our second quarter 2011 EPS targets are based on the following assumptions: Total sales are expected to grow about 6% to 7%, driven by a combination of new store growth and, as mentioned, same-store sales that are targeted to be up 2% to 3%. We are forecasting about 23 net new stores to open during the period, including 15 Ross Dress for Less and 8 dd's DISCOUNTS. We are planning comparable store sales gains of 2% to 3% for each month of the quarter. Last year's same-store sales rose 5% in May and June and 2% in July. We are projecting operating margin of 10.8% to 11% for the 2011 second quarter. This compares to 11.1% in the second quarter of 2010, which was up 140 basis points on top of an outstanding 260 basis point increase in 2009. There are a number of reasons why we are planning operating margins to be slightly down in the second quarter compared to a much better than planned 160 basis point growth in the first quarter. For we are still projecting a slight increase in merchandise margin for the second quarter, this growth is forecasted to be much less than the 95 basis point gain we just reported. That improvement was mainly driven by sales that were well above plan, resulting in faster turns and much lower markdowns. In addition, our second quarter guidance assume that we start to see some modest pressure on margins from higher sourcing prices. Distribution expenses as a percent of sales was declined about 20 basis points in the first quarter, our forecasted increase in the second quarter. This is mainly due to timing of packaway related expenses. As a reminder, we capitalize buying and distribution costs associated with packaway inventory and recognize those expenses from the merchandises sold. Last year, distribution expenses declined by 40 basis points in the second quarter as packaway levels rolled. This year, distribution costs [ph] are forecast to increase by a similar amount as packaway levels are projected to decline somewhat. Finally, as previously mentioned, occupancy contributed about 25 basis points to operating margin in the first quarter. This was mainly due to about 20 basis points from occupancy-related savings for certain locations combined with slight leverage on the mall [ph] planned sales. Net interest expense is planned to be approximately $2.5 million and our tax rate is expected to be about 37% to 38%. We also estimate weighted average diluted shares outstanding of about 116 million. Now I'll turn the call back to Michael.

Thank you, John. I want to reiterate that we are very pleased with our better-than-expected start to the year, especially given the tough prior year comparisons and the ongoing challenging macroeconomic and retail climate. It's also important to note that our guidance for the balance of the year takes into consideration some potential external factors that could pressure our business. These include the ongoing uncertainty in the macroeconomic environment, as well as our expectations, as previously mentioned, for higher sourcing costs. Nevertheless, we remain confident that our flexible business model will help us navigate the environment better than most full-priced retailers. While we hope to do better based on our recent performance trends, we are now forecasting some incremental upside to our original earnings guidance for the balance of the year. As noted in today's press release, we have raised our full year fiscal 2011 earnings per share forecast from $5.16 to $5.31, which is ahead of our initial guidance of $4.90 to $5.10. This updated earnings per share range represents projected growth of 11% to 15% in fiscal 2011, on top of exceptional 31% and 52% gains in 2010 and 2009, respectively. As we said before, we know that our ability to give customers the best bargains possible is and always will be the key to our success. To ensure that we have ongoing access to a plentiful supply of off-price product, we are making further investments in our merchandise organization. Continued expansion of our merchant staff reflects that delivering compelling bargains to our customers remains our number one priority and also our most important strategy. Our recent example of the benefits we are seeing from this investment is the terrific buys we have been able to make on packaway and in-season merchandise that helped drive our much better than expected performance in the first quarter. During the turbulent economic environment of the last couple of years, we have seen customers gravitate more toward off-price retailers. Looking ahead, we believe that this increased focus on value by consumers will continue, which bodes well for our business. At this point, we would like to open up the call and respond to any questions you may have.

[Operator Instructions] And your first question comes from the line Paul Lejuez from Nomura. Paul Lejuez - Nomura Securities Co. Ltd.: Guys, you obviously have a lot of experience with packaway merchandise. Just wondering if you can maybe share with us the typical merchandise margin that you would see on that sort of product relative to non-packaway buys. And then I'm also wondering, what are your markdown levels looking like this year end of first quarter versus last year?

I would say packaway margins in the respective categories of merchandise are slightly higher, okay? But it all depends on balance and how we purchased it and better versus moderate product. But like product, category to category, it's slightly higher.

Something I'd add to that, Paul, is that when we look at the average retail of packaway items, tends to be a little bit lower, sort of better value and the packaway tends to turn a little bit faster.

And relative to your question about markdown levels in the first quarter, merchandise margin improved by 95 basis points, 15 of that was due to shortage and the most substantial part of the remaining 80 was digital [ph] markdowns. Paul Lejuez - Nomura Securities Co. Ltd.: How about ending the quarter, John?

What's that? Paul Lejuez - Nomura Securities Co. Ltd.: How about at the end of the first quarter; what are markdown levels look like relative to last year?

So our clearance levels were down at the end of the first quarter about 15% if that's where you're going, Paul.

Your next question comes from the line of Brian Tunick from JPMorgan. Brian Tunick - JP Morgan Chase & Co: As you move into the new stage, just curious sort of what are you doing differently, marketing or logistic-wise, as you enter the new market today versus a couple of years ago to ensure success? And then the second question, on the CapEx or the store build out cost side, what's sort of happening there as we hear some of the landlords are having some financing issues? How is that changing the economics for you guys? Michael O'Sullivan: I'll take the first part of that, Brian, in terms of what are we doing in new markets. I'd say a couple of things, we've done a number -- we've pursued a number of initiatives in the last few years across the chain, but I think will be particularly helpful in new markets. First of all, the investments we've made in improved localized planning and trending, what I call micro-merchandising, that should be particularly helpful as we move into new markets in terms of making sure we have the right assortment and trending that assortment based upon the local customer needs. Secondly, the investments in the Merchant group that Michael referenced in his comments, again, I think will help the new markets because they help the whole chain. And then the leader inventories, meaning that the merchandise will turn faster and we'll be able to replenish it more rapidly with merchandise that we think is more appropriate for that customer based upon the sales trend. So there are a number of things that make us feel like we're in better shape now than we were several years ago in new markets. The other point that I'd make, though, is I think we've learned a lot from our expansion into the Southeast in terms of marketing and operation, and we're obviously employing some of those learnings as we enter new markets. And then the final thing, the final point to make is that in our plans, although the new markets are important to us, financially, they're not going to be material for these next couple of years. The 6% or 7% unit growth that we're forecasting, only 1 to 2 points of that is in the new market, so I think it's important to put that in context.

So on the second point of your question, Brian, CapEx related to new stores will be about $110 million this year, up from $76 million last year, driven by a couple of factors. One, we're rolling out more stores. And secondly, the stores require a little bit more CapEx as we take on more of the ownership of the buildout.

Next question comes from the line of Adrianne Shapira from Goldman Sachs. Adrianne Shapira - Goldman Sachs Group Inc.: I'm just wondering if you could, your comments about some modest pressures and sourcing costs. If maybe you could shed some light, quantify what you're seeing in the market today.

I'm sorry, I couldn't hear some of the question. Could you repeat it please? Adrianne Shapira - Goldman Sachs Group Inc.: I was just asking you to better sort of following on your comments about just pressure from sourcing costs, if you could just quantify what you're seeing in the marketplace today.

Well, clearly, every manufacturer is discussing and those that are public companies are discussing the sourcing costs increases from the Far East. We are seeing it in terms of our dialogue with them and we expect it to really be more impactful as we move to latter part of the second quarter into the third quarter. The one thing that isn't clear is how this will all play out. Typically, changes of pricing like this is a disruption in the industry and in the past, it's been good for our price, so we don't know how this will play out. This is a very different situation and powerbase [ph] companies have seen for a long, long time seeing inflation in power versus deflation. So we're fortunate that we have a flexible model and can react to how this plays out by business and with the correct dollars within our stores to businesses in a very simple way. We operate our business with a lot of liquidity, so we are seeing that manufacturers want to raise their retail, want their retails to be raised in mainstream stores. We're seeing mainstream retailers try this. We're not sure how effective or not it is yet, but we have our eyes very much attuned to it and for us, it's more news to follow, but it's now become a way of life for us to monitor -- even more so than before to monitor everything that's going on in mainstream retail as it relates to pricing. Adrianne Shapira - Goldman Sachs Group Inc.: Just following up on your comments, 2 points you raised. I mean, it sounds like some people have been trying to pass on modest increases early in the year. I'm wondering if you're sensing any disruption, and have you been opportunistic in light of any disruptions people have had a harder time passing on even the modest level today. And then second, as you're looking for pressure to mount in the back half, if you could kind of quantify it, what sort of increases are the manufacturers talking about?

I got the first part of the question, the second one I'll wind up coming back to you on. The first part of the question, in terms of -- we're seeing cycled amounts of product in the marketplace. I don't know if it's directly attributable to the pricing increases or sales not materializing at certain sectors of retail to the degree that they forecast or if there are other problems inside their 4 walls. But it's been a very good buying market as our packaway levels have shown. And I'm sorry, I did miss the second part of the question. Adrianne Shapira - Goldman Sachs Group Inc.: Sure. And I was just asking if you could quantify the increases that you're alluding to in the back half, what manufacturers are looking to pass on?

It depends on the category, certain categories are minimal. Certainly, cotton-based categories are highest. In some cases, they're in low double digits. In other cases, they're in low singles. But it varies everywhere by sector of the store and manufacturer within that and how some manufacturers are absorbing more, others are passing on more. So it's -- that's as specific as I can be.

Your next question comes from the line of Evren Kopelman from Wells Fargo. Evren Kopelman - Wells Fargo Securities, LLC: I wanted to ask about the strong regions and the strong categories for Florida and Texas. What do you think is driving the better results there? I mean, Florida, as you've been calling out for a while, and how sustainable is double-digit comps there? And same question for the strong categories, is it more space allocation? Is it something else? And again, how sustainable are kind of the dress and shoe comps? Michael O'Sullivan: Yes, Evren, on the regions, Florida and Texas have been our strongest regions. But I would say that actually across the chain, all our regions have been performing reasonably well. In Florida or Texas, with Florida in particular, the economy in Florida over a number of years, the study we, our comps going back 2 or 3 years ago were very weak, so we think we're recovering and have recovered quite a lot of that business. And I don't have a comment on Texas.

And relative to the strong categories, going into any selling period, we identify where we feel we have the strongest ammunition in terms of product, and that ties to both fashion trends as well as product availability that's in our hotel [ph] and also what we expect in the marketplace. And so, I would say the categories that are performing best in our store that we referred to in the comments were all of the above. We think there are fashion trends going on in the apparel basis, few parallel parts of that, that are very dominant to what's going on in apparel today, as well as they were early -- we identify them early and we funded them.

Your next question comes from the line of Sean Naughton from Piper Jaffray. Sean Naughton - Piper Jaffray: In terms of the comp guidance for the second quarter, your 2-year trend has been steadily in the low double digits for about the last 9 months and your forecast is for a mid- to high single. Is there anything in terms of the second quarter from last year that we should be thinking about in year-over-year comparisons or anything you're seeing in the business that we should think that -- why that could potentially slow? Michael O'Sullivan: The only thing I can point to, Sean, is that the last few years there's been -- with the economic decline, et cetera, there's been so many shifts in the economy and in the retail sector that looking back just over 2 years is a little bit misleading. If you look back over 3 years or even 4 years, I think you'll see that the guidance that we have out there -- or that we're just putting out there for Q2 is in line with Q1. But you have [indiscernible]. Sean Naughton - Piper Jaffray: Yes, that's fair. And then in terms of dd's, maybe Michael, you can talk about -- the sales and gross margin sounded like they were ahead of plan internally. Can you give us an update on whether or not this division was positive to the operating margin in Q1? And how you're thinking about that business as you roll it out for all of 2011?

Yes. So Sean, for the first quarter, dd's did well and even before allocations was positive; we're on trend with that business. The guidance we gave to start the year was that, that business would be slightly accretive to earnings, and we're on pace to do that. Sean Naughton - Piper Jaffray: Okay, that's good to hear. And then maybe just lastly, in terms of the SG&A, obviously nice leverage on that 3% comp in Q1, should we expect that similar type of leverage throughout the balance of the year if you are able to achieve this latest level of same-store sales? Michael O'Sullivan: There are a couple of unusual factors that affected the margin in Q1 that Michael referenced in his comments, particularly the timing of distribution expenses that we wouldn't expect to recur in the balance of the year. So would we expect some leverage on a 2% comp? Yes, but not as much as we saw in Q1.

Your next question comes from the line of Jeff Black from Citigroup. Jeff Black - Citigroup Inc: So I guess my question, I just don't recall seeing inventory 20% above the sales rate even when we had high levels of packaway. I mean, back in '04, we were, 3s and 4s above the sales rate, but not 20%. So what do we expect to end Q2 would be the question. And the other part of the question is just on the liquidity dynamic. I mean, as you get in to the back half with these high levels of packaway, will we be able to take advantage of inventory buys should they emerge? Michael O'Sullivan: Let me take the first piece, Jeff, about the inventory growth. I think it is very important to separate out packaway inventory, which we're planning to roll out later in the season or even in next season, from selling store inventory. The selling store inventory continues to be reduced and actually will continue to be reduced in the sort of high single digits for the rest of the year. And that's what's driving our costs of turn and then our markdowns. The packaway is much more opportunistic, and although it looks high as a percentage of inventory, the truth is that because we've been turning our inventories, that's actually quite our misleading metric. If you look at packaway as a percentage of receipts or as a percentage of sales, it's in line with our average over the last 5 years, and actually, it's somewhat lower than it was 8 to 10 years ago. So based upon that, we feel like our inventories are in pretty good shape.

And with what Michael just said, that we show very comfortable about our ability to chase the business and be totally liquid for fall, and that packaway, which is some of the best buys in our store, okay, is not in any way going to be an inhibitor of us to take advantage of market opportunities. Jeff Black - Citigroup Inc: And then, the end 2Q, where do we see the just total inventory levels going?

So in-store levels, let's piece that out again and we can add them back up. But in-store levels should be down, as Michael mentioned, for the year they should be down mid single-digits. And packaway levels, on a sequential basis, we're planning those to come down slightly in the second quarter. The [indiscernible] levels, yes.

Your next question comes from the line of Kimberly Greenberger from Morgan Stanley. Kimberly Greenberger - Morgan Stanley: Michael, the sales growth in the first quarter far exceeded what we expected, and I think that your plan as well. I'm wondering if you can just talk about the drivers of the upside. It didn't seem like weather was particularly favorable in Q1, and is it that the content of the merchandise you were able to buy was just so much better than last year? If you could just dig down a little bit and shed some light on those drivers, that would be helpful.

Okay. Really, what I would say is 2 aspects. What we were buying in season was better than we expected, and our packaway, which we had accumulated in several months prior, performed at a very strong level. Additionally, we had certain businesses that had been strong for us for a period of time that continued to perform as we expected or as we hoped at a very high-level. And in those businesses, we found plenty of product as we were going, and those were the businesses that we identified in the comp. Kimberly Greenberger - Morgan Stanley: That's for second quarter?

Your next question comes from the line of Stacy Pak with Barclays Capital. Stacy Pak - Prudential: I guess I have a few questions, but I'm wondering if you can just start with the sourcing costs increase in Q2 and increase in the second half. And I guess, fundamentally, you're mostly buying excess, right? So why -- I mean, why would you really expect your costs to go up if you're buying what other people don't really want? I mean, I thought that sort of the fundamental thing in off price was you're not going to be as impacted by the rise in sourcing just because of that factor. So could you start with that?

I'll start with it. There's a big unknown for all this, for all -- in this for all of us. But essentially, manufacturers are going to be paying more. There's a possibility that even on their excess, we might have to pay a little more than we paid a year ago, okay? And so that has some pressure. We don't know how our customer would respond to that. Or if we'll pass it on to them. So it'll depend by category, by timing of buys, by vendor, by brand label. So there's many, many variables. But at this location like this, in the past, it's been positive, but this is such a different dislocation, we're a little uncertain to its implication. Remember there has not been inflation in power prices for years and years, so... Stacy Pak - Prudential: Right. And you're not paying more yet, are you?

We're not paying more yet would be an appropriate comment on closeouts. But we don't know what's ahead here, okay? Stacy Pak - Prudential: Okay. And then on May, will you comment whether you're in line with the 2% to 3%. I'm also wondering if we should use a 30% flow-through, if there is upside to sales going forward or if we should be using a different flow-through to upside on sales going forward? And then lastly, can you talk about how we should think about shrink, or the opportunity in shrink, going into the back half of the year?

I think your question was flow-through and, yes, we'd say about 25%, 30% is appropriate for our model. The third part of your question was relative to shrink and last year in the third quarter, we picked up about $0.10 relative to our expectations around shrink. Right now, our guidance does not include any benefit that we may get from shrink. Stacy Pak - Prudential: I guess, okay. But do think you're going to get a benefit on top of the $0.10 benefit from last year is the real question. Michael O'Sullivan: We take physical inventory in September, Stacy; it's hard to predict that. Certainly, over the last year, we've made investments to try and reduce shortage. Which have then have settled [ph]. So we hope to do well, but really, it's very hard to predict. Stacy Pak - Prudential: Okay. And then I didn't hear, did you answer the May?

Yes. The answer was we don't comment on mid-month sales. I'm sure that's not the answer you wanted, but that's our fault. Stacy Pak - Prudential: Okay. And then just last thing if I may, are you seeing different product at dd's given what happened with AJWright, any product availability?

Some, some.

Your next question comes from the line of Jeff Stein with Soleil Securities. Jeffery Stein - Soleil Securities Group, Inc.: A question regarding the behavior of the dd's customer relative to the Ross customer given the recent rise in gas prices. I'm wondering, now that you've kind of crossed that $4 gallon threshold, are you noticing the dd's customer behaving any differently? Michael O'Sullivan: Jeff, I'll take that. I think the short answer is no. dd's beat it -- its internal sales plan in the first quarter as it did last year. So again, we're very sensitive to things like gas prices and the general economy. But we really haven't seen any pull back impact to the dd's customer. I should also comment, we looked at Ross's just by income band as well based upon where the stores are and what the income demographics are for the stores. And across income bands, Ross's performance has been fairly consistent at the low-end and at the high-end, so we haven't seen any impact from gas prices. Jeffery Stein - Soleil Securities Group, Inc.: Right. Two other quickies. First of all, what was the -- how many dd's stores were there at the end of the first quarter?

The number is 70, Jeff. Jeffery Stein - Soleil Securities Group, Inc.: Okay. And then one question on packaway. Is there, I guess, did you make -- I mean, it's a huge jump that you've seen in packaway; is it across multiple categories? Or is there perhaps one large or one or 2 large purchases that you made that you're just going to parse out over a period of time, maybe 3 months, 6 months?

It's pretty broad based. There are a few pockets where we're a little more invested, but I just want to remind you that packaway is some of the best product in our store and we're happy when our packaway level moves up. Jeffery Stein - Soleil Securities Group, Inc.: Oh I understand that. Well, I guess, the reason for my question is this, let's say, hypothetically, you made a great buy in Hanes underwear and you put 30% of it out in the first quarter and it sold great and then you put another 30% out in the second quarter. That could boost your sales as well. So I'm trying to understand if -- have you seen positive indications on a piece of that packaway that gives you reason to be optimistic for subsequent quarters and sell-through?

It's broad-based, okay? It's not one -- a few big buys here, a few big buys in certain pockets, and I think that's the answer I would give you, unless I'm missing part of the question.

Your next question comes from the line of Laura Champine from Cowen and Company. Laura Champine - Cowen and Company, LLC: When was it possible that about the new market you referenced, this is really the first expansion into new territories in nearly a decade. Does that imply higher unit growth for next year? Or how should we be modeling unit growth beyond 2011? Michael O'Sullivan: Laura, I would say you should assume that it will be similar to 2011, so about 6% to 7% unit growth. We feel like we can manage growth in a fairly high quality way at that kind of level. So although certainly long-term there are big opportunities, we think it's better to stick with the 6% to 7% unit growth per year.

Your next question comes from the line of Roxanne Meyer from UBS. Roxanne Meyer - UBS Investment Bank: I'm just curious, you raised guidance or it's implied that you raised guidance since you've given your April comps to the tune of about $0.06 for the rest of the year. I'm just wondering what specific areas you're feeling more confident in as we look out for the rest of the year? And then secondly, how should we think about freight costs increases as we move forward?

So relative to the year, you're right, Roxanne, we did raise it a bit. We did tighten things up a bit, so that guidance assumes that EBIT will increase about 20 to 40 basis points over where we had it initially. So I think we were just overall looking at trying to see things up. Relative to freight costs, freight was up in the first quarter principally driven by fuel costs and our outlook right now is, the Department of Energy is forecasting those freight and fuel costs to remain fairly flat to where they are and that's implied in the guidance, and we'll just have to see before we go [ph]. Michael O'Sullivan: The other point I'd make is freight costs about 2% to 3% sales for us and fuel is just a component of that. So as John said, we built in projections in our guidance, but it's not a big vulnerability for us, at least on the cost side it's not.

Your next question comes from the line of Marni Shapiro from the Retail Tracker. Marni Shapiro - The Retail Tracker: We have a lot of conversation about the environment being uncertain not just because of average unit costs going up, but also the consumer and you guys have done a very good job of being very nimble. Could you talk a little bit around how close to be [ph] can you be buying these days and how much flexibility you have if you see pricing change to really manipulate what's going on in season?

We have a lot of flexibility, okay? And we can adjust prices within a 30-day period. We can have our store, in most categories, a different price line, okay? So we watch what's going on very closely. Our buyers are constantly out in mainstream retailers, and we're in constant touch with the market and the combination of all of that will lead us to be very aware and very quick to adjust prices if we need to in any direction... Michael O'Sullivan: The other point I think Michael made earlier is the flexibility also and obviously, in between business in terms if we think there are better values in one business versus another, we can shift some dollars between those businesses as well.

The next question comes from the line of Mark Montagna from Avondale Partners. Mark Montagna - Avondale Partners, LLC: I just wanted to ask a question about the fourth quarter ending inventory where you had a lot of packaway, and, I know, I don't mean to beat a dead horse, but it sounds like it was very good buy. It sounded like you've gotten the margins that you had expected. I'm wondering if you can just characterize, did that buying exceed your expectations in terms of the sell-through and the margins? And as you replace the packaway, do you expect to replace it at the same margin that you had actually put some in? Michael O'Sullivan: Let me respond to that, Mark. I think I'd go back to what we said earlier that packaway is among the most attractive stuff in the store, but to the extent that we buy more packaway, we think that's a good thing for our business. Having said all that, the truth is that if look at our packaway balance and you look at our sales for the year, packaway is close to 1/10 of our sales. So there's a limit to just how important packaway is. So did it help in the first quarter? Absolutely. But did the other merchandise do pretty well? Yes, it did. So it wasn't just the packaway trend.

Your next question comes from the line of Richard Jaffe from Stifel, Nicolaus. Richard Jaffe - Stifel, Nicolaus & Co., Inc.: Again, the dead horse, packaway. How long does merchandise stay in packaway in the same new warehouse before you flow it out on average? Is it a seasonal thing or just a week-to-week, month-to-month kind of flow?

It's a seasonal thing. On average, packaway is flowing right now, the holding period is about 3 months. So that's about where we are. Richard Jaffe - Stifel, Nicolaus & Co., Inc.: That's great. On a different subject, product costs appear to be going up industry-wide. Where are your average unit retails today to the 2 divisions and how do you see them changing, if at all, in the second half?

So the average unit retail at Ross has been pretty consistent around $10 and dd's is probably between $7 to $8; that's where we are today and we'll just have to see where they go. Richard Jaffe - Stifel, Nicolaus & Co., Inc.: If the world trades up 10% with product costs up about the same amount, could you imagine yourself doing the same thing or would you try and just offer greater value?

The key thing for us is to keep a value differential between us -- between our product and mainstream retailers, and it's something we're watching very closely. So we're going to react and move with what our customer tells us and what the market has to bare in this.

Your next question comes from the line of Jill Caruthers from Johnson Rice. David Mann - Johnson Rice & Company, L.L.C.: It's David Mann. My question goes back to packaway again. In terms of the second quarter guidance for the expense that you're going to take out of inventory, what packaway level -- I'm not sure if you said, what packaway level do you expect it to go to? And will you be recognizing all of the expense that you -- the entire expense that's sitting in inventory?

So David, so packaway levels, we have them planned down slightly, but still exceeding last year. So a piece of the deferred comps will come through but not all the comp. David Mann - Johnson Rice & Company, L.L.C.: And then how much additional costs might there be that we'll need to take into account for third and fourth quarter?

It all depends of where packaway levels go. So we'll have to see where that goes. David Mann - Johnson Rice & Company, L.L.C.: I guess if we assume that they went back to historical levels, how much additional cost, distribution cost, is sitting in inventory?

David, that's a more difficult question to answer. To go the other way in the second quarter of last year, when packaway levels went up. We deferred about $0.04 or $0.05 on those costs so we could probably get at that way. Michael O'Sullivan: Also, you have to be careful with your historic levels, David. Because if you compare with 4 or 5 years ago, our packaway levels are at historical levels already. If you compare it with last year, obviously, they're higher than last year, so. David Mann - Johnson Rice & Company, L.L.C.: So is there a chance, in your view, that we may see an extended period where packaway levels are at a higher than -- stay at these heightened levels? Michael O'Sullivan: No. It's very unpredictable. Frankly, we'd like if the answer was yes, but it's unpredictable. So it's hard to say.

Your next question comes from the line of Dana Telsey from Telsey Advisory Group. Dana Telsey - Telsey Advisory Group: As we talk about the changes that have happened whether it's inventory and, obviously, the good of this expense planning that you've done, how do you think about future targets for the business where operating margins can go over the long-term, and how are you feeling about the potential for dd's and what that store count should look like over the long term? Michael O'Sullivan: Let's see, in terms of long-term target, I think we feel very happy with our long-term goal of 10% to 15% EPS growth each year. Now, within that, I think the margin level, we think our current margins are sustainable. Maybe we can squeeze a little bit more out -- I think that's -- either way, I think we'll end up with 10% to 15% EPS growth. Now, separately on dd's, I think we've said that we think dd's can get to be a 500 store chain. Dana Telsey - Telsey Advisory Group: And just on that operating margin side?

So on the operating margin side, Dana, we do believe that we're sustainable at the current level. The biggest driver of any improvement in operating margins is typically a better than planned sales on top line like we saw during the first quarter. So we if we can out-achieve, overachieve our sales targets, we should see some of that drop to the bottom.

Your next question comes from the line of Dave Weiner from Deutsche Bank. David Weiner - Deutsche Bank AG: So all my questions have been asked, but I guess I'll ask one on pricing. One of your answers, and a couple of answers you talked about how you're constantly in this field checking competitor pricing. Have you actually seen for comparable prices, for comparable merchandise, competitor prices go up yet or maybe a little last month or 2? I know you're talking about kind of what's on the comp in the back half of the year, but how about over the last couple of months?

We've seen experimentation in mainstream retail of price increases. David Weiner - Deutsche Bank AG: So is that mostly within Apparel, within Apparel categories, or does that extend to Home as well? Michael O'Sullivan: No, that was all on apparel. David Weiner - Deutsche Bank AG: All apparel. Okay. And then would you say experimentation, they're trying on kind of very limited SKUs and then we'll see where that takes us in the back half, or they're kind of sticking with those price increases?

No, I think what we've seen, and it varies, in some cases, we've seen them experiment on the ticket and POS deeper. So they're going out the door at the same price. And in other cases we've seen people stick with it a little longer. So it's not clear who's going to do what and when and how. David Weiner - Deutsche Bank AG: And just one last, and this maybe kind of a minutia, but I'll ask it anyway, if on the price increases that you've seen that have kind of, have been sustained on those products, is that enough to cover what you think the general cost increases are? Or even if these current price increases stick, we're still going to be short coming into the second and the third quarters of what cost increases would be?

If I fully have the question, where we saw people experimenting with price, they were experimenting at a retail that was consistent with their expected price increases.

There are no further questions at this time. I'll turn it back for closing comments.

Thank you 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.