As we enter 2001, Ross Stores continues to be financially strong and solidly positioned as the second largest off-price retailer in the country. Importantly, during 2000, we continued to invest in our business to create the solid infrastructure necessary to support our plans for accelerated growth in the coming years.

Like many retailers, our performance in 2000 was affected by a slowing economy that increased competition throughout the sector. Nonetheless, we still were able to deliver earnings per share growth during 2000 in the high single digits. In addition, healthy cash flows provided the funds for continued store growth, significant share repurchases and an increase in our dividend payout, resulting in a competitive return on average equity of 32%.


Fiscal 2000 Operating Results


Earnings per share for the 53 weeks ended February 3, 2001 grew 7% to $1.82, from $1.70 in pro forma earnings per share for the 52 weeks ended January 29, 2000. Net earnings for fiscal 2000 totaled $151.8 million, compared to pro forma net earnings of $155.6 million for fiscal 1999. Sales for fiscal 2000 grew 10% to $2.7 billion, with comparable store sales up 1% on top of a 6% increase in the prior year. The 53rd week added $40 million in revenue and $.07 in earnings per share to fourth quarter and fiscal 2000 results. Fiscal 1999 results are reported pro forma for the exclusion of a non-recurring pre-tax litigation charge of $9.0 million, or $.06 per share.


Great Brands - Great Prices - Everyday!


Business in fiscal 2000 began on a healthy note. First quarter same store sales increased 7% and earnings per share grew 27%. Our sales and earnings momentum softened abruptly, however, beginning in May - at the same time consumer spending slowed and department stores increased their promotional activity to clear inventories. In an effort to be more competitive, we shifted our merchandise assortments to include a higher proportion of lower price point goods. As an unintended consequence, our brand content got out of balance, with too many regional brands or second tier labels that lacked national recognition with our customers.

The key to success in our business is offering customers compelling values in the form of great brands at great prices - everyday of the week. Over the past several months, we have been working diligently to create more compelling assortments of fresh and exciting national name-brand fashions at competitive discounts for the family and the home. We expect to see substantial improvement in our brand content in the second quarter of 2001.


Strong Cash Flows Fund Growth


The strong cash flows we generated in fiscal 2000 enabled the company to fund store growth and return capital to stockholders in the form of share repurchases and higher dividends. Capital expenditures in 2000 totaled approximately $82.1 million as the company opened 34 new stores, relocated six existing stores, refurbished and updated another 74 stores, remodeled or expanded 15 locations, and increased the areas for our non-apparel businesses in many stores.

We are especially pleased with the strong returns we were able to sustain in 2000 - with return on average stockholders' equity of 32% and return on average assets of 16%. These healthy returns benefited from the repurchase of 10.1 million shares of common stock during the year at an aggregate cost of $169 million. These shares were bought under a two-year $300 million repurchase program authorized by the Board of Directors in January 2000. We funded the buyback with cash from operations and a modest amount of debt, ending the year with $30 million in long-term borrowings, or a long-term debt to total capitalization ratio of 6%. In addition, the Board of Directors approved a 13% increase in the quarterly cash dividend payment for fiscal 2001. These actions reflect our ongoing commitment to enhancing stockholder returns.

We strengthened the management team with the addition of Jim Peters, who joined the company as President and Chief Operating Officer in August 2000. Prior to Ross, he was President of U.S. Stores for Staples. We believe that his in-depth business knowledge and solid retail management experience across a broad base of operational functions for successful, fast-growing retailers will be important resources for Ross Stores as we continue to pursue initiatives to enhance our growth and build stockholder value.

Looking ahead, we see exciting opportunities, and we are making the infrastructure investments necessary to position the company for accelerated growth in 2001 and beyond. These initiatives are discussed in further detail in the following business update.

In closing, we extend our thanks to all of our stockholders, employees and customers for their support. In particular, our appreciation goes out to each of our valued associates for their ongoing commitment and dedication. Their contributions are the number one driver of our past success and one of our biggest resources as we look to future growth opportunities.



Sincerely,

MICHAEL BALMUTH Vice Chairman and Chief Executive Officer	JAMES C. PETERS President and Chief Operating Officer	NORMAN A. FERBER Chairman of the Board