This section and other parts of this Form 10-Q contain forward-looking statements that involve risks and uncertainties. Our actual results may differ materially from the results discussed in the forward-looking statements. Factors that might cause such differences include, but are not limited to, those discussed in Part II, Item 1A (Risk Factors) below. The following discussion should be read in conjunction with the condensed consolidated financial statements and notes thereto included elsewhere in this Quarterly Report on Form 10-Q and the consolidated financial statements and notes thereto in our Annual Report on Form 10-K for 2008. All information is based on our fiscal calendar.

Overview

We are the second largest off-price apparel and home goods retailer in the United States. As of May 2, 2009, we operated 922 Ross Dress for Less ("Ross") locations in 27 states and Guam, and 52 dd's DISCOUNTS stores in four states. Ross offers first-quality, in-season, name-brand and designer apparel, accessories, footwear and home fashions at everyday savings of 20% to 60% off department and specialty store regular prices. dd's DISCOUNTS features a more moderately-priced assortment of first-quality, in-season, name-brand apparel, accessories, footwear and home fashions at everyday savings of 20% to 70% off moderate department and discount store regular prices.

Our primary objective is to pursue and refine our existing off-price strategies to drive gains in profitability and improved financial returns over the long term. In establishing appropriate growth targets for our business, we closely monitor market share trends for the off-price industry. Total aggregate sales for the five largest off-price retailers in the United States increased 3% during 2008 on top of a 6% increase in 2007. This compares to total national apparel sales which declined 4% during 2008 compared to a 4% increase in 2007, according to data published by the NPD Group, which provides global sales and marketing information on the retail industry.

We believe that the stronger relative sales gains of the off-price retailers during 2008 reflected the increasing importance of value to consumers, especially as the recessionary headwinds accelerated. Our sales and earnings gains benefited from efficient execution of our resilient and flexible off-price business model. Our merchandise and operational strategies are designed to take advantage of the expanding market share of the off-price industry as well as continued customer demand for name-brand fashions for the family and home at compelling everyday discounts.

We expect the macro-economic pressures to continue, and are planning to maintain tight controls of both inventory levels and operating expenses as part of our strategy to help us maximize our profitability.

Results of Operations

The following table summarizes the financial results for the three month periods
ended May 2, 2009 and May 3, 2008:

                                                        Three Months Ended
                                                May 2, 2009         May 3, 2008
    Sales
       Sales (millions)                         $      1,692        $      1,556
       Sales growth                                      8.7 %              10.3 %
       Comparable store sales growth                       3 %                 3 %

    Costs and expenses (as a percent of sales)
       Cost of goods sold                               75.0 %              75.9 %
       Selling, general and administrative              16.1 %              15.9 %
       Interest expense (income), net                    0.1 %             (0.1) %

    Earnings before taxes                                8.8 %               8.3 %

    Net earnings                                         5.4 %               5.1 %

Stores. Our expansion strategy is to open additional stores based on market penetration, local demographic characteristics, competition, expected store profitability, and the ability to leverage overhead expenses. We continually evaluate opportunistic real estate acquisitions and opportunities for potential new store locations. We also evaluate our current store locations and determine store closures based on similar criteria.

                                                   Three Months Ended
                                               May 2, 2009     May 3, 2008
         Stores at the beginning of the period         956             890
         Stores opened in the period                    19              28
         Stores closed in the period                   (1)               -
         Stores at the end of the period               974             918

Sales. Sales for the three month period ended May 2, 2009 increased $135 million, or 8.7%, compared to the three month period ended May 3, 2008, due to the addition of 56 net new stores opened between May 3, 2008 and May 2, 2009 and an increase in "comparable" store sales (defined as stores that have been open for more than 14 complete months). For the three month period ended May 2, 2009, comparable store sales grew 3% on top of a 3% increase for the three month period ended May 3, 2008.

                                                            Three Months Ended
                                                     May 2, 2009       May 3, 2008
 Ladies                                                       33 %              33 %
 Home accents and bed and bath                                22 %              22 %
 Men's                                                        12 %              14 %
 Shoes                                                        12 %              12 %
 Accessories, lingerie, fine jewelry, and fragrances          12 %              11 %
 Children's                                                    9 %               8 %
    Total                                                    100 %             100 %

We expect to address the competitive climate for off-price apparel and home goods by pursuing and refining our existing strategies and by continuing to strengthen our organization, to diversify our merchandise mix, and to more fully develop our organization and systems to improve regional and local merchandise offerings. Although our strategies and store expansion program contributed to sales gains for the three month period ended May 2, 2009, we cannot be sure that they will result in a continuation of sales growth or in an increase in net earnings.

Cost of goods sold. Cost of goods sold for the three month period ended May 2, 2009 increased $87.2 million compared to the same period in the prior year mainly due to increased sales from the opening of 56 net new stores between May 3, 2008 and May 2, 2009 and an increase in comparable store sales.

Cost of goods sold as a percentage of sales for the three month period ended May 2, 2009 decreased approximately 90 basis points from the same period in the prior year. This improvement was driven primarily by a 65 basis point increase in merchandise gross margin, a 65 basis point reduction in freight costs, and occupancy expense that levered by about 20 basis points. These improvements were partially offset by a 55 basis point increase in buying and incentive costs and a 5 basis point increase in distribution expenses.

We cannot be sure that the gross profit margins realized for the three month period ended May 2, 2009 will continue in the future.

Selling, general and administrative expenses. For the three month period ended May 2, 2009, selling, general and administrative expenses increased $24.4 million compared to the same period in the prior year, mainly due to increased store operating costs reflecting the opening of 56 net new stores between May 3, 2008 and May 2, 2009.

Selling, general and administrative expenses as a percentage of sales for the three month period ended May 2, 2009 grew by approximately 15 basis points over the same period in the prior year. This increase was primarily the result of the 30 basis point benefit in the prior year's first quarter related to a gain recognized from a lease settlement. Without that benefit, the first three months of 2009 had a combined 15 basis point decrease in store operating and general and administrative costs as a percent of sales versus the prior year period.

Interest expense (income), net. Net interest expense increased for the three month period ended May 2, 2009 by approximately $3.3 million compared to the same period in the prior year primarily due to lower interest rates on cash and investments.

Taxes on earnings. Our effective tax rate for the three month periods ended May 2, 2009 and May 3, 2008 was approximately 39% and 38%, respectively, which represents the applicable combined federal and state statutory rates reduced by the federal benefit of state taxes deductible on federal returns. The effective rate is affected by changes in law, location of new stores, level of earnings and the result of tax positions with various taxing authorities. We anticipate that our effective tax rate for fiscal 2009 will be in the range of 38% to 40%.

Financial Condition

Liquidity and Capital Resources

Our primary sources of funds for our business activities are cash flows from
operations and short-term trade credit. Our primary ongoing cash requirements
are for merchandise inventory purchases, capital expenditures in connection with
opening new stores, and investments in distribution centers and information
systems. We also use cash to repurchase stock under our stock repurchase program
and to pay dividends.

                                                 Three Months Ended
 ($000)                                      May 2, 2009     May 3, 2008
 Cash flows provided by operating activities    $240,732        $160,835

 Cash flows used in investing activities        (29,327)        (39,332)

 Cash flows used in financing activities        (73,458)        (73,279)

 Net increase in cash and cash equivalents      $137,947       $  48,224

Operating Activities

Net cash provided by operating activities was $240.7 million for the three month period ended May 2, 2009 compared to $160.8 million for the three month period ended May 3, 2008. The primary source of cash provided by operating activities for the three month periods ended May 2, 2009 and May 3, 2008 was accounts payable and net earnings plus non-cash expenses for depreciation and amortization. The increase in cash flow from operating activities for the three month period ended May 2, 2009 primarily resulted from an increase in accounts payable leverage as a result of faster inventory turns. Accounts payable leverage (defined as accounts payable divided by merchandise inventory) was 61% as of January 31, 2009 and increased to 74% as of May 2, 2009. Accounts payable leverage was 64% as of May 3, 2008.

Working capital (defined as current assets less current liabilities) was $418.4 million as of May 2, 2009, compared to $418.7 million as of May 3, 2008. Our primary source of liquidity is the sale of our merchandise inventory. We regularly review the age and condition of our merchandise and are able to maintain current merchandise inventory in our stores through replenishment processes and liquidation of slower-moving merchandise through clearance markdowns.

Investing Activities

During the three month periods ended May 2, 2009 and May 3, 2008, our capital expenditures were approximately $33.9 million and $42.3 million, respectively. Our capital expenditures included fixtures and leasehold improvements to open new stores, implement information technology systems, build or expand distribution centers and install material handling equipment and related distribution center systems, and various other expenditures related to our stores, buying, and corporate offices. We opened 19 and 28 new stores on a gross basis during the three month periods ended May 2, 2009 and May 3, 2008, respectively.

We are forecasting approximately $190 million in capital requirements in fiscal year 2009 to fund expenditures for fixtures and leasehold improvements to open new Ross and dd's DISCOUNTS stores, for the relocation or upgrade of existing stores, for investments in store and merchandising systems, buildings, equipment and systems, and for various buying and corporate office expenditures. We expect to fund these expenditures with cash flows from operations.

During the three month periods ended May 2, 2009 and May 3, 2008, our liquidity and capital requirements were provided by available cash, cash flows from operations, and trade credit. Our buying offices, our corporate headquarters, one distribution center, one trailer parking lot, three warehouse facilities, and all but two of our store locations are leased and, except for certain leasehold improvements and equipment, do not represent capital investments. We own one distribution center in each of the following cities: Carlisle, Pennsylvania, Moreno Valley, California, and Fort Mill, South Carolina, and one warehouse facility in Fort Mill, South Carolina.

In January 2008, our Board of Directors approved a two-year $600.0 million stock repurchase program for fiscal 2008 and 2009. We repurchased 2.2 million shares of common stock for an aggregate purchase price of approximately $77.2 million during the three month period ended May 2, 2009. We repurchased 2.5 million shares of common stock for approximately $77.2 million during the three month period ended May 3, 2008.

For the three month periods ended May 2, 2009 and May 3, 2008, dividends paid were $14.0 million and $12.5 million, respectively.

Short-term trade credit represents a significant source of financing for merchandise inventory. Trade credit arises from customary payment terms and trade practices with our vendors. We regularly review the adequacy of credit available to us from all sources and expect to be able to maintain adequate trade, bank, and other credit lines to meet our capital and liquidity requirements, including lease payment obligations in 2009.

Our $600 million credit facility remains in place and available as of May 2, 2009 and expires in July 2011.

We estimate that cash flows from operations, bank credit lines, and trade credit are adequate to meet operating cash needs, fund our planned capital investments, repurchase common stock, and make quarterly dividend payments for at least the next twelve months.

Contractual Obligations

The table below presents our significant contractual obligations as of May 2,
2009:

 ($000)                                      Less
                                           than 1         1 - 3         3 - 5       After 5
 Contractual Obligations                     Year         Years         Years         Years          Total1
 Senior notes                         $        --     $      --     $      --     $ 150,000     $   150,000
 Interest payment obligations               9,667        19,335        19,335        59,863         108,200
 Capital leases                               389           195            --            --             584
 Operating leases:
    Rent obligations                      343,070       627,656       483,283       493,280       1,947,289
    Synthetic leases                        5,837         8,909         1,023            --          15,769
    Other synthetic lease obligations       3,193           714        56,000            --          59,907
 Purchase obligations                   1,043,969           210            --            --       1,044,179
 Total contractual obligations        $ 1,406,125     $ 657,019     $ 559,641     $ 703,143     $ 3,325,928

1Pursuant to the guidelines of FIN 48, a $26.5 million reserve for unrecognized tax benefits is included in other long-term liabilities on our condensed consolidated balance sheet. These obligations are excluded from the schedule above as the timing of payments cannot be reasonably estimated.

Senior notes. We have a Note Purchase Agreement with various institutional investors for $150 million of unsecured, senior notes. The notes were issued in two series and funding occurred in December 2006. The Series A notes totaling $85 million are due in December 2018 and bear interest at a rate of 6.38%. The Series B notes totaling $65 million are due in December 2021 and bear interest at a rate of 6.53%. Interest on these notes is included in Interest payment obligations in the table above.

Borrowings under these notes are subject to certain operating and financial covenants, including maintaining certain interest coverage and other financial ratios. As of May 2, 2009, we were in compliance with these covenants.

Capital leases. The obligations under capital leases relate to distribution center equipment and have a term of two years.

Off-Balance Sheet Arrangements

Operating leases. We lease our two buying offices, our corporate headquarters, one distribution center, one trailer parking lot, three warehouse facilities, and all but two of our store locations. Except for certain leasehold improvements and equipment, these leased locations do not represent long-term capital investments.

We have lease arrangements for certain equipment in our stores for our point-of-sale ("POS") hardware and software systems. These leases are accounted for as operating leases for financial reporting purposes. The initial terms of these leases are either two or three years, and we typically have options to renew the leases for two to three one-year periods. Alternatively, we may purchase or return the equipment at the end of the initial or each renewal term. We have guaranteed the value of the equipment of $3.9 million at the end of the respective initial lease terms, which is included in Other synthetic lease obligations in the table above.

We lease approximately 161,000 and 15,000 square feet of office space for our New York City and Los Angeles buying offices, respectively. The lease terms for these facilities expire in 2015 and 2011, respectively. The lease term for the New York office contains a renewal provision.

We lease a 1.3 million square foot distribution center in Perris, California. The land and building for this distribution center are financed under a $70 million ten-year synthetic lease that expires in July 2013. Rent expense on this center is payable monthly at a fixed annual rate of 5.8% on the lease balance of $70 million. At the end of the lease term, we have the option to either refinance the $70 million synthetic lease facility, purchase the distribution center at the amount of the then-outstanding lease obligation, or arrange a sale of the distribution center to a third party. If the distribution center is sold to a third party for less than $70 million, we have agreed under a residual value guarantee to pay the lessor any shortfall amount up to $56 million. Our contractual obligation of $56 million is included in Other synthetic lease obligations in the above table.

In accordance with Financial Accounting Standards Board ("FASB") Interpretation ("FIN") No. 45, "Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others," we have recognized a liability and corresponding asset for the fair value of the residual value guarantee in the amount of $8.3 million for the Perris, California distribution center and $1.2 million for the POS leases. These residual value guarantees are being amortized on a straight-line basis over the original terms of the leases. The current portion of the related asset and liability is recorded in prepaid expenses and accrued expenses, respectively, and the long-term portion of the related assets and liabilities is recorded in other long-term assets and other long-term liabilities, respectively, in the accompanying condensed consolidated balance sheets.

In November 2001 we entered into a nine year lease for a 239,000 square foot warehouse and a ten-year lease for a 246,000 square foot warehouse, both in Carlisle, Pennsylvania. In January 2009, we exercised a three-year lease option for a 253,000 square foot warehouse in Fort Mill, South Carolina, extending the lease term to February 2013. In June 2008, we purchased a 423,000 square foot warehouse also in Fort Mill, South Carolina. All four of these properties are used to store our packaway inventory. We also lease a 10-acre parcel of land that has been developed for trailer parking adjacent to our Perris distribution center.

The synthetic lease facilities described above, as well as our revolving credit facility and senior notes, have covenant restrictions requiring us to maintain certain interest coverage and other financial ratios. In addition, the interest rates under these agreements may vary depending on actual interest coverage ratios achieved. As of May 2, 2009 we were in compliance with these covenants.

Purchase obligations. As of May 2, 2009 we had purchase obligations of $1,044.2 million. These purchase obligations primarily consist of merchandise inventory purchase orders, commitments related to store fixtures and supplies, and information technology service and maintenance contracts. Merchandise inventory purchase orders of $1,011.4 million are purchase obligations of less than one year as of May 2, 2009.

Commercial Credit Facilities

The table below presents our significant available commercial credit facilities
at May 2, 2009:

($000)                                  Amount of Commitment Expiration Per Period                 Total
                                 Less than                1 - 3        3 - 5        After 5       amount
Commercial Credit Commitments       1 year                years        years          years    committed
Revolving credit facility       $       --             $600,000      $    --      $      --     $600,000
   Total commercial commitments $       --             $600,000      $    --      $      --     $600,000

Revolving credit facility. We have available a $600 million revolving credit facility with our banks, which contains a $300 million sublimit for issuance of standby letters of credit, of which $227.7 million was available at May 2, 2009. This credit facility which expires in July 2011 has a LIBOR-based interest rate plus an applicable margin (currently 45 basis points) and is payable upon maturity but not less than quarterly. Our borrowing ability under this credit facility is subject to our maintaining certain financial ratios. As of May 2, 2009 we had no borrowings outstanding under this facility and were in compliance with the covenants.

Standby letters of credit. We use standby letters of credit to collateralize certain obligations related to our self-insured workers' compensation and general liability claims. We had $72.3 million and $58.8 million in standby letters of credit outstanding at May 2, 2009 and May 3, 2008, respectively.

Trade letters of credit. We had $25.3 million and $19.8 million in trade letters of credit outstanding at May 2, 2009 and May 3, 2008, respectively.

Dividends. In May 2009, our Board of Directors declared a cash dividend of $.11 per common share, payable on June 30, 2009. Our Board of Directors declared quarterly cash dividends of $.11 per common share in January 2009, and $.095 per common share in January, May, August, and November 2008.

Critical Accounting Policies

The preparation of our condensed consolidated financial statements requires our management to make estimates and assumptions that affect the reported amounts. These estimates and assumptions are evaluated on an ongoing basis and are based on historical experience and on various other factors that management believes to be reasonable. We believe the following critical accounting policies describe the more significant judgments and estimates used in the preparation of our condensed consolidated financial statements.

Merchandise inventory. Our merchandise inventory is stated at the lower of cost or market, with cost determined on a weighted average cost basis. We purchase manufacturer overruns and canceled orders both during and at the end of a season which are referred to as "packaway" inventory. Packaway inventory is purchased with the intent that it will be stored in our warehouses until a later date, which may even be the beginning of the same selling season in the following year.

Included in the carrying value of our merchandise inventory is a provision for shortage. The shortage reserve is based on historical shortage rates as evaluated through our periodic physical merchandise inventory counts and cycle counts. If actual market conditions, markdowns, or shortage are less favorable than those projected by us, or if sales of the merchandise inventory are more difficult than anticipated, additional merchandise inventory write-downs may be required.

Depreciation and amortization expense. Property and equipment are stated at cost, less accumulated depreciation and amortization. Depreciation is calculated using the straight-line method over the estimated useful life of the asset, typically ranging from five to twelve years for equipment and 20 to 40 years for real property. The cost of leasehold improvements is amortized over the lesser of the useful life of the asset or the applicable lease term. Lease accounting. When a lease contains "rent holidays" or requires fixed escalations of the minimum lease payments, we record rental expense on a straight-line basis over the term of the lease and the difference between the average rental amount charged to expense and the amount payable under the lease is recorded as deferred rent. We amortize deferred rent on a straight-line basis . . .