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With a market cap of $47.8 billion, Ross Stores, Inc. (ROST) is a leading off-price retailer in the U.S., operating Ross Dress for Less and dd's DISCOUNTS, which offer branded apparel, footwear, accessories, and home goods at 20% to 70% lower prices than department stores. Catering to middle- and moderate-income households, it focuses on providing quality fashion and home essentials at affordable prices.
Shares of the discount retailer have underperformed the broader market over the past 52 weeks. ROST has dipped marginally over this time frame, while the broader S&P 500 Index ($SPX) has rallied 20.8%. In addition, shares of ROST are down 6.1% on a YTD basis, compared to SPX’s 2.6% gain.
Focusing more closely, the Dublin, California-based company has also lagged behind the Consumer Discretionary Select Sector SPDR Fund’s (XLY) 27.5% return over the past 52 weeks.
Despite reporting weaker-than-expected Q3 total sales of $5.1 billion on Nov. 21, shares of ROST rose 2.2% the next day due to stronger-than-expected EPS of $1.48. Investors were encouraged by the company's 70-basis-point gross margin expansion to 28.3%, driven by lower freight and supply-chain costs, which helped offset softer sales. Additionally, Ross Stores raised its full-year EPS forecast to $6.10 - $6.17.
For the fiscal year, which ended in January 2025, analysts expect ROST’s EPS to grow nearly 11% year-over-year to $6.17. However, the company's earnings surprise history is promising. It topped the consensus estimates in the last four quarters.
Among the 21 analysts covering the stock, the consensus rating is a “Moderate Buy.” That’s based on 14 “Strong Buy” ratings and seven “Holds.”
This configuration is less bullish than three months ago, with 18 “Strong Buy” ratings on the stock.
On Nov. 23, 2024, Baird cut Ross Stores' price target to $175 but kept an “Outperform” rating, citing an EPS beat despite weather-related comp sales weakness. The firm noted improving trends and viewed the Q4 guidance as a sign of management’s confidence.
As of writing, ROST is trading below the mean price target of $171.63. The Street-high price target of $190 implies a potential upside of 32.7% from the current price levels.
