Ross Stores Earns Jefferies Upgrade On Expected Sales Acceleration, Margin Growth

Jefferies on Wednesday upgraded Ross Stores’ (ROST) stock to Buy from Hold as the off-price retailer is “well-positioned” to outperform, along with strong margins for over the next three years.

Ross Stores shares were up about 2% in pre-market trading. As of Tuesday’s close, the stock has declined by 14% year-to-date.

Jefferies raised its price target on Ross Stores stock to $150 from $135, according to The Fly. The retailer’s comparable sales should accelerate through the end of the year, and earnings before interest and taxes (EBIT) should expand by 170 basis points over the next three years, Jefferies analyst Corey Tarlowe said.

Off-price retailers such as Ross and TJX Cos (TJX) are expected to benefit from customers trading down to buy cheaper clothing and footwear as U.S. President Donald Trump’s tariffs have risked price increases on everything from apparel to handbags.

These companies typically purchase clothing and footwear from other retailers and manufacturers during the traditionally off-season, at a significantly lower price. The items are then sold at their stores at a discount of up to 60%.

Stocktwits data showed retail sentiment on Ross was ‘bullish’ over the past week, compared to the ‘bearish’ sentiment a month ago.

Ross, however, withdrew its annual forecasts in May due to tariffs, which could impact its profits. The company also stated it was taking a cautious stance, given the changes in consumer buying behavior.

“Despite the underlying health of the business, we have limited visibility on how customer demand may evolve over the balance of the year, given prolonged inflation, deteriorating consumer sentiment, and still elevated and potentially fluctuating tariff levels,” CEO James Conroy said on a post-earnings call in May.

To further shield itself, Conray said the company would have to increase prices as more than half of the products it sells originate in China.

“While we directly import only a small portion of our merchandise, more than half of the total merchandise that we sell originates in China,” he added.

For updates and corrections, email newsroom[at]stocktwits[dot]com.

Also See: Greenbrier Stock Races Ahead In Premarket Trade After Upbeat Q3 Revenue