Ross Stores Struggles to Keep Up with Market Growth
Retail Giant Faces Challenges Amid Increasing Competition
Ross Stores, Inc. (ROST), headquartered in Dublin, California, is a prominent off-price retailer known for its brands Ross Dress for Less and dd’s DISCOUNTS. With a market cap of $46.6 billion, Ross Stores offers a variety of designer clothes, accessories, footwear, and home décor at discounted rates.
Over the past year, Ross Stores’ shares have lagged significantly behind the broader market. ROST has risen just 14.1%, whereas the S&P 500 Index ($SPX) has surged nearly 32.3%. However, in 2024, ROST shares have increased by 2.9%, compared to the S&P 500’s 24.7% gain year-to-date.
In comparison to the SPDR S&P Retail ETF (XRT), ROST’s performance remains underwhelming. The XRT has grown approximately 27.4% over the past year and 9.9% in 2024.
Ross Stores faces significant challenges, primarily due to its dependence on physical store locations. This reliance exposes the company to the increasing trend of online shopping. Moreover, stiff competition among discount retailers has further tightened its profit margins and reduced market share.
Despite these difficulties, shares of Ross Stores rose by 1.8% following the release of its Q2 earnings report on August 23. The company announced $5.3 billion in total sales, representing a 7% increase from the previous year, with comparable store sales up by 4%, indicating improved customer engagement.
Looking ahead, analysts predict that ROST’s earnings per share (EPS) will rise by 10.1% to $6.12 for the current fiscal year, which ends in January 2025. Notably, Ross Stores has consistently exceeded earnings expectations, beating the consensus estimate for the last four quarters.
Among 21 analysts tracking ROST, the stock currently holds a consensus rating of “Strong Buy,” supported by 17 “Strong Buy” recommendations and four “Holds.”
This consensus rating reflects a slight decrease in optimism compared to a month ago when 18 analysts rated it a “Strong Buy.”
On November 14, Wells Fargo & Company (WFC) adjusted its price target for Ross Stores downward from $175 to $165. Despite this change, the firm continues to hold an “Overweight” rating on the retailer, suggesting confidence in Ross’s potential for growth.
The average price target of $173.74 implies a 22.1% potential increase from ROST’s current price. The highest price target of $190 indicates a possible upside of 33.5%.
On the date of publication, Kritika Sarmah did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information, please view the Barchart Disclosure Policy here.
The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.
