Ross Stores Inc. (ROST) just reminded Wall Street why off-price retail can be such a beautiful business model. The discount retailer crushed third-quarter expectations Thursday, sending shares soaring over 7% in Friday trading as analysts rushed to boost their price targets.
The numbers tell a pretty compelling story. Ross Stores posted earnings of $1.58 per share, comfortably ahead of the $1.42 consensus estimate. But the real surprise came from same-store sales, which jumped 7% when analysts were expecting something closer to 4.5%. That's the kind of beat that gets attention.
What the Analysts Are Saying
JPMorgan's Matthew Boss stayed Overweight on the stock while bumping his price target from $188 to $200. He noted that gross margins contracted 30 basis points year-over-year to 28.0%, but even that came in better than the 27.2% Street estimate. Total sales hit $5.60 billion, topping consensus of $5.42 billion.
The really interesting part? Management cited "a broad-based acceleration across all major merchandise categories, all regions, and all demographics." That's not just one thing working—that's everything working. Ross raised its fourth-quarter same-store sales outlook to 3%-4% from a prior 2%-3%, while guiding to Q4 earnings of $1.77-$1.85 per share.
Telsey Advisory Group's Dana Telsey maintained a Market Perform rating but raised the price target from $160 to $175. He pointed out that the 7% comps growth significantly outpaced last year's 1% and the company's own 2%-3% guidance range. Management also lifted full-year earnings guidance to $6.38-$6.46 per share from $6.08-$6.21.
Still, Telsey added a note of caution: "The company's core lower-income customer continues to experience increased pressure from recent policy shifts that have weighed on consumer confidence and spending and an ever changing macro landscape makes visibility to consistent improvement challenging."
BofA Securities analyst Lorraine Hutchinson reaffirmed her Buy rating and raised the price target from $175 to $200. She credited the quarter's performance to improved assortment and store investments. Hutchinson was particularly encouraged by "the continued sequential improvement in the ladies business, which is benefitting the most from ROST's F24 gross margin investment to elevate its branded penetration."
The fourth-quarter guidance came in ahead of expectations across the board, giving investors confidence that the momentum isn't just a one-quarter wonder. When a retailer is firing on all cylinders like this—better traffic, better merchandise mix, better margins than feared—it tends to attract attention from the bulls.
