Analyst Peeks Into Ross Stores' Proven Theory To Brave Amazon's Threat To Retail Sector: Here's How

BMO Capital Markets analyst Simeon Siegel reiterated Outperform rating on Ross Stores, Inc. ROST, raising the price target to $127 from $113.

ROST has been a prime beneficiary of the shift from dept stores to off-price, Siegel notes. 

And with no e-commerce, a $10 average price point, and high cash tender, ROST has proven insulated from Amazon.Com, Inc.'s AMZN threat to retail, notes the analyst.

ROST recently reported street-beating performance in Q2, with comparable store sales up 5% YoY.

Siegel expects ROST to take share longer-term, recognizing challenging near-term macro dynamics on the company's target demographic.

2Q23 is only the second time in the last 11 quarters (post-COVID) that ROST guided EPS above Street at the high-end. 

Critically, ROST has beaten its high-end guides ~93% of the time since 1Q19. However, the recent track record against Street's preguidance estimate is less impressive, the analyst adds.

A comparison shows ROST nearly exactly matched TJX Companies, Inc. TJX on YoY sales growth, but TJX bested ROST on gross margins and EBIT (rate and YoY change). 

Based on the above, the analyst raised FY23 adjusted EPS estimate from $5.02 to $5.28. FY23 revenue estimate is raised from $19.845 billion to $20.07 billion.

For FY24, the analyst raised adjusted EPS estimate from $5.52 to $5.78. FY24 revenue estimate is raised from $20.67 billion to $21.05 billion.

Price Actions: ROST shares are trading higher by 5.05% to $118.77 on the last check Friday.