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On Thursday, Bernstein analysts adjusted their outlook on Ross Stores, Inc. (NASDAQ:ROST), reducing the price target from $163.00 to $147.00, while maintaining a Market Perform rating on the stock. The new price target reflects a more cautious stance on the discount retailer’s growth prospects amid a challenging retail environment. According to InvestingPro data, the stock is currently trading near its 52-week low at $125.95, with analyst targets ranging from $127 to $188.
Ross Stores’ new CEO, Jim Conroy, was recently appointed to spearhead strategic growth in a business landscape that is showing signs of maturity and a slowdown. Bernstein analysts highlighted Conroy’s unique background, noting he was chosen not for his experience in Buying or Off-price sectors, but for his ability to drive strategic expansion. The company, currently valued at $41.55 billion, faces the challenge of maintaining its modest revenue growth, which stood at 3.69% in the last twelve months.
The analysts expressed approval of the immediate steps Conroy is taking to enhance customer acquisition, conversion, and average basket size. However, they emphasized the need for Ross Stores to achieve significant long-term growth to maintain an earnings per share (EPS) algorithm above 10%. The company is currently grappling with stagnant comparable store growth and decelerating sales densities, particularly as new stores are opening in less productive, newer markets. InvestingPro analysis indicates the stock trades at a P/E ratio of 19.95x, which appears high relative to its near-term earnings growth prospects.
Conroy, with his extensive retail experience, is seen as a "more balanced" CEO who can apply a strategic perspective to the company’s growth on various fronts. Despite this, the analysts have reduced their forecast for Ross Stores’ fiscal year 2026 EPS to $7.37, a 4-cent decrease from previous estimates. They also adjusted the target multiple from 22x to 20x, taking into account the potential for Ross’s core consumers to reduce discretionary spending due to higher inflation, which could negate some or all of the anticipated uplift in comparable store sales.
The report concludes with a reiterated Market Perform rating and a revised price target of $147, suggesting that Bernstein analysts are taking a wait-and-see approach to the discount retailer’s ability to navigate the headwinds and capitalize on its strategic initiatives under the new leadership. For deeper insights into Ross Stores’ financial health, valuation metrics, and growth prospects, investors can access the comprehensive Pro Research Report available exclusively on InvestingPro, which covers over 1,400 top US stocks with expert analysis and actionable intelligence.
In other recent news, Ross Stores, Inc. reported revenues of $21.1 billion for fiscal 2024, continuing its expansion with the addition of 19 new stores across 14 states. The company plans to open approximately 90 new locations this year, primarily focusing on Ross Dress for Less outlets. Despite these developments, several analysts have adjusted their price targets for Ross Stores. UBS decreased its price target to $163, maintaining a Neutral rating, citing economic pressures on the company’s core customer base. TD Cowen also lowered its target to $169 but retained a Buy rating, noting the company’s consistent same-store sales growth outside the COVID-19 years. Bernstein adjusted its target to $163, maintaining a Market Perform rating, as it awaits further strategic details from Ross Stores’ new CEO. Meanwhile, Telsey Advisory Group reduced its target to $150, maintaining a Market Perform rating, due to sales concerns despite better-than-expected expense management. These revisions reflect cautious optimism about Ross Stores’ ability to navigate current economic challenges while continuing its growth trajectory.
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