Trump to visit Fed on Thursday amid Powell feud, renovation probe
On Saturday, Bernstein analysts maintained a Market Perform rating for Ross Stores, Inc. (NASDAQ:ROST) with a steady price target of $147.00. The retailer, currently valued at $45.1 billion, has demonstrated strong fundamental strength with a perfect Piotroski Score of 9 according to InvestingPro data. The focus of their assessment was on the impact of tariffs on the retailer’s financial performance, which comes at a time when the stock has experienced a notable 10.2% decline over the past week. Bernstein pointed out that, despite Ross Stores posting a quarter that met expectations and providing a positive outlook for second-quarter comparable sales, the results were marred by the effects of tariffs on profit margins and consumer demand.
The analysts noted that Ross Stores forecasted a significant headwind to gross margins in the second quarter, between 90 to 120 basis points, due to tariffs. This pressure on margins comes as the company maintains a gross profit margin of 32.7%. This adverse impact stems not only from the direct costs of imported goods affected by tariffs but also from increased use of packaway inventory—which incurs additional handling costs—and the expenses of re-ticketing items as tariff rates fluctuated. For deeper insights into Ross Stores’ financial metrics and comprehensive analysis, investors can access the full Pro Research Report available on InvestingPro, which covers over 1,400 US stocks. Furthermore, Ross Stores’ heavy reliance on imports from China was highlighted as a contributing factor.
Comparatively, Bernstein mentioned that TJX Companies (NYSE:TJX), a competitor, projected a much smaller tariff-related headwind of 35 basis points. This difference was attributed to TJX’s greater leverage in vendor negotiations and their ability to swiftly adjust and diversify their supply chain, capabilities that Ross Stores may lack.
Bernstein expressed skepticism regarding Ross Stores’ strategy to implement price increases in the second half of the year, questioning the retailer’s capacity to do so without negatively affecting sales volumes. Given the current soft demand environment and the retailer’s focus on cost-conscious consumers, the analysts are doubtful that Ross Stores can successfully manage price hikes without diminishing the potential benefits of gaining market share from customers trading down. Despite these challenges, the company maintains strong financial health metrics, with current assets exceeding short-term obligations at a ratio of 1.55x.
In other recent news, Ross Stores reported its first-quarter 2025 earnings, surpassing analyst expectations with earnings per share (EPS) of $1.47 compared to a forecast of $1.43, and revenue reaching $5 billion against a predicted $4.94 billion. Despite this positive performance, the company withdrew its annual guidance due to macroeconomic uncertainties, including potential impacts from tariffs. Additionally, inventory levels saw an 8% increase, raising concerns amid inflationary pressures. Analyst Corey Tarlowe from Jefferies adjusted Ross Stores’ stock target down to $135 from $145, maintaining a Hold rating, citing challenges due to the company’s reliance on Chinese imports. The company’s EPS guidance for the second quarter is projected to be between $1.40 and $1.55, with comparable store sales expected to be flat to up 3%. Ross Stores opened 16 new Ross locations and three dd’s discount stores in the first quarter, with plans to open approximately 90 new stores this year. The company is navigating supply chain disruptions and inflationary pressures while focusing on providing high-quality branded merchandise at great value.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.