Ross Stores stock target cut to $135 by Jefferies

On Friday, Jefferies analyst Corey Tarlowe reduced the price target on Ross Stores, Inc. (NASDAQ: NASDAQ:ROST) to $135 from $145, while maintaining a Hold rating on the shares. The adjustment follows Ross Stores’ first-quarter earnings report, which showed improved comparable store sales as the quarter progressed. According to InvestingPro data, the stock appears to be trading near its Fair Value, with technical indicators suggesting overbought conditions. The company, currently valued at $50 billion, trades at a P/E ratio of 24.4x.

The company, known for its off-price retail offerings, is navigating challenges due to its significant reliance on Chinese imports, which account for over 50% of its inventory. This exposure is anticipated to pressure merchandise margins going forward. Despite these challenges, InvestingPro analysis shows Ross maintains strong financial health with a solid 32.7% gross profit margin and sufficient cash flows to cover its obligations.

Despite Ross Stores’ alignment with second-quarter comparable sales expectations, the company’s earnings per share (EPS) guidance fell short of consensus estimates. Additionally, Ross Stores has withdrawn its full-year guidance, reflecting uncertainty in the retail environment.

Tarlowe acknowledges that Ross Stores is positioned to attract value-conscious consumers but expresses a preference for competitors such as TJX Companies (NYSE:TJX) and Burlington Stores (NYSE:BURL). The revised price target of $135 down from $145 reflects these concerns and the anticipated impact on Ross Stores’ financial performance.

In other recent news, Ross Stores reported its first-quarter 2025 earnings, which slightly exceeded expectations on both earnings per share (EPS) and revenue. The company achieved an EPS of $1.47, surpassing the forecast of $1.43, while revenue reached $5 billion, beating the anticipated $4.94 billion. Despite these positive results, Ross Stores decided to withdraw its annual guidance due to macroeconomic uncertainties, which include potential tariff impacts. Inventory levels increased by 8%, raising concerns about potential markdown risks amidst inflationary pressures. The company 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. Analysts from firms such as JPMorgan and Citigroup (NYSE:C) inquired about the company’s strategies for mitigating tariff impacts and managing inventory levels, highlighting ongoing concerns in the retail sector. Ross Stores’ CEO, Jim Conroy, emphasized the company’s resilience and focus on providing high-quality branded merchandise at a great value.

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