On Friday, Deutsche Bank increased its price target for shares of Ross Stores, Inc. (NASDAQ:ROST) to $175 from the previous target of $165, while reaffirming its Buy rating on the stock. The adjustment follows Ross Stores' announcement of significant top-line growth, an increase in profitability, and an upward revision of its full-year guidance.
Ross Stores reported a 4% comparable store sales increase, which marks a step up in two-year growth to 9% from 4%, surpassing the buy-side expectations of 3%. The company's second-quarter performance exceeded projections, and it has modestly raised its outlook for the second half of the year due to additional operational efficiencies.
Despite Ross Stores' efforts to fine-tune its value strategy, which has led to lower merchandise margins, the company has successfully enhanced productivity across its operations. This improvement has contributed to the bottom line, complementing the robust top-line growth.
The analyst noted that even with the updated guidance, the company's financial estimates remain conservative. This cautious approach positions Ross Stores to potentially outperform expectations for the remainder of the fiscal year. The report highlighted the effectiveness of the off-price retail model, particularly in the current economic environment, as demonstrated by Ross Stores and its peer, TJX Companies (NYSE:TJX), just the day before.
In conclusion, Deutsche Bank's revised price target reflects a positive outlook for Ross Stores, indicating confidence in the company's operational excellence and its ability to continue surpassing market expectations.
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