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Investing.com -- Ross Stores Inc rose about 2% to $132.55 in Wednesday’s pre‑market trade after Jefferies upgraded the off‑price retailer to Buy, saying its shares look cheap next to rivals and that profit margins should rebound over the next three years.
Analysts lifted its price target to $150, implying roughly 13% upside, and said Ross’s stock trades at about 19 times forward earnings, a six‑point discount to long‑time leader TJX Companies Inc (NYSE:TJX) and wider than its usual one‑point gap. Burlington (NYSE:BURL) sits near 22x.
Analyst wrote that same‑store sales could accelerate in the second half on “easy compares” and stronger women’s apparel and cosmetics ranges.
Jefferies forecasts third‑quarter comps of 3.3% versus Wall Street’s 2.5 % and sees 3.5% growth in the fourth quarter, then settling only slightly below the chain’s long‑term average of 3.8%.
Brokerage expects operating margin to expand about 170 basis points by fiscal 2027 as buying and occupancy costs leverage on mid‑single‑digit sales growth and last year’s investments in branded merchandise bear fruit.
Jefferies models EBIT margins at 11.5% in 2025, 12.4% in 2026 and 13.5% in 2027, approaching the pre‑pandemic norm even with an estimated 25–30 bp drag from new distribution projects and tariff costs.
Ross’s new chief executive, Michael Hartshorn, has been in the job only six months, leaving “more of the playbook still to be revealed,” Jefferies said.
About a quarter of revenue comes from home goods, giving the chain optionality if lower mortgage rates revive housing turnover.
Short interest stands roughly 10 basis points above the five‑year average, Jefferies added, but low investor expectations, consensus still assumes a year‑on‑year earnings dip, give the Dallas‑area retailer room to surprise as it narrows the valuation gap with larger peer TJX.