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Ross Stores Earnings: What Wall Street Is Saying

Ross Stores shares were lower after the discount retailer's guidance disappointed investors.
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Shares of Ross Stores  (ROST) - Get Free Report dropped on Friday after the discount retailer's third-quarter outlook disappointed investors. 

Wall Street's analysts weighed in on the Dublin, Calif., company's second quarter and guidance.

Analysts at Cowen maintained an outperform rating while lowering Ross's price target to $144 a share from $147. 

"Second-half guidance is conservative but implies a swing in [earnings before interest and taxes] margin from slight expansion in first-half 2021 vs. fiscal 2019 to [3 percentage points-plus] of contraction in second-half 2021 given higher supply-chain inflation," Cowen analyst John Kernan said. 

That outlook contrasts with consensus estimates for  (TJX) - Get Free Report, which didn't provide guidance, and Burlington Stores  (BURL) - Get Free Report, which in May said it expected EBIT margin to contract 0.2 to 0.3 percentage point due to faster freight and supply-chain costs, according to Kernan. 

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Wells Fargo analyst Ike Boruchow affirmed an overweight rating and $135 price target on Ross Stores. "Robust" second-quarter results were "far surpassing" company sales and margin guidance, but there is room for concern as management took a "highly cautious tone" on the rest of the year. 

"We get it, [the second half] has headwinds -- but we view this second-half outlook as a tad overly conservative following such a strong second quarter -- not an atypical approach for this management team," Boruchow said. 

Jefferies analyst Janine Stichter maintained her hold rating and $131 price target as she also said third-quarter guidance was soft but "typical" of the company's conservative style.

 The company's off-price inventory is a "long-term secular winner," but she still prefers TJX and Burlington, "where we see more significant growth and margin opportunities over the near- and long-term."

Ross Stores shares at last check were 3.5% lower at $122.10.