ROST: Off Price Momentum And Margin Discipline Will Support Balanced Returns Ahead

Analysts have modestly raised their fair value estimate for Ross Stores to about $183 from roughly $178, citing solid Q3 beat and raise performance, improving revenue growth and margins, and a richer anticipated future P/E multiple within an increasingly favored off price retail backdrop.

Analyst Commentary

Street research following the Q3 print reflects a largely constructive stance on Ross Stores, with several firms lifting price targets into the high $170s to low $180s range and at least one major bank moving above $200, supporting the modest increase in fair value.

Bullish analysts highlight that the company is executing well on accelerating comparable sales and margin expansion, which underpins expectations for sustained earnings growth and justifies a richer valuation multiple relative to its historical range and off price peers.

More cautious voices acknowledge Ross Stores' strengths but flag macro and customer specific headwinds that could cap upside to both growth and multiple expansion if trends slow or volatility in lower income spending persists.

Bullish Takeaways

• Q3 was characterized as a clean beat, with comparable sales growth around the mid single digits and broad based strength. This reinforced confidence in Ross Stores' ability to drive traffic and ticket despite a choppy consumer backdrop.
• Multiple firms raised price targets into the $175 to low $180s range, while JPMorgan moved to $200. This signaled conviction that current earnings power and execution warrant a premium within the off price group.
• Margin expansion is viewed as a key pillar of the bull case. Disciplined expense management and favorable merchandise margins are supporting upward revisions to earnings estimates and fair value.
• Bullish analysts see Ross Stores as a top pick in off price. They cite its ability to capture trade down demand from value seeking lower to middle income shoppers and to compound growth via continued store expansion.

Bearish Takeaways

• Bearish analysts, while acknowledging solid execution, maintain more restrained ratings. They argue that the core lower income customer is under pressure from policy shifts and weaker confidence, which could limit visibility into consistent comp growth.
• Some see the macro environment as ever changing and uncertain. This makes it harder to underwrite a straight line trajectory for sales and earnings and thus tempers enthusiasm for aggressive multiple expansion from current levels.
• Neutral stances emphasize that the latest quarter was solid but not transformative. At higher price targets, they suggest that much of the near term operational upside may already be reflected in the share price.
• There is also incremental concern that, as expectations ratchet higher after a beat and raise quarter, any moderation in comps or margins in coming periods could trigger a valuation reset from elevated targets.

What's in the News

• Raised full year 2025 earnings per share guidance to a range of $6.38 to $6.46, despite an anticipated $0.16 per share drag from tariff related costs. This signals confidence in underlying profitability (Corporate guidance).
• Increased guidance for the 13 weeks ending January 31, 2026, now expecting comparable store sales up 3% to 4%, total sales growth of 6% to 8%, and earnings per share between $1.77 and $1.85 (Corporate guidance).
• Completed repurchase of approximately 12.9 million shares, or 3.9% of shares outstanding, for $1.84 billion under the buyback program announced March 5, 2024. This includes 1.7 million shares bought between August 3 and November 1, 2025 (Buyback tranche update).
• Accelerating brick and mortar expansion, with dozens of new Ross Dress for Less locations slated to open nationwide on October 11, 2025. Each location is expected to add roughly 55 to 60 jobs and broaden access to off price apparel and home goods (Business expansions).
• Expanding dd's DISCOUNTS banners with multiple new stores opening September 27, creating about 45 jobs per location and deepening the company’s presence in value oriented neighborhoods (Business expansions).

Valuation Changes

• The fair value estimate has risen slightly to about $183 from roughly $178, reflecting incremental improvements in the outlook for earnings and cash flows.
• The discount rate has increased modestly to around 8.6% from about 8.4%, indicating a slightly higher required return embedded in the valuation.
• The revenue growth assumption has been lifted slightly to approximately 5.4% from about 5.1%, incorporating a somewhat stronger top line trajectory.
• The net profit margin forecast has edged up to roughly 9.9% from about 9.8%, reflecting incremental confidence in sustained margin performance.
• The future P/E multiple has risen modestly to about 28.1x from roughly 26.9x, implying a somewhat richer valuation relative to prior expectations.