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.

Strategic expansion and operational investments position Ross to capture growth as consumers seek value in uncertain economic times.
Improved merchandising and supply chain initiatives support strong margins and reinforce the company's competitive advantage.
Persistent cost pressures, limited pricing power, aggressive store expansion, lack of digital presence, and dependency on closeout inventory all threaten long-term profitability and growth.

Catalysts

About Ross Stores

Operates off-price retail apparel and home fashion stores under the Ross Dress for Less and dd’s DISCOUNTS brands in the United States.What are the underlying business or industry changes driving this perspective?

Resilient demand for value-oriented retail evidenced by continued broad-based improvement in traffic and basket size, alongside strong early back-to-school sales and a robust pipeline of new store openings, positions Ross to capture incremental revenue as persistent economic uncertainty drives consumers toward off-price channels.
The expansion into new and underpenetrated geographic markets-including successful entries into the New York Metro area and Puerto Rico-leverages ongoing population shifts to urban and suburban clusters, providing a tangible runway for both revenue and earnings growth via increased store count and enhanced productivity of new locations.
Enhanced merchandising strategy, including a higher mix of closeout inventory and refined vendor negotiations, is mitigating tariff impacts and supporting gross margin stability. Over time, expected price equilibrium across the sector will enable improvement in merchandise margin and earnings.
Investments in supply chain infrastructure and operational initiatives (e.g., new distribution center, store refreshes, rollout of self-checkout) are establishing a foundation for greater operating leverage and cost discipline, which should benefit net margins as these investments scale.
Ongoing disruption among traditional retailers and continued vendor access to high-quality branded closeouts reinforce Ross's ability to deliver a compelling value proposition and maintain favorable gross margins, supporting long-term earnings growth even in a challenging macro environment.

Ross Stores Future Earnings and Revenue Growth

Assumptions

How have these above catalysts been quantified?

Analysts are assuming Ross Stores's revenue will grow by 5.1% annually over the next 3 years.
Analysts are assuming Ross Stores's profit margins will remain the same at 9.6% over the next 3 years.
Analysts expect earnings to reach $2.4 billion (and earnings per share of $7.84) by about September 2028, up from $2.1 billion today.
In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 25.5x on those 2028 earnings, up from 23.6x today. This future PE is greater than the current PE for the US Specialty Retail industry at 18.7x.
Analysts expect the number of shares outstanding to decline by 2.64% per year for the next 3 years.
To value all of this in today's terms, we will use a discount rate of 8.37%, as per the Simply Wall St company report.

Ross Stores Future Earnings Per Share Growth

Risks

What could happen that would invalidate this narrative?

Persistent pressures from elevated tariffs and increased distribution costs, which may not be fully mitigated by vendor negotiations or minor price increases, are causing operating margins to decline (down 95 basis points YoY in latest quarter), potentially constraining net income and earnings growth if these headwinds continue long term.
Ross's strategy of limited and cautious price increases to maintain its value proposition may become unsustainable if inflation and industry-wide price hikes accelerate, risking either a squeeze on merchandise margin or driving away price-sensitive customers, both of which could negatively impact revenue and profitability.
Aggressive physical store growth (targeting roughly 90 new locations this year and entering new markets) raises the risk of market saturation and heightened store cannibalization, which could slow same-store sales growth and dilute overall revenue gains from expansion.
The company's ongoing lack of a robust e-commerce or omnichannel presence represents a significant vulnerability as secular consumer preferences continue shifting toward online and digital-first experiences, ultimately risking erosion of foot traffic and revenue over the long term.
Ross's reliance on robust access to closeout and excess branded inventory could be threatened if brands continue tightening controls over off-price channel distribution (selling more DTC or tightening supply), potentially leading to weaker merchandise selection, reduced traffic, and lower average ticket values, impacting both top-line growth and gross margins.

Valuation

How have all the factors above been brought together to estimate a fair value?

The analysts have a consensus price target of $159.471 for Ross Stores based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $175.0, and the most bearish reporting a price target of just $130.0.
In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $25.0 billion, earnings will come to $2.4 billion, and it would be trading on a PE ratio of 25.5x, assuming you use a discount rate of 8.4%.
Given the current share price of $149.04, the analyst price target of $159.47 is 6.5% higher. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.

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Disclaimer

AnalystConsensusTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystConsensusTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.

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