Ross Stores (ROST) Stock Forecast & Price Target

Ross Stores demonstrated a robust financial performance in Q2, with total sales increasing by 4.6% to reach $5.53 billion, aligning closely with the consensus estimate of $5.54 billion and remaining within the company’s guidance range of 2%-6%. The retailer's positive sales momentum is underpinned by improved customer traffic and average basket size, contributing to an anticipated sales growth of 6%-8% year-over-year, surpassing previous consensus expectations. Additionally, broad sales trends across key merchandise categories and strong regional performances, particularly in the Southeast and Midwest, underscore Ross Stores' competitive positioning in the off-price retail sector.

Ross Stores is projecting a decline in earnings per share (EPS) for the third quarter, estimating a range of $1.31-$1.37 compared to last year's result of $1.48, indicating a downward trend in profitability. Additionally, net interest income is expected to decrease significantly to approximately $27 million, down from $43 million the prior year, which raises concerns about the company's financial health and ability to manage debt effectively. Furthermore, the forecasted operational margin is anticipated to decline by approximately 150 basis points to 10.5%, falling below consensus estimates, highlighting potential challenges in maintaining cost efficiency amid stagnant selling and administrative expenses as a percentage of sales.