Ross Stores (ROST) Stock Forecast & Price Target

Ross Stores demonstrated solid financial performance, with total sales increasing by 4.6% to $5.53 billion in Q2, aligning closely with the 4.8% consensus expectation. The company has guided sales growth for the upcoming periods to rise between 5%-8% year-over-year, reflecting improved performance across key merchandise categories, particularly cosmetics, along with strong regional sales in the Southeast and Midwest. Additionally, the increase in customer traffic and average basket size indicates a positive trajectory in consumer engagement, further bolstering optimism for the company's financial outlook.

The financial outlook for Ross Stores is negative due to the expected decline in earnings per share (EPS) for the third quarter, projected between $1.31 and $1.37, which is lower than the previous year’s EPS of $1.48. Additionally, a significant decrease in net interest income is anticipated, with guidance suggesting approximately $27 million, down from $43 million last year, indicating potential pressures on overall profitability. Furthermore, an expected operating margin deleverage of approximately 150 basis points to 10.5% adds to concerns, as the margins have shown troubling trends amid flat SG&A costs as a percentage of sales year-over-year.