Ross Stores, Inc. (NASDAQ:ROST) shares traded little changed on Friday after the off-price retailer delivered second-quarter earnings of $1.56 per share, surpassing analyst estimates of $1.53. Results were tempered by an approximate 11-cent per share negative impact from tariff-related costs.
Bank of America Securities reiterated a Buy rating with a $175 forecast.
Analyst Lorraine Hutchinson noted that Ross Stores is still gaining from trade-down customers and strong merchandise flow, and remains confident in its tariff navigation.
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She cut fiscal year 2025 EPS by 3% to $6.09 but kept fiscal year 2026 EPS intact as long-term earnings expectations are unchanged.
Broad-based sequential gains were seen, with most categories positive by late July; cosmetics led while ladies apparel also beat the chain average, validating earlier brand investments.
Tariffs lifted DC labor costs due to in-house ticketing and added expenses from a new facility ramp-up.
Hutchinson projected peak gross margin pressure in the third quarter (-130bp), including 60bp from tariffs and packaway absorption, which the analyst expects to reverse in the fourth quarter.
The analyst also highlighted that Ross has room to nearly double its store base, with square footage expected to expand at a mid-single-digit rate over time.
He also emphasized the company's long record of returning excess cash to shareholders through consistent buybacks and dividends.
Telsey Advisory Group also weighed in, maintaining a Market Perform rating while raising its forecast from $150 to $160.
Analyst Dana Telsey said tariff pressures on merchandise margin and earnings should ease in the third quarter and more in the fourth quarter, helped by vendor negotiations, sourcing shifts, and pricing actions.
While second-quarter stabilization was positive, Telsey noted that third-quarter and fourth-quarter guidance shows ongoing volatility and challenges in the environment.
The analyst added that Ross Stores stands to gain from value-seeking and trade-down consumers, but its core lower-income shoppers face added strain from policy changes hurting confidence and spending, with the macro backdrop limiting visibility on steady improvement.
Telsey revised fiscal year 2025 EPS to $6.21 from $6.26, versus $6.32 last year.
The analyst also trimmed fiscal year 2026 EPS to $6.78 from $6.84.
Price Action: ROST shares are trading higher by 0.59% to $146.48 at last check Friday.
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