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Barchart
Barchart
Kritika Sarmah

Is Ross Stores Stock Underperforming the Dow?

Based in Dublin, California, Ross Stores, Inc. (ROST) is a leading off-price retailer specializing in apparel and home accessories. Valued at a market cap of $51.8 billion, the company operates under the Ross Dress for Less and dd's DISCOUNTS brands across the United States.

Companies valued at $10 billion or more are generally labeled as “large-cap” stocks, and Ross Stores fits this criterion perfectly. The company thrives in the off-price retail sector by offering branded and designer merchandise at deep discounts, attracting value-conscious consumers. Its agile buying strategy ensures a steady flow of discounted products, while cost-efficient operations, including minimal advertising and no-frills store designs, enable lower prices. 

With a broad national presence and strong brand recognition, Ross benefits from economies of scale and diverse demographics. Additionally, its value-focused model excels during economic downturns, reinforcing its competitive edge over traditional retailers.

However, shares of the off-price retailer have retreated 4.8% from its 52-week high of $163.60, reached on Aug. 23. Shares of ROST have gained 3.3% over the past three months, underperforming the Dow Jones Industrials Average’s ($DOWI) 8.6% gains during the same time frame.

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In the long term, shares of Ross Stores have gained almost 17.9% over the past 52 weeks, trailing $DOWI’s 22.1% return over the same time frame. Moreover, ROST is 12.6% up on a YTD basis, lagging behind $DOWI’s 17.4% gains.

ROST has consistently traded below its 200-day moving average since early March and has remained mostly under its 50-day moving average since the past year despite some fluctuations, indicating a strong bearish trend.

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ROST’s weak price momentum over the past year stems from its dependence on physical retail locations, leaving it exposed to the ongoing shift toward online shopping. Furthermore, intensifying competition within the discount retail sector has strained its margins and threatened its market share.

On Nov. 21, Ross Stores released its Q3 earnings, and its shares popped 2.6% and remained in green for the rest of the week. While its EPS of $1.48 topped the consensus estimate, its revenue of $5.1 billion missed the market’s expectations. It also raised its 2025 EPS forecast to $6.10-$6.17 from a previous forecast of $6.00-$6.13, the midpoint above the consensus of $6.13.

Its rival, The TJX Companies, Inc. (TJX), has risen 42.7% over the past 52 weeks and returned 25.6% in 2024, outpacing ROST’s gains over the same time frame. 

Despite ROST’s underwhelming price action over the past year, analysts remain very bullish about its prospects. Among the 21 analysts covering the stock, there is a consensus rating of “Strong Buy,” and the mean price target of $173.58 suggests a premium of 11.4% to current price levels.

 

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