By Mackenzie Tatananni
Ross Stores stock rose after the company's third-quarter earnings beat expectations. Analysts are cautiously optimistic.
The stock was up 7.3% to $153.35 in premarket trading Friday, marking the largest increase since a 7.8% gain in May and putting it on track for its highest close since September, according to Dow Jones Market Data.
Other discount retailers were gaining before markets opened Friday. TJX was up 0.6% to $120.45, while Burlington Stores jumped 3.6% to $282.60.
Ross reported third-quarter earnings per share of $1.48, beating FactSet consensus estimates of $1.35 to $1.41 per share.
Guggenheim Partners analyst Robert Drbul maintains a rating of Buy for the stock and reiterated a price target of $180. The rating reflects "the favorable environment for the company given healthy supply of branded goods in the marketplace, stronger value proposition, and ongoing sales optimism," Drbul wrote.
Despite the positive outlook, sales were disappointing. Net sales were up 3% to $5.07 billion, missing analysts' estimate of $5.15 billion, while comparable-store sales rose 1%, also landing below Wall Street's target.
Ross CEO Barbara Rentler acknowledged that sales had slowed from the "solid gains" reported in the first half of the year. She said that although the retailer's base of customers with low to moderate incomes continue to struggle with inflation, the company could have "better executed" some of its marketing initiatives.
Unseasonably warm temperatures and disruptions from Hurricane Helene and Milton are estimated to have affected comparable-store sales by around 1%.
Drbul anticipates the company will gain ground during the holiday buying season and maintain this momentum into the new year.
"While we are mindful of macro uncertainties, we believe ROST will sustain its positive sales momentum," Drbul wrote, noting the company's strength in "gifting, cosmetics and accessories."
The retailer's board has elected James Conroy to succeed Rentler as CEO, effective Feb. 2, 2025.
This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
November 22, 2024 08:13 ET (13:13 GMT)
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