At a glance:
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Ross Stores beat Q3 earnings expectations with $1.58 per share (vs. $1.42 expected) and 10% sales growth while tech stocks crashed
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Foot traffic surged 9.4% as consumers hunt for deals amid weakening sentiment and inflation concerns
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The company raised full-year guidance, announced 40 new store openings, and bought back $262 million in stock
Tech and AI stocks went through hell and back this week as concerns about a bubble became mainstream. Nvidia (NVDA) dropped, Palantir (PLTR) tanked, and the Nasdaq-100 ($IUXX) had one of its worst stretches since April.
Then there’s Ross Stores (ROST), which just posted its best week ever, hitting all-time highs while the rest of the market felt like an old wooden rollercoaster.
The discount retailer crushed expectations, raised guidance, and announced aggressive expansion plans.
While consumers are fatigued by high prices and inflation, Ross is quietly thriving by giving shoppers exactly what they want: deals.
Ross reported third-quarter earnings of $1.58 per share on Thursday, beating analyst expectations of $1.42 and marking a 7% increase from last year. Sales jumped 10% to $5.6 billion, with same-store sales up a strong 7%.
“We had an excellent back-to-school selling season with strong trends that continued through the balance of the quarter,” said CEO Jim Conroy on the conference call with analysts. “The strength in top line, coupled with our continued focus on expense control, resulted in an operating margin of 11.6% that was much stronger than expected.”
According to location analytics firm Placer.ai, foot traffic at Ross stores increased 9.4% in the third quarter. TJ Maxx parent company TJX (TJX) saw similar gains, with HomeGoods traffic up 9.6% and TJ Maxx/Marshalls up 8.1%.
This performance contrasts with Target (TGT), where store visits declined 2.7% year over year and its stock has plummeted to its lowest price in six years.
This divergence makes sense, especially because many consumers consider Target to be more of a “luxury” discount store compared to Ross.
Consumer sentiment unexpectedly fell to 50.4 in early November, according to a University of Michigan survey, near a record low. A Deloitte survey found 57% of consumers expect the economy to weaken in the next six months, the most pessimistic outlook since 1997.
When people want to find a deal, they shop at Ross.
In an environment where retailers are closing stores, Ross is expanding and has announced plans to open 36 new Ross Dress for Less stores and four Dd’s Discounts locations across 17 states.
The company also bought back $262 million in stock during the quarter and remains on track to repurchase $1.05 billion for fiscal 2025 under its $2.1 billion authorization.
Management raised fourth-quarter guidance to $1.77-$1.85 per share with same-store sales growth of 3-4%. Full-year earnings are now expected at $6.38-$6.46 per share.
Conroy addressed tariff worries head-on, noting the company absorbed about 5 cents per share in tariff-related costs during Q3 but expects those costs to be “negligible in the fourth quarter.”
“We are optimistic about our prospects for the holiday season, driven by our ongoing focus on delivering quality, branded merchandise at exceptional value,” Conroy said. “This approach continues to gain strong traction with the consumer, particularly in an environment of rising prices across mainstream retail.”
Ross stock trades at a price-to-earnings ratio of 25.47, which can be reasonable for a retailer posting double-digit same-store sales growth. The company has a market cap of $52.2 billion and generated $2.1 billion in annual income.
Buying any stock at all-time highs is often tricky. But Ross has momentum heading into the crucial holiday shopping season, management is confident enough to raise guidance and buy back stock aggressively, and the macro environment actually favors discount retailers as consumers tighten budgets.
If inflation stays elevated and consumer sentiment remains weak, shoppers will keep hunting for deals. Ross is positioned to capture that demand while competitors like Target struggle. The stock jumped 8.3% on Thursday alone and is up more than 20% year to date.
TJ Maxx and HomeGoods are posting similar performance, with TJX Companies’ stock up nearly 4% this week after raising its own full-year forecast. The off-price retail sector is having a moment.
For investors burned by tech volatility this week, Ross represents a glimmer of hope: a stock hitting new highs backed by strong earnings growth, expanding margins, and real consumer demand. Not bad for a company selling discounted sweaters.
On the date of publication, Justin Estes did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. This article was originally published on Barchart.com
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