Ross Store Profits: What Wall Street Says
Ross stores actions (ROST) – Get a report fell on Friday after the discount retailer’s third-quarter outlook disappointed investors.
Wall Street analysts weighed on the company’s second quarter and forecast in Dublin, California.
Cowen analysts maintained an outperformance rating while lowering Ross’s price target to $ 144 per share from $ 147.
“The forecasts for the second half of the year are cautious but imply a variation in [earnings before interest and taxes]margin of a slight increase in the first half of 2021 compared to the 2019 financial year at [3 percentage points-plus] contraction in the second half of 2021 given rising supply chain inflation, ”said Cowen analyst John Kernan.
This perspective contrasts with consensus estimates for (TJX) – Get a report, which provided no guidance, and Burlington stores (BURL) – Get a report, who said in May that he expected the EBIT margin to contract 0.2 to 0.3 percentage points due to faster freight and supply chain costs, according to Kernan.
Wells Fargo analyst Ike Boruchow claimed an overweight and a price target of $ 135 on Ross Stores. The “robust” second quarter results “far exceeded” the company’s sales and margin forecasts, but there is cause for concern as management has adopted a “very cautious tone” for the remainder of the year.
“We understood, [the second half]has headwinds – but we see this outlook for the second half as a bit too conservative after such a strong second quarter – it’s not an atypical approach for this management team, ”said Boruchow.
Jefferies analyst Janine Stichter maintained her maintenance rating and price target of $ 131 as she also said the third quarter forecast was weak but “typical” of the company’s conservative style.
The company’s non-priced inventory is a “long-term secular winner”, but it still prefers TJX and Burlington, “where we see greater growth and margin opportunities in the short and long term.”
Ross Stores shares at last check were down 3.5% to $ 122.10.