UPDATE: Citigroup Downgrades Ross Stores to Neutral, Lowers PT
In a report published Wednesday, Citigroup downgraded its rating on Ross Stores (NASDAQ: ROST) from Buy to Neutral, and lowered its price target from $70.00 to $60.00.
Citigroup noted, “We lower our rating to Neutral from Buy and reduce our target price to $60 on 14x from $70 on more conservative margin & sales ests ~in-line w/ street in 2013 & 2014 (2013 EPS now $3.90; 2014 EPS now $4.30). Key rationale for downgrade: (1) We expect ROST to be rangebound in the near-term given the lack of an actionable catalyst & solid current margins; (2) 2012 may be difficult to anniversary given non-recurring benefits from retailer bankruptcies, already superior inventory turns (~5-6x per year) and control, and micro-merchandising progress; (3) Valuation fair as ROST at 15.3x vs. a 3-yr avg of 14.1x with range of 11.1-18.9x; (4) New market expansion while still likely positive ROIC may yield lower new store productivity; (5) Instead we prefer Buy rated TJX on strong growth potential in Europe (12% mix), Homegoods concept runway, and M&A of online off-pricer Sierra Trading. Also, TJX could be better positioned to obtain trade-down shoppers on higher HHI target.”
Ross Stores closed on Monday at $54.09.
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