Piper Downgrades Ross Stores, Says 'No One Is Immune' To Weakening Consumer Environment

Piper Jaffray’s Neely J.N. Tamminga believes that with Ross Stores, Inc. ROST shares currently trading close to their five-year high, the stock valuation could see downside risk due to a weakening consumer environment or a 1Q miss.

Tamminga downgraded the rating on the company from Neutral to Underweight, with a price target of $55.

The analyst also expressed concern regarding the consensus forecasts, which are above the guidance range for comparable store sales as well as EPS.

Waning Interest In Off-Price Stores

According to the Piper Jaffray report, “It is a common belief among the investment community that off-price concepts are part of a secular, demographic trend towards value retailing.”

However, Tamminga pointed out that there have been signs of weakening activity in off-price stores for both women and teens, given that “consumers are looking for newness and not likely finding it at off-price, but rather at specialty and/or department stores.”

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Stock At Risk

The analyst mentioned that given the current high stock valuation, Ross Stores’ shares could be at risk if a slowdown were to become evident.

The stock is currently trading at a premium to the market and if the 1Q results “underwhelm” investors, Tamminga expects the shares to come under pressure.