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Ross Stores: Finding Buried Treasure In The Retail Space

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Ross Stores: Finding Buried Treasure In The Retail Space

Discount retailers as diamonds in the rough for the broader retail sector is becoming a chorus that continues to gain traction.

Ross Stores, Inc. (NASDAQ: ROST) is further solidifying this rhetoric, reporting a first-quarter earnings and sales beat on Thursday and a comps increase by an impressive 3 percent.

Quarter, In Review & Analyst's Take

Morgan Stanley is calling Ross’ first quarter a retail treasure, given its solid performance amid an “extremely challenging environment, significant exposure to low income consumers, and unfavorable weather,” said analyst Kimberly Greenberger.

The company’s strong comp figures were driven by an increase in traffic and average transaction size — a rarity among Morgan Stanley's recent retail coverage.

Channel checks in May show sales trends are improving broadly, leading Morgan Stanley to believe Ross could continue to deliver growth despite facing tougher compares.

“ROST is a best-in-class operator and has delivered 10 years of operating margin expansion and consistent comp and EPS growth. The off-price backdrop continues to look favorable, insulated from eCommerce disintermediation and with growth in expanding categories like Home,” said Greenberger.

Recent department store closures and weak fundamentals in remaining stores presents opportunity for Ross to continue to gain market share, according to Morgan Stanley.

Morgan Stanley reiterated its Overweight rating on the stock with a $69 price target.

At last check, shares of Ross Stores were up 2.36 percent at $62.51.

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Image Credit: By Michael Rivera (Own work) [CC BY-SA 3.0 (http://creativecommons.org/licenses/by-sa/3.0)], via Wikimedia Commons

Latest Ratings for ROST

DateFirmActionFromTo
Jan 2021Morgan StanleyMaintainsOverweight
Nov 2020Morgan StanleyMaintainsOverweight
Nov 2020Morgan StanleyMaintainsOverweight

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