Ross Stores Stock Climbs Pre-Market Despite Mixed Q3: Wall Street’s Split, Retail Isn’t Buying It

Ross Stores Inc. ($ROST) stock was up as much as 7% pre-market after the retail giant posted mixed third-quarter earnings but raised guidance for the full year.

The company posted earnings of $1.48 per share beating Wall Street estimates of $1.40 per share.

However, its revenue didn’t quite hit the $5.15 billion forecast, coming in at $5.07 billion.

Despite the revenue dip, the off-price retailer raised its annual profit forecast to earnings between $6.10 and $6.17, from $6.00 to $6.13 – an increase compared to last year’s earnings of $5.56 per share. 

JPMorgan is bullish on Ross Stores despite “mixed” results from the third quarter, raising its price target to $173 from $171 while maintaining an ‘Overweight’ rating on the shares following the "mixed" Q3 report. The brokerage is betting on the holiday season to benefit the company.

Meanwhile, Baird lowered its price target on Ross Stores to $175 from $180 while keeping an ‘Outperform’ rating on the shares. 

The brokerage believes prior headwinds from weather and execution issues are behind the company. It noted that Ross Stores historically gains in the fourth quarter and its raised guidance reflects the same. 

Ross Stores Inc. Sentiment and Message Volume on Nov 22 as of 7:20 a.m. ET | Source: Stocktwits

Amid mixed results, retail sentiment on Stocktwits plunged to a year-low of ‘extremely bearish’ (5/100), even as message volume surged to a year-high of ‘extremely high’ (97/100).

Retail investors on the platform seem beaten down by the management’s commentary. 

Ross Stores CEO Barbara Rentler said the company was “disappointed” with its sales results as “business slowed from the solid gains” reported in the first half of the year.

“Although our low- to moderate-income customers continue to face persistently high costs on necessities pressuring their discretionary spending, we believe we should have better executed some of our merchandising initiatives,” she said during the earnings call. 

While the company raised its full-year earnings guidance, earnings per share in the fourth quarter are expected to be in the range of $1.57 to $1.64 compared to $1.82 in the fourth quarter of 2023.

“This guidance range includes an unfavorable impact of approximately $0.03 per share, primarily from the timing of packaway-related expenses that benefited the third quarter,” said Ross Stores CFO Adam Orvos.

He added that total sales are projected to decline from 1% to 3%.