Off-price retailer Ross Stores, Inc. (NASDAQ: ROST) reported Tuesday fourth-quarter results which came in
better-than-expected on the top-and-bottom line and ended the full year beating its own comp and earnings guidance.
The Analysts
Morgan Stanley's Kimberly Greenberger maintains an Overweight rating on Ross
Stores' stock with an unchanged $94 price target.
Bank of America Merill Lynch's Lorraine Hutchinson maintained at Buy with a price target lifted from $95 to $105.
Morgan Stanley: Conservative Guidance
Ross Stores' streak of beating the high end of its own annual comp and earnings guidance now stands at five years, and there
is reason to believe this trend can continue in 2019, Greenberger said in a Wednesday note.
While the company did see some headwinds in the fourth quarter after merchants identified select inventory content issues, it's
likely a self-inflicted problem that's both temporary and fixable, the analyst said.
Ross Stores is a play on the lower-income consumer segment, so it can benefit from macro tailwinds like stronger wage growth,
lower gas prices and the possibility of higher tax refunds, Greenberger said.
In Morgan Stanley's view, the company's 2019 comp guidance of 1-2-percent growth and EPS of $4.30 to $4.50 both look
conservative.
BofA: Ladies Apparel Issues Fixable
Ross Stores' ladies apparel segment suffered in the fourth
quarter from inventory balance issues, but the men's category performed fine, Hutchinson said in a Tuesday note.
The company didn't offer much commentary on the segment, other than noting it did not have the right weighting in some
categories, the analyst said.
The off-price category is "very flexible," so a gradual rebalancing of issues seen in the quarter could be fixed over the course
of the year, Hutchinson said. Since buyers reduced receipts after noticing product issues, there are no pockets of excess
inventory, she said.
BofA is modeling for a 30-basis point drop in operating margin in 2019 to 13.3 percent from higher wage and freight cost
increases. Room exists for upside to margins if the company succeeds in fixing the ladies business and delivers
better-than-expected comps, in the sell-side firm's view.
Price Action
Ross Stores shares were up 0.24 percent at $94.40 at the time of publication.
Related Links:
Q4
Retail Earnings Season: A Cheat Sheet
Freight
Costs, Higher Wages Likely To Weigh On Ross Stores' Margins
Photo by Steve
Morgan/Wikimedia.
Latest Ratings for ROST
Date |
Firm |
Action |
From |
To |
Nov 2018 |
Morgan Stanley |
Maintains |
Overweight |
Overweight |
Nov 2018 |
Citigroup |
Maintains |
Neutral |
Neutral |
Nov 2018 |
Credit Suisse |
Maintains |
Outperform |
Outperform |
View More Analyst Ratings for
ROST
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