Ross Stores (ROST) Gains on UBS Upgrade to Buy

Ross Stores shares rose about 3% premarket after UBS upgraded the retailer to Buy with a $315 target, citing a narrowing store productivity gap with TJX.

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What Did UBS Say About Ross Stores?

UBS said investors are underestimating Ross's ability to narrow its productivity gap with TJX, the larger off-price competitor. The bank forecasts annual revenue growth of about 8.5% over the two years to fiscal 2028, roughly 2.6 percentage points above consensus.

Its earnings model is also above the Street. UBS projects EPS growth of about 15% a year, up about 690 basis points from its prior forecast. It puts fiscal 2028 EPS at $10.85, 9% above consensus, and raised its fiscal 2026 to 2028 estimates by 2% to 23%. The target now uses a 29 times earnings multiple, up from 27 times.

Why Is Store Productivity the Focus?

Store productivity, or sales generated per store, is the center of the thesis because Ross and TJX were broadly level on it in 2017. By the end of 2025, TJX's productivity had risen 44% while Ross's had risen 24%. UBS argues that closing even part of that difference would support comparable sales growth in fiscal 2027 and beyond.

Marketing is one lever. Ross spent about 0.4% of sales on marketing in calendar 2025, against 1.1% at TJX. UBS expects the figure to reach 0.7% of sales by fiscal 2029, with marketing costs growing about 25% a year.

UBS also expects operating margin to expand by about 55 basis points a year through fiscal 2030. That would lift it to 14.7%, from 11.9% in fiscal 2025.

How Are Ross Stores' Fundamentals Holding Up?

Ross's latest results are strong. In the second quarter, reported in August, revenue rose 13% to about $6.27 billion, comparable store sales gained 10% and EPS came in at $2.66. Management raised full-year EPS guidance to a range of $8.61 to $8.77, from $7.50 to $7.74. The new range includes roughly $0.60 from tariff refunds.

Guidance for the rest of the year points to continued growth:

• Third-quarter comparable sales are forecast to rise 6% to 7%, with EPS of $1.75 to $1.83.
• Fourth-quarter comparable sales are forecast to rise 4% to 5%, with EPS of $2.17 to $2.26.
• The company plans to open 115 new locations in 2026, up from 110 in earlier guidance.

Market Reaction

The stock closed Friday at $229.30 and has gained about 31% this year. Its record high of $257 was set on August 3, and $240 is the nearest resistance level, meaning the price area where earlier selling has capped rallies. Options activity leans bullish: the 10-day call-to-put volume ratio of 3.32 sits in the 90th percentile of its annual range. Of 21 brokerages covering the shares, 16 rate them a strong buy and five rate them a hold.

Strategic Context

The upgrade reflects a broader debate about value retail. Off-price chains have gained share as consumers trade down, and TJX's higher productivity is the benchmark for what a mature operator can extract from each store. Ross has been expanding its footprint while Conroy's team works on merchandising and marketing. UBS's case is that the productivity gap, rather than store count alone, is the main source of upside in the coming years.

Outlook

Ross reports third-quarter results next, against guidance for comparable sales growth of 6% to 7%. That report will test whether the sales momentum behind the UBS thesis is holding. Productivity versus TJX, marketing spend and margin progress toward the 14.7% level UBS models for fiscal 2030 are the metrics that matter most from here. In the near term, the shares face resistance near $240 and the $257 record high.