Why Ross Stores (ROST) Is a Resilient Off-Price Retail Play Worth Buying Now

In an era of economic uncertainty, rising tariffs, and supply chain chaos, (ROST) has emerged as a standout performer in the off-price retail sector. While many retailers grapple with margin compression and declining consumer confidence, ROST has demonstrated a unique ability to thrive in adversity. By leveraging its value-driven model, disciplined execution, and strategic agility, Ross Stores has not only weathered industry headwinds but also positioned itself as a compelling long-term investment. Let's break down why ROST is a stock worth buying now.

Outperforming Tariffs and Inflation: A Masterclass in Adaptation

The second quarter of 2025 was a mixed bag for ROST, but its resilience shone through. Despite a 95-basis-point decline in operating margin to 11.5%, driven by an 11-cent-per-share hit from tariffs, the company exceeded earnings estimates by 1.96%. Revenue grew 5% year-over-year to $5.53 billion, with comparable store sales rising 2%—a testament to its ability to attract price-sensitive shoppers.

How is ROST outperforming peers? The answer lies in its proactive mitigation strategies. The company has diversified its sourcing mix under a “China-plus-one” approach, shifting 60% of Chinese imports to Vietnam, India, and Malaysia. This reduces exposure to U.S.-China trade tensions and stabilizes costs. Additionally, Ross Stores has renegotiated vendor contracts, optimized freight logistics, and adjusted pricing to absorb tariff pressures. These moves have cushioned the blow of margin compression, allowing ROST to maintain its value proposition even as competitors struggle.

Strong Consumer Demand: The Power of the Off-Price Model

The off-price retail sector has long been a safe haven during economic downturns, and ROST is no exception. With inflation eroding consumer budgets, Ross Stores' model of offering branded merchandise at 50–70% discounts has become increasingly attractive. In Q2, the company saw robust demand in key categories like cosmetics, ladies' apparel, and home goods—segments that contribute to high-margin, high-traffic sales.

Moreover, ROST's expansion into new markets is fueling growth. The company opened 31 new stores in Q2 alone, including its first locations in Puerto Rico and a significant push into the New York Metro area. These openings are not just about scale; they reflect a strategic focus on high-potential demographics and urban centers where demand for value-driven shopping is surging.

Upgraded Analyst Sentiment: A Consensus of Confidence

Analyst sentiment for ROST has shifted decisively in recent months. Following the Q2 earnings beat, 12 of 16 analysts upgraded or maintained “Strong Buy” ratings, with a 12-month average price target of $153.76—3.8% above the current price of $148.20. Firms like Bank of America and Jefferies have highlighted ROST's tariff mitigation strategies and long-term expansion plans as key catalysts, while even cautious voices like Morgan Stanley acknowledge the company's structural advantages.

The upgraded outlook is supported by ROST's financial health. The company maintains a current ratio of 1.55, a 32-year dividend streak, and a yield of 1.11%. While its PEG ratio of 4.39 suggests some valuation concerns, the forward P/E of 22.95 is below its 10-year average, making it an attractive value play.

Long-Term Catalysts: Store Expansion and Digital Innovation

ROST's growth story isn't just about surviving tariffs—it's about capitalizing on structural trends. The company plans to open 90 new stores in 2025, with a focus on urban and suburban markets. These locations will bolster traffic and reinforce ROST's dominance in the off-price sector.

Beyond physical expansion, Ross Stores is investing in digital transformation. Recent initiatives include enhanced e-commerce capabilities, targeted digital campaigns, and in-store tech like self-checkout kiosks. These upgrades improve the customer experience and drive efficiency, creating a flywheel effect of traffic, sales, and loyalty.

Risks and Realities: A Cautious Outlook

No investment is without risks. ROST's guidance for 2025 includes a projected $0.22–$0.25 per share hit from tariffs, and macroeconomic volatility could dampen consumer demand. Additionally, rivals like (TJX) pose competitive threats. However, ROST's disciplined cost management, pricing power, and brand loyalty provide a buffer against these challenges.

Investment Thesis: A Buy for the Long Haul

For investors seeking a resilient, value-oriented play in the retail sector, Ross Stores offers a compelling case. Its ability to outperform industry headwinds through strategic execution, strong consumer demand, and upgraded analyst sentiment makes it a standout. While near-term margin pressures persist, the company's long-term growth drivers—store expansion, digital innovation, and a defensible off-price model—position it for sustained outperformance.

Final Verdict: Buy Ross Stores (ROST) for its proven resilience, disciplined management, and clear path to long-term value creation. With a forward-looking strategy and a strong balance sheet, ROST is not just surviving the current retail landscape—it's thriving.