Ross Stores Stock Rises After Earnings. Off-Price Retailers Are Big Winners.

Ross Stores (ticker: ROST) stock was up 6.5% to $128 in early trading on Friday.

On Thursday, the company posted third-quarter earnings of $1.33 a share, higher than the consensus call for $1.22 among analyst tracked by FactSet and soaring above the $1 recorded in the year-earlier quarter. Sales of $4.92 billion beat estimates of $4.84 billion, and comparable sales jumped 5%, compared with the 3% analysts had expected.

“We continue to face macroeconomic volatility, persistent inflation, and more recently, geopolitical uncertainty,” said Chief Executive Officer Barbara Rentler in the earnings release. “As a result, we believe it is prudent to maintain a cautious approach in forecasting our business and are reiterating our prior sales guidance for the fourth quarter.” Earnings are expected to land between $1.56 and $1.62 a share, while analysts expected $1.61.

That said, for the fiscal year ending Feb. 3, the company now expects per-share earnings between $5.30 and $5.36, compared with an earlier call for a result between $5.15 and $5.26.

Off-price retailers seem to share a similar point of view, according to William Blair analysts Dylan Carden and Alexander Vasti, who rate Ross shares at Outperform.

“On the call, Ross echoed comments from
TJX
that brands are increasingly seeking out the off-price channel given recent outperformance, offsetting anxiety around more limited inventory availability looking into next year as retailers pull back on orders,” the analysts wrote in a Friday report.

Earlier this week,
TJX
(TJX), the parent company of TJ Maxx and HomeGoods, posted strong quarterly numbers but issued a profit forecast that fell short of expectations.

Write to Emily Dattilo at [email protected]