Ross Stores (ROST) Stock Trades Up, Here Is Why

What Happened?

Shares of off-price retail company Ross Stores (NASDAQ:ROST) jumped 3.7% in the morning session after the company reported second-quarter results that beat profit estimates and offered optimistic guidance for the next quarter.

The discount retailer posted earnings of $1.56 per share, which was ahead of Wall Street's expectation of $1.54. Its revenue of $5.53 billion was up 4.6% year on year and was in line with analyst estimates. Adjusted EBITDA also significantly outperformed Wall Street's forecasts. While same-store sales growth of 2% marked a deceleration from historical levels, investors were encouraged by the company's optimistic earnings per share (EPS) guidance for the next quarter, which surpassed analysts' expectations. This strong profit outlook suggested continued operational efficiency and pricing power, leading to a positive market reaction.

After the initial pop the shares cooled down to $146.49, up 0.6% from previous close.

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What Is The Market Telling Us

Ross Stores’s shares are not very volatile and have only had 2 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful, although it might not be something that would fundamentally change its perception of the business.

The previous big move we wrote about was 18 days ago when the stock gained 3.2% on the news that markets rebounded following a sharp sell-off in the previous trading session as a weaker-than-expected July jobs report fueled investor hopes for a potential interest rate cut. The U.S. economy added only 73,000 jobs in July, falling well short of the 110,000 expected by economists. This disappointing data has led to a dramatic shift in market sentiment regarding the Federal Reserve's next move. According to the CME FedWatch Tool, the probability of a September interest rate cut has surged from around 40% to over 80%. Lower interest rates generally stimulate the economy by making borrowing cheaper for consumers. This can lead to increased spending on discretionary items, such as apparel and home goods, which directly benefits consumer retail companies. The prospect of more accommodative monetary policy is therefore boosting investor confidence in the sector's outlook.

Ross Stores is down 4% since the beginning of the year, but at $146.49 per share, it is still trading close to its 52-week high of $156.61 from December 2024. Investors who bought $1,000 worth of Ross Stores’s shares 5 years ago would now be looking at an investment worth $1,640.

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