On Wednesday, JPMorgan has increased its price target for Ross Stores, Inc. (NASDAQ: NASDAQ:ROST) shares, lifting the figure to $163, up from the previous $150. The firm has reaffirmed its Overweight rating on the stock, signaling confidence in the retailer's market position and growth trajectory.
Ross Stores is seen as well-placed in the expanding off-price sector, with potential to gain from the declining market share of department stores. The company's goal to reach a network of 2,500 stores indicates a possibility for over a decade of 5-6% annual square footage expansion, equating to roughly 90 new stores each year. This expansion is expected to be efficient, with a payback period of less than two years per store.
Management at Ross Stores is optimistic about achieving a low-double-digit growth in profits over multiple years. This outlook is supported by the company's core customer base, which largely consists of lower-income shoppers, with 66% of transactions made in cash.
Ross Stores' value proposition is also strong, offering products at prices 20-60% lower than those found on Amazon (NASDAQ:AMZN) or at department stores.
The retailer's financial health adds to its resilience, with a forecast of generating $1.1 billion in free cash flow by the fiscal years 2022/23. This robust balance sheet is expected to provide Ross Stores with a cushion against the shifts in the retail environment, ensuring the company remains on a solid footing for growth.
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