Key Highlights

  • Q2 fiscal 2026 sales rose 13% to $6.3 billion with comparable store sales up 10%, driven mainly by customer traffic (Aug. 20 release).
  • EPS of $2.66 included a roughly $0.60 benefit from IEEPA Tariff refunds, but even without it EPS beat the company's $1.85 to $1.93 guidance.
  • Ross raised full-year EPS guidance to $8.61 to $8.77 from $7.50 to $7.74 and lifted its 2026 store opening plan to 115 locations.
  • Shares closed at $232.51 on Sep. 22, up about 32% year-to-date, with a trailing price-to-earnings ratio near 28 and an average analyst price target of about $270.

Ross Stores (NASDAQ:ROST) beat expectations in its fiscal second quarter by pairing double-digit, traffic-driven sales growth with wider margins, and then raised its outlook for the rest of the year. In its Aug. 20 release, the off-price retailer reported sales up 13% to $6.3 billion and comparable store sales up 10%, on top of a 2% gain a year earlier. Earnings per share were $2.66, far above the company's own guidance of $1.85 to $1.93.

A one-time item added to the headline number. Results included about $253 million of refunds of tariffs paid under the International Emergency Economic Powers Act (IEEPA), which lifted EPS by roughly $0.60. Excluding that benefit, EPS would have been about $2.06, still above the top of guidance. Operating Margin rose 610 basis points. Excluding the refunds, it was up 205 basis points, versus the company's plan for 130 to 150 basis points.

Investors rewarded the report. The shares had slipped 2.4% to $228.99 during regular trading on Aug. 20, before the results came out after the close. They then rose 4.4% to $239.04 on Aug. 21, the day after the release, topping analyst estimates. The stock has since given back some of that move and closed at $232.51 on Sep. 22.

Breaking Down the Second-Quarter Beat

The quality of the sales growth stood out. Chief Executive Jim Conroy said comparable store sales growth was once again driven mainly by customer traffic, supported by both new customers and higher engagement from existing shoppers. He credited the merchandise offering, Marketing initiatives and improvements to the in-store experience.

Net income rose to $851 million from $508 million a year earlier, and EPS rose from $1.56. For the first six months of fiscal 2026, sales rose 17% to $12.3 billion, comparable store sales rose 13% and EPS reached $4.69, up from $3.03. Because comps rose 10% in the second quarter, the first-half figure implies an even stronger first quarter.

Ross opened 47 stores during the quarter, 35 under the Ross Dress for Less banner and 12 under dd's DISCOUNTS. It repurchased 1.4 million shares for $319 million and said it remains on track to buy back $1.275 billion of stock in fiscal 2026 under a two-year, $2.55 billion authorization approved in March.

How the Outlook Changed

Management raised guidance for both remaining quarters despite what Conroy called significantly more challenging year-over-year comparisons in the back half. Ross now expects third-quarter comparable store sales to rise 6% to 7%, with EPS of $1.75 to $1.83. For the fourth quarter, it expects comps up 4% to 5% and EPS of $2.17 to $2.26.

Full-year EPS guidance rose to $8.61 to $8.77, including the roughly $0.60 tariff refund benefit, up from a prior range of $7.50 to $7.74. Ross also raised its 2026 store opening plan to 115 locations, about 90 Ross and 25 dd's DISCOUNTS, from 110 previously.

The pieces add up. First-half EPS of $4.69 plus the third- and fourth-quarter ranges gives roughly $8.61 to $8.78, in line with the annual guidance. That means the second-half outlook assumes operating earnings without any further tariff refunds. Ross framed the quarterly EPS ranges as dependent on the second half performing in line with its sales projections.

Wall Street responded with higher price targets. Deutsche Bank (NYSE:DB) raised its target to $294 from $283, Jefferies Financial Group (NYSE:JEF) raised its target to $285 from $265, and Evercore ISI, a unit of Evercore Inc. (NYSE:EVR), raised its target to $290 from $276, all keeping Buy ratings. The average analyst target sits near $270 with a consensus Buy rating.

The Off-Price Model in the Current Retail Market

Ross operates more than 2,000 stores under its two banners, selling brand-name apparel, footwear and home goods at discounts to department and specialty store prices. The model relies on opportunistic buying of excess and closeout inventory, which tends to become more available when other retailers struggle or Supply chains shift.

That positioning has worked in 2026. The stock had gained about 32% for the year as of Aug. 21. New traffic data in mid-September showed Ross and Target (NYSE:TGT) were drawing shoppers from rivals as consumers hunt for value. Ross competes most directly with TJX Companies (NYSE:TJX), owner of T.J. Maxx and Marshalls, and with Burlington Stores (NYSE:BURL), as well as with Walmart (NYSE:WMT), Target and Amazon (NASDAQ:AMZN) for value-focused apparel spending.

The company's comparable sales momentum also reflects internal changes since Conroy took over as CEO in 2025, including more marketing and upgraded store presentation. Management has said it believes the current trends show those actions are working.

Risks Behind the Strong Numbers

Several risks deserve attention. The tariff refund is non-recurring, so fiscal 2026 EPS will be harder to compare with fiscal 2027. Ross itself flagged tougher comparisons in the second half, and guided comps sharply lower from the 10% pace, which leaves less room for error if traffic slows. Trade policy remains uncertain, and new tariffs on imported apparel and home goods could pressure margins or vendor pricing.

Valuation is another consideration. The stock trades at a trailing price-to-earnings ratio of about 28, which assumes continued execution. Rapid store growth also carries execution risk, particularly as Ross enters new markets. On the other side, steady Buybacks and a value-seeking consumer provide support, and this quarter again showed that the company's own guidance can prove conservative.

Ross Stores Heads Into a Tougher Holiday Comparison

Board changes take effect Oct. 1, when Shelley Bransten and Christian Johnson join the board. The holiday season will test whether Ross can hit its 4% to 5% fourth-quarter comp target against a tougher base. The next major catalyst is third-quarter results, which Ross has typically reported in November; the company has not yet announced a date.

Investors will watch whether traffic-driven comps hold near the 6% to 7% guidance, how margins look without the tariff refund, and whether Ross updates its store opening plans for 2027.