Citi Reiterates a 'Hold' Rating on Ross Stores (ROST), Lowers Price Target

November 20, 2008 10:03 AM EST

Citi reiterates a 'Hold' rating on Ross Stores Inc (Nasdaq: ROST), price target lowered from $32 to $26.

Citi analyst says, "Impressive Inventory Mgmt — 3Q08 inventory psf declined -11% by our est. & mgmt expects inventory psf down -LDD at end of 4Q (vs. -14% in 4Q07) vs. 4QE comps -LSD which should allow ROST to capitalize on excess inventory in the marketplace (driving higher brand content). We forecast 4Q GM +15 bps as we expect more muted merch. margin gains as ROST anniversaries LY’s tight inventory control which drove faster turns and lower markdowns in 4Q07...Our enthusiasm over ROST’s impressive off-price business model, plentiful merchandise availability & tight inventory mgmt (driving faster turns) is offset by overly optimistic 2009 consensus estimates ($2.50 vs. Citi $2.25) & our expectation for decelerating GM expansion as ROST anniversaries its prudent inventory strategy and deleverages expenses on negative comps."

Ross Stores, Inc. operates two chains of off-price retail apparel and home accessories stores.

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