Ross Stores (ROST) Upgraded to Buy: UBS Sees 37% Upside on Productivity

Ross Stores (ROST) opened the week with an upgrade. UBS moved the off-price retailer to Buy from Neutral on Monday and raised its price target to $315 from $239, which works out to about 37% upside from Friday's $229.30 close.

The stock rose roughly 2% to 3% on the news, according to Schaeffer's Research. It's still sitting below its Aug. 3 record high of $257.

The thesis is about store productivity, meaning how much each location sells.

As Investing.com reported, Ross and TJX Companies were broadly level on that measure in 2017. By the end of 2025, TJX's productivity had risen 44%. Ross's had risen 24%.

UBS thinks investors are underestimating how much of that gap new CEO Jim Conroy can close. Conroy took over in February 2025, and the bank expects him to lean on strategies he used at Boot Barn.

The numbers UBS is putting on that view are above the Street. It forecasts revenue growth of about 8.5% a year over the two years to fiscal 2028, roughly 2.6 percentage points above consensus.

Its fiscal 2028 earnings estimate of $10.85 per share sits 9% above consensus, and it models EPS growth of about 15% a year. UBS also raised its fiscal 2026 to 2028 estimates by between 2% and 23%.

"Ross and TJX had broadly similar store productivity in 2017, but TJX's productivity increased 44% by the end of 2025, compared with 24% at Ross."

Marketing is one of the clearest levers. Ross spent just 0.4% of sales on marketing in calendar 2025, against 1.1% at TJX. UBS expects Ross to reach 0.7% by fiscal 2029, which implies marketing costs growing about 25% a year.

The bank also expects better merchandise and brand selection and stronger in-store operations. Together with the marketing push, that's the three-part plan behind the productivity argument.

Valuation is part of the call as well. UBS now applies a 29 times earnings multiple, up from 27 times, arguing that stronger estimate revisions will ease worries about slowing growth. Its $315 target is built on that $10.85 fiscal 2028 EPS figure.

The recent results give the argument some support. In the second quarter, Ross reported sales up 13% with comparable store sales up 10%, driven mainly by customer traffic, according to the company's earnings release. Management raised its second-half outlook.

Guidance calls for comparable sales growth of 6% to 7% in the third quarter and 4% to 5% in the fourth. That's slower than the second quarter, partly because the comparisons get harder.

Now the counterpoint. Analysts were already bullish, with 16 of 21 brokerages rating the stock a strong buy, so a lot of good news is in the price. The shares are up about 31% this year, and $240 has acted as resistance.

UBS's numbers are also forecasts that sit well above consensus. If sales growth cools faster than expected, or the marketing spend doesn't translate into traffic, those estimates can come down quickly.

For retail investors, the practical takeaway is to treat $240 and the $257 record as the levels that matter. A clean move through them would suggest the market is buying the productivity story. A fade back toward the low $230s would be a more forgiving place to start a position.

The next real test is the third-quarter report. Watch comparable sales against that 6% to 7% guide, any sign of rising marketing spend, and whether Ross keeps closing the productivity gap with TJX.

Bottom line: UBS is betting Ross has room to catch up with TJX, and the next earnings report will show whether that's happening.