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Don't Ignore These 2 Highly Ranked Retail Stocks

The holiday shopping season could be a catalyst for retail stocks. Let’s take a look at a pair of highly-ranked Zacks stocks that may continue to excel as we move closer to the Christmas holiday and perhaps a Santa Clause rally.

Ross Stores ROST

Off-price retailer of apparel and home accessories Ross Stores has been on quite a run of late after beating Q3 expectations. Higher highs could be around the corner for ROST with the stock up roughly 18% following the positive Q3 results.

ROST beat Q3 expectations by 23% with EPS of $1.00 per share. This marked an -8% decline YoY but was nevertheless impressive considering economic challenges. Sales were virtually flat from a year ago but beat top line estimates by 5% at $4.56 billion.

Despite inflationary headwinds expected to pressure the company’s low-to-moderate income customers, CEO Barbara Rentler said Ross Stores faces its easiest sales and earnings comparisons in Q4. This led to the company raising its guidance given the third quarter sales momentum and improved holiday assortments.

Year over year, ROST earnings are expected to drop -12% in its fiscal 2023 at $4.30 per share but this is up from $3.99 a share 90 days ago. Fiscal 2024 earnings are expected to jump 14% to $4.92 per share. FY24 earnings estimates have also trended higher from $4.60 last quarter.

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Zacks Investment Research


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Sales are projected to dip -2% in FY23 to $18.54 billion. Fiscal 2024 sales are expected to stabilize and rise 6% to $19.67 billion. FY24 sales would represent 31% growth from pre-pandemic levels with 2019 sales at $14.98 billion.

Year to date, ROST is up +2% to outperform the S&P 500’s -17% and slightly underperform its peer group’s +5% that includes Burlington Stores BURL and others. Over the last decade, ROST’s total return is +351% to beat the benchmark and its peer group’s +220%.

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Zacks Investment Research


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Trading around $116 per share ROST has a forward P/E of 26.9X, which is on par with the industry average. ROST trades at a significant discount to its decade high of 84.3X and closer to the median of 21.1X.

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Zacks Investment Research


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Chico’s FAS CHS

Another retail company that investors want to start paying attention to is Chico’s FAS Inc. The women’s fashion retailer is also receiving positive earnings estimate revisions.

CHS currently sports a Zacks Rank #1 (Strong Buy) and has an overall “A” VGM score. Year over year, CHS fiscal 2023 earnings are expected to climb 127% to $0.91 per share. FY24 earnings are set to rise another 10%. Earnings estimates for FY23 and FY24 are largely up over the last 90 days.

Top line growth is also expected, with sales set to jump 19% in FY23 and another 5% in FY24 to $2.27 billion.

Last week, Chico’s Q3 earnings climbed 33% YoY to beat expectations by 54% with EPS of $0.20 per share. The company also beat top line expectations by 2% with Q3 sales at $518.33 million. CHS grew YoY net sales by 14% on top of 29% growth in last year’s third quarter.

Year to date CHS is up +10% to beat the S&P 500 and largely outperform its peer group’s -58%. Even better, over the last two years, CHS is up an impressive +294% to outperform the benchmark and its peer group’s -55%.

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Zacks Investment Research


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Trading around $6 per share, CHS has a forward P/E of 6.6X. This is nicely below the industry average of 12.9X. Furthermore, CHS trades far below its decade-high of 290X and beneath the median of 16.2X. The price to sales paid for CHS is very favorable for investors at 0.3X on par with the industry average and below the benchmark. CHS appears to be a lower risk higher reward investment at its current levels.

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Zacks Investment Research


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Bottom Line

These retail stocks could be poised to go higher considering their low valuations and rising earnings estimate revisions. Both companies have a niche within the retail industry and could receive a boost from the holiday shopping season. This could be another catalyst for ROST and CHS stock after recently beating Q3 expectations.

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Ross Stores, Inc. (ROST) : Free Stock Analysis Report

Chico's FAS, Inc. (CHS) : Free Stock Analysis Report

Burlington Stores, Inc. (BURL) : Free Stock Analysis Report

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