Step 8: Revenue Breakdown & Growth Drivers — Ross Stores (ROST)

Date: March 6, 2026 Current Price: $212.48 | LTM Revenue: $22,751M | Store Count: 2,267

---

8.1 Revenue by Segment / Brand

Ross Stores reports as a single operating segment and does not break out revenue between Ross Dress for Less and dd's DISCOUNTS in its SEC filings. However, we can derive estimates from store count data and management commentary.

Store Count History (Fiscal Year-End)

Fiscal Year	Ross Dress for Less	dd's DISCOUNTS	Total Stores	Net Adds	States
FY2015 (Jan 2016)	1,274	172	1,446	+84	34+DC
FY2016 (Jan 2017)	1,340	193	1,533	+87	36+DC
FY2017 (Feb 2018)	1,409	213	1,622	+89	37+DC
FY2018 (Feb 2019)	1,480	237	1,717	+95	38+DC
FY2019 (Feb 2020)	1,546	259	1,805	+88	39+DC
FY2020 (Jan 2021)	1,585	274	1,859	+54	40+DC
FY2021 (Jan 2022)	1,628	295	1,923	+64	40+DC
FY2022 (Jan 2023)	1,693	322	2,015	+92	40+DC
FY2023 (Jan 2024)	1,764	345	2,109	+94	43+DC
FY2024 (Feb 2025)	1,831	355	2,186	+77	43+DC
FY2025 (Jan 2026)	1,904	363	2,267	+81	44+DC

Sources: Ross Stores FY2015-FY2025 Q4 earnings releases; SEC 10-K filings (CIK 0000745732).

Estimated Revenue by Brand (FY2025)

dd's DISCOUNTS stores are smaller format (~22,000 sq ft vs. ~25,000-30,000 for Ross) and serve a lower-income demographic with lower price points, implying lower revenue per store.

Metric	Ross Dress for Less	dd's DISCOUNTS	Total
Store Count (FY2025)	1,904	363	2,267
Store Mix (%)	84%	16%	100%
Est. Avg Revenue/Store ($M)	~$10.5	~$6.5	~$10.0
Est. Segment Revenue ($M)	~$19,990	~$2,360	$22,751
Est. Revenue Share (%)	~88%	~12%	100%

Key assumptions: Ross Dress for Less generates ~$10.5M per store (consistent with ~$430/sq ft on ~25,000 sq ft selling area). dd's DISCOUNTS generates ~$6.5M per store given smaller format and lower price points. Management has noted dd's posted "healthy sales gains above Ross" in recent years, suggesting dd's comp growth runs 200-400bps above Ross.

Revenue and Store Count Growth by Brand

Period	Ross Store CAGR	dd's Store CAGR	Total Store CAGR
FY2015-FY2025 (10 years)	4.1%	7.8%	4.6%
FY2019-FY2025 (6 years)	3.5%	5.8%	3.9%

dd's growth drivers: dd's DISCOUNTS is the faster-growing concept, with nearly double the store count CAGR of Ross. Management accelerated dd's openings to 25 planned for FY2026 (vs. ~10 in FY2025), reflecting increased confidence following merchandising improvements and availability of former Rite Aid locations.

---

8.2 Revenue by Product Category

Ross discloses product category mix as a percentage of sales in its 10-K filings. Dollar amounts are not reported by category.

Product Category Sales Mix (FY2024 10-K, Year Ended Feb 1, 2025)

Category	% of Sales	Est. Revenue ($M)	Trend (5-Year)
Home Accents & Bed and Bath	26%	~$5,495	Stable; largest category since ~2020
Ladies	22%	~$4,649	Declining share (was 33% in FY2000)
Men's	16%	~$3,381	Steady
Accessories, Lingerie, Fine Jewelry & Cosmetics	15%	~$3,170	Cosmetics standout performer
Shoes	12%	~$2,536	Growing; best performer in FY2025
Children's	9%	~$1,902	Unchanged at ~9% for decades
Total	100%	$21,133

Product Category Mix Through 9 Months of FY2025 (Nov 1, 2025)

Category	% of Sales	Direction vs. FY2024
Home Accents & Bed and Bath	25%	-1pp (tariff headwinds)
Ladies	23%	+1pp (juniors strong)
Men's	16%	Flat
Accessories, Lingerie, Fine Jewelry & Cosmetics	14-15%	Flat
Shoes	13%	+1pp (best performer)
Children's	9%	Flat

Category Mix Evolution — 20-Year Shift

Category	FY2000	FY2024	Change
Ladies	33%	22%	-11pp (significant decline)
Home Accents & Bed/Bath	17%	26%	+9pp (now #1 category)
Men's	21%	16%	-5pp
Accessories/Jewelry/Cosmetics	12%	15%	+3pp
Children's	9%	9%	Flat
Shoes	8%	12%	+4pp

Key insight: Home has grown from ~17% to ~26% of sales over two decades — a major strategic diversification that reduces dependence on apparel cycles.

Growth Drivers & Risks by Category

Category	Growth Drivers	Risks
Home (26%)	Department store closures (Bed Bath liquidation); trade-down from HomeGoods/Pottery Barn; broad assortment	Tariff exposure (imported goods); Amazon competition; bulky items harder to source opportunistically
Ladies (22%)	Juniors segment "particularly strong"; trade-down from Nordstrom/Macy's; trend-driven purchases	Fashion risk (wrong trends = markdowns); Amazon apparel growth; fast fashion (Shein, Temu) competition
Men's (16%)	Steady demand; branded basics; less fashion risk than ladies	Slower growth category; limited differentiation vs. TJX/BURL
Accessories/Cosmetics (15%)	Cosmetics is a standout performer; high-margin impulse buys; fine jewelry draws affluent trade-down	Counterfeiting/shrinkage risk on small high-value items; Ulta/Sephora competition in cosmetics
Shoes (12%)	Fastest-growing category; branded athletic shoes at deep discounts; DSW/Famous Footwear closures	Sizing/returns complexity; Nike DTC shift could limit off-price supply
Children's (9%)	Stable, recession-resistant (kids outgrow clothes); repeat purchase cycle	Stagnant share for 20+ years; limited growth catalyst

FY2025 Q4 Earnings Call Highlights:

• Best performers: Shoes and Cosmetics
• Ladies: Continued strength; juniors "particularly strong"
• Home: "Sequential improvement" after tariff headwinds; dd's had "vibrant home" business
• Outerwear: "Bigger business for us this quarter than it has been"

---

8.3 Revenue by Geography

Ross Stores operates exclusively in the United States (plus Guam and Puerto Rico). There are no international operations.

Store Concentration by State (FY2024-FY2025 Data)

Rank	State	Approx. Stores	% of Total	Pop. per Store
1	California	~339	~19%	~116,600
2	Texas	~226	~13%	~128,300
3	Florida	~202	~11%	~109,400
4	Illinois	~85	~5%	—
5	Arizona	~69	~4%	—
6	Georgia	~60	~3%	—
7	Pennsylvania	~52	~3%	—
8	North Carolina	~49	~3%	—
9	Washington	~48	~3%	—
10	Virginia	~42	~2%	—
	All Other (34 states)	~1,095	~35%	—
	Total	~2,267	100%

Top 3 states (CA, TX, FL) = ~43% of all stores. This geographic concentration is a key risk factor — a state-level recession, natural disaster, or regulatory change in any of these three states would disproportionately impact results.

Geographic Growth Drivers & Risks

Region	% of Stores	Growth Driver	Risk
Sun Belt (CA, TX, FL, AZ, GA)	~50%	Population growth; core market; strong brand recognition	Over-penetration; natural disaster exposure; CA regulatory cost
Midwest (IL, OH, MI, IN)	~10%	Underpenetrated; new market entry; strong initial productivity	Weaker population growth; less brand awareness; weather risk
Northeast (PA, NY, NJ, CT)	~8%	High population density; affluent trade-down customers; new NY Metro stores "very strong"	High real estate costs; union labor markets; entrenched TJX presence
Southeast (NC, VA, TN, SC)	~12%	Growing populations; affordable real estate; favorable demographics	Increasing competition from BURL expansion
West/Mountain (WA, OR, CO, NV)	~10%	Established markets; steady performance	Limited runway for additional stores

Recent Expansion Milestones

• FY2025: First stores in New York Metro area and Puerto Rico — "very strong" initial performance
• FY2024-25: Expanded into Michigan (new market)
• FY2026 plan: 110 new stores (85 Ross + 25 dd's), with emphasis on Midwest and Northeast

Geographic concentration risk is partially mitigated by the diversification trend — Ross has gone from 34 states to 44 states over 10 years, and the top 3 state share has been gradually declining as newer markets grow faster.

---

8.4 Customer Demographics

Target Customer Profile

Attribute	Ross Dress for Less	dd's DISCOUNTS
Primary Age	25-54 years old	25-44 years old
Growing Cohort	18-34 (juniors, young men's)	Similar
Gender	~75-80% female	~80% female
Household Income	$35,000-$75,000	$25,000-$50,000
Education	Broad; value-conscious across income	Skews toward non-college
Visit Frequency	2-3x per month	2-3x per month
Average Basket	~$30-35 per transaction	~$25-28 (est.)
Average Item Price	~$10	~$8 (est.)

Customer Trends (FY2025)

• Growth "broad-based across income demographics and age demographics, including 18- to 34-year-old customers"
• Comp growth "driven mainly by an increase in transactions and customers with a modest increase in basket"
• Trade-down from department stores continues — TJX reports "record influxes of high-income shoppers"
• 87% of financially stressed shoppers plan to use discount stores (Bank of America survey)

---

8.5 Store Economics

Revenue per Store — 10-Year History

Fiscal Year	Revenue ($B)	Avg Store Count*	Rev/Store ($M)	YoY Change
FY2015	$11.94	1,404	$8.5	—
FY2016	$12.87	1,490	$8.6	+1.8%
FY2017	$14.13	1,578	$9.0	+3.7%
FY2018	$15.00	1,670	$9.0	0.0%
FY2019	$16.04	1,761	$9.1	+1.1%
FY2020	$12.53	1,832	$6.8	-25.3% (COVID)
FY2021	$18.92	1,891	$10.0	+47.1% (recovery)
FY2022	$18.70	1,969	$9.5	-5.0%
FY2023	$20.38	2,062	$9.9	+4.2%
FY2024	$21.10	2,148	$9.8	-0.5%
FY2025	$22.80	2,227	$10.2	+4.1%

Avg store count = (beginning + ending) / 2

10-Year Rev/Store CAGR: 2.0% ($8.5M → $10.2M). Post-recovery, revenue per store exceeded pre-COVID levels by ~12%.

Unit Economics Summary

Metric	Ross Dress for Less	dd's DISCOUNTS	Blended
Avg Gross Square Footage	~28,000 sq ft	~22,000 sq ft	~27,000 sq ft
Avg Selling Square Footage	~23,000-25,000 sq ft	~18,000 sq ft (est.)	~22,000-24,000 sq ft
FY2025 Revenue per Store ($M)	~$10.5 (est.)	~$6.5 (est.)	~$10.0
Revenue per Selling Sq Ft	~$420-$450 (est.)	~$360 (est.)	~$410-$430
Est. 4-Wall EBITDA Margin	20-25%	15-20% (est.)	18-23%
New Store Productivity (Yr 1)	70-75% of mature store	70-75% of mature store	—
Time to Maturity	3-5 years	3-5 years	—

New Store Economics

• FY2026 plan: 110 new stores (85 Ross + 25 dd's) = ~5% unit growth
• Management guidance: "70% to 75% new store productivity" in Year 1
• FY2025 described as "one of our best years in a while" for new store performance
• New stores in Northeast and Midwest markets showing "very strong" productivity, validating the expansion thesis

---

8.6 Growth Drivers — Detailed Analysis

A. Store Expansion Runway (Primary Driver — ~65% of Revenue Growth)

Metric	Current (FY2025)	Long-Term Target	Remaining	Growth (%)
Ross Dress for Less	1,904	2,900	996	+52%
dd's DISCOUNTS	363	700	337	+93%
Total	2,267	3,600	1,333	+59%

At the current pace of ~90-110 new stores/year, the runway provides 12-15 years of unit growth. FY2026 guidance of 110 new stores represents an acceleration to ~5% unit growth (from ~3.7% in FY2025).

Risks to store expansion:

• Diminishing returns as newer markets may have lower population density and weaker brand recognition
• Competition for prime retail real estate from Burlington (100+ stores/yr), TJX (~90/yr), and Nordstrom Rack
• Construction cost inflation and permitting delays
• Cannibalization of existing stores as density increases in mature markets

B. Comparable Store Sales (Secondary Driver — ~35% of Revenue Growth)

Period	Average Annual Comp	Primary Driver
FY2015-FY2019 (Pre-COVID)	+3.8%	Traffic + modest ticket growth
FY2022-FY2025 (Post-COVID)	+2.3% (incl. FY2022 -4%)	Transaction recovery + trade-down
FY2023-FY2025 (Normalized)	+4.3%	Strong execution + consumer shift
FY2026 Guidance	+3% to +4%	Conservative (historical beat by ~240bps)

Comp growth decomposition: Management stated FY2025 comp growth was "driven mainly by an increase in transactions and customers with a modest increase in basket" — i.e., traffic-led, which is healthier than ticket-led growth.

Risks to comp growth:

• Recession could reduce even trade-down spending if consumers eliminate discretionary purchases entirely
• Competition from TJX, Burlington, and digital off-price (ThredUp, Poshmark) could cap comp gains
• Post-COVID consumer behavior still normalizing — elevated FY2025 comps may not be sustainable

C. dd's DISCOUNTS Acceleration

dd's is the higher-growth concept with the most runway:

• Long-term target: 700 stores (vs. 363 today) = 93% growth potential
• Currently in only 22 states — significant white space
• Benefiting from Rite Aid and other retail bankruptcies freeing real estate
• FY2026 plan accelerates dd's openings to 25 (from ~10 in FY2025)
• Comps have consistently outperformed Ross Dress for Less by 200-400bps
• Targets lower-income demographic that is most responsive to trade-down trends

Risks to dd's growth:

• Lower-income customer is most vulnerable to macro downturns
• Smaller store format limits category assortment vs. Ross
• Dollar stores (Dollar General, Dollar Tree) compete for the same demographic
• Lower revenue per store means dd's stores contribute less to total revenue per incremental unit

D. New Market Entry

Market	Status	Opportunity
New York Metro	Entered FY2025; "very strong"	Large, high-density market; premium trade-down
Puerto Rico	Entered FY2025	Underserved off-price market
Michigan	Entered FY2024-25	Large Midwest state; underpenetrated
Upper Midwest (WI, MN, IA)	Not yet entered	Population of ~15M with few off-price options
New England (CT, MA, NH, VT, ME)	Limited presence	~15M population; high-income trade-down potential

E. Structural / Secular Tailwinds

1. Department store closures: Macy's closing 150 stores by FY2026; Kohl's closing 27; Forever 21 and Joann liquidated — frees both inventory and customers
2. Tariff disruption: Creates excess branded inventory that feeds directly into off-price buying channels
3. Consumer trade-down: 87% of financially stressed shoppers plan to use discount stores (BofA)
4. Generational shift: Gen Z and millennials embrace off-price as "smart shopping" — cultural tailwind
5. Real estate availability: Retail bankruptcies (Rite Aid, Bed Bath, etc.) provide prime locations at favorable rents

---

8.7 CAGR Calculations

Total Revenue CAGR

Period	Start Revenue	End Revenue	Years	CAGR
FY2015 - FY2025	$11,940M	$22,751M	10	6.7%
FY2019 - FY2025	$16,039M	$22,751M	6	6.0%
FY2014 - FY2025	$11,042M	$22,751M	11	6.8%

Store Count CAGR

Period	Start	End	Years	CAGR
FY2015 - FY2025 (Total)	1,446	2,267	10	4.6%
FY2015 - FY2025 (Ross only)	1,274	1,904	10	4.1%
FY2015 - FY2025 (dd's only)	172	363	10	7.8%

Revenue per Store CAGR

Period	Start Rev/Store	End Rev/Store	Years	CAGR
FY2015 - FY2025	$8.5M	$10.2M	10	2.0%
FY2019 - FY2025	$9.1M	$10.2M	6	2.0%

Revenue Growth Decomposition

Driver	Contribution to Revenue CAGR	10-Year CAGR
Store count growth	~65%	4.6%
Revenue per store growth (comp + mix)	~35%	2.0%
Total revenue growth	100%	6.7%

This confirms Ross Stores' growth is predominantly unit-driven (~65% from new stores) with a meaningful contribution from same-store productivity improvements (~35%). This is a healthy, repeatable growth profile that is less dependent on pricing power and more on disciplined execution of a proven store model.

Forward Revenue CAGR Implied by DCF Assumptions

Scenario	FY2025 Revenue	FY2035 Revenue (Yr 10)	Implied 10-Yr CAGR
Conservative	$22,751M	$33,182M	3.8%
Base	$22,751M	$40,527M	5.9%
Growth-Oriented	$22,751M	$44,097M	6.8%
Extreme Bear	$22,751M	$33,182M	3.8%

The Base Case forward CAGR of 5.9% is modestly below the historical 10-year CAGR of 6.7%, reflecting expected deceleration as the store base grows and comp growth normalizes. This appears reasonable given the 1,333-store expansion runway and consistent 3-5% comp growth history.

---

8.8 Summary of Key Findings

1. Single segment reporting — Ross does not break out Ross vs. dd's revenue. Estimated split: Ross Dress for Less ~88% ($20.0B), dd's DISCOUNTS ~12% ($2.4B).

2. Home is now the #1 category at 25-26% of sales, having surpassed Ladies (22-23%) over the past two decades. This diversification reduces apparel cycle dependence.

3. Geographic concentration risk — Top 3 states (CA, TX, FL) represent ~43% of stores. However, expansion into Midwest and Northeast is diluting this concentration, and new markets are showing "very strong" productivity.

4. Enormous store expansion runway — 1,333 stores remaining to reach the 3,600 target (+59% growth), providing 12-15 years of unit growth at the current ~100 stores/year pace.

5. 10-year revenue CAGR of 6.7%, driven ~65% by new stores and ~35% by same-store productivity. The 6-year CAGR (FY2019-FY2025) is 6.0%, reflecting COVID disruption.

6. dd's DISCOUNTS is the higher-growth concept — 7.8% store count CAGR (vs. 4.1% for Ross) with comp growth consistently 200-400bps above the larger banner. FY2026 accelerates dd's openings to 25.

7. Store economics are strong — ~$10M revenue per store, ~$420-450 revenue per selling sq ft, estimated 20-25% 4-wall EBITDA margins. New stores achieve 70-75% productivity in Year 1.

8. Forward growth is well-supported — The Base Case DCF's 5.9% revenue CAGR is conservative relative to the historical 6.7%, and the store expansion runway, secular off-price tailwinds, and consistent comp growth provide high visibility.

---

Step 8 Complete. Ross Stores' revenue growth is driven by a predictable, unit-economics-driven model: ~90-110 new stores per year contributing ~65% of growth, plus 3-5% annual comp sales providing the remaining ~35%. The company has 1,333 stores of expansion runway to its 3,600-store target, providing 12-15 years of visible organic growth. dd's DISCOUNTS is emerging as the higher-growth concept (93% store growth remaining vs. 52% for Ross). Key risks are geographic concentration (43% in 3 states), margin pressure from wages/shrinkage, and increasing competition from TJX, Burlington, and Nordstrom Rack.

Step 15 — News Impact Analysis: Ross Stores (ROST)

Date: March 6, 2026 Period Covered: September 2025 — March 2026 Last Major Event: Q4 FY2025 Earnings (March 3, 2026)

---

1. Comprehensive News Summary (September 2025 — March 2026)

A. CEO Jim Conroy — First Full Year in Charge

Background: James G. Conroy joined Ross as CEO in February 2025, recruited from Boot Barn (BOOT) where he was CEO. He received a ~$75M total first-year compensation package including $7.6M sign-on bonus, $32.2M restricted stock, and $8M performance-contingent RSUs.

Key Strategic Actions & Announcements:

• Improved merchandising: Credited with driving better buying, stronger assortments in ladies, men's, cosmetics, and shoes; center-core categories showed sequential improvement
• Marketing effectiveness: Enhanced marketing campaigns (unchanged spend rate but higher customer awareness/engagement); impact visible starting back-to-school season
• Store execution: "Test and learn" approach to payroll investments targeting high-volume activities like store recovery and register throughput
• Self-checkout expansion: Piloted in select stores with positive results; expansion across the fleet authorized for 2026
• Accelerated store growth: Increased dd's DISCOUNTS openings from 10 to 25 stores; overall 110 new stores planned (vs. 90 in FY2025)
• AUR strategy shift: Gaining confidence in shifting assortment to slightly higher-priced goods (new items, not like-for-like price increases) to recapture margin

Assessment: Conroy has delivered a strong first year. The Q4 results — 9% comp growth, record sales — validate the early initiatives. He brings a fresh "growth" orientation vs. the historically conservative Ross culture. The market rewarded this with a 7-8% stock surge post-earnings.

Model Impact: Positive. Supports the case for sustainable mid-single-digit comps and margin expansion. Consider raising near-term comp assumptions by 50-100 bps.

---

B. Q4 FY2025 Earnings Results (Announced March 3, 2026)

Metric	Q4 FY2025	Consensus	Beat/Miss
Revenue	$6.64B	$6.42B	+$220M beat (+3.4%)
Comparable store sales	+9%	~+5-6% est.	Significant beat
EPS	$2.00	$1.90	+$0.10 beat
Full-year FY2025 EPS	$6.61	—	vs. $6.32 FY2024 (+4.6% YoY)
Full-year FY2025 revenue	$22.8B (record)	—	+12% YoY

Key Takeaways:

1. Comp drivers: Higher transactions and customer counts (traffic-driven), with only modest increase in basket size — healthy comp composition
2. Strongest categories: Shoes and cosmetics
3. Strongest regions: Midwest and Mountain states
4. Merchandise margin: Improved, driven by "better buying" — off-price's core value-creation lever
5. Dividend: Increased 10% to $0.445/quarter ($1.78 annualized)
6. Buyback: New $2.55B two-year authorization (FY2026-2027), 21% increase vs. prior program
7. Stock reaction: Surged ~8% to new 52-week high of $213.52 on March 4-5

Model Impact: Very material. Revenue came in well above consensus, suggesting the model's top-line assumptions may need upward revision. The 9% Q4 comp is exceptional for a mature retailer and reflects both secular off-price tailwinds and company-specific execution.

---

C. FY2026 Guidance

Metric	FY2026 Guidance	Commentary
Q1 comp sales	+7% to +8%	Implies very strong start to spring; management noted "very strong start to the spring season"
Q1 EPS	$1.60 to $1.67
Q1 total sales growth	+10% to +12%	Includes new store contribution
Full-year comp sales	+3% to +4%	Conservative vs. FY2025's trajectory; typical Ross sandbagging
Full-year EPS	$7.02 to $7.36	Midpoint $7.19 = +8.8% YoY growth
Full-year total sales growth	+5% to +7%
Operating margin	12.0% to 12.3%	vs. 11.9% in FY2025; expansion driven by merchandise margin + lower distribution costs
CapEx	~$1.1B	Supply chain, store maintenance, self-checkout
New stores	110 (85 Ross + 25 dd's)	5% unit growth

Model Impact: The FY2026 guide is above consensus expectations and confirms the margin expansion thesis. The Q1 guide of +7-8% comps is especially bullish. However, full-year +3-4% may be sandbagged — Ross historically guides conservatively and beats. Model should use +4-5% comps for base case.

---

D. Store Expansion Plans

• FY2026: 110 new stores (85 Ross Dress for Less + 25 dd's DISCOUNTS)
• FY2025 actual: 90 new stores opened, 9 closed; ended year at 2,267 total stores
• Long-term target: 3,600 stores (2,900 Ross + 700 dd's) — implies ~1,333 stores of remaining whitespace (~59% growth from current base)
• dd's DISCOUNTS acceleration: From 10 openings in FY2025 to 25 in FY2026 — signals renewed confidence in the dd's concept
• New Arizona DC: Opened in 2025, supporting Western expansion; features solar canopies

Model Impact: The 3,600-store long-term target is a significant growth runway. At 110 stores/year, reaching 3,600 would take ~12 years. This supports a long-duration growth story. The dd's acceleration is incrementally positive — historically underinvested.

---

E. Tariff Impact

• FY2025 total tariff cost: $0.16/share ($54M pre-tax estimate)
• Q3 FY2025: ~$0.05/share negative impact, partially offset by better buying
• Q4 FY2025: Tariff-related costs "negligible"
• FY2026 outlook: Expects to recapture some tariff pressure from FY2025 through better buying and selective AUR increases
• Structural exposure: >50% of merchandise originates in China (though Ross is primarily an indirect importer purchasing from brands/manufacturers)
• Off-price advantage: Tariffs create market dislocation that increases available off-price inventory as brands seek to move displaced/excess goods — net tailwind

Model Impact: Tariffs are a net positive for off-price long-term despite short-term cost headwinds. The $0.16/share FY2025 impact was manageable and declining. FY2026 guide already embeds tariff assumptions. No model adjustment needed unless tariff regime changes dramatically.

---

F. Analyst Upgrades/Downgrades (Post Q4 Earnings)

Firm	Action	Rating	Price Target	Notes
Telsey Advisory	Upgrade	Market Perform → Outperform	$240	Significant upgrade post-earnings
Guggenheim	Target raise	Buy	$226	Maintained buy
Barclays	Target raise	—	$221	Lifted target
Wells Fargo	Target raise	Overweight	$235	Forecasts strong price appreciation
Zacks	Downgrade	Strong Buy → Hold	—	Contrarian; may reflect valuation concern post-surge

Consensus: 17 Buy, 5 Hold, 0 Sell — Moderate Buy consensus, average PT $199.28 (likely stale pre-earnings; post-earnings targets clustering $220-240)

Model Impact: Broad analyst endorsement post-earnings. The Telsey upgrade is notable as a notable Street voice moving to bullish. Post-earnings targets suggest Street sees $220-240 as fair value range.

---

G. Management Changes (Beyond CEO)

Change	Details	Date
CFO transition	Adam Orvos retired Sept 30, 2025; replaced by William Sheehan (promoted from Group SVP of Finance; 20-year Ross veteran)	Oct 1, 2025
Board Chair transition	Michael Balmuth stepped down as Executive Chairman Jan 31, 2026; replaced by K. Gunnar Bjorklund (independent director since 2003, Lead Independent Director since 2023)	Feb 1, 2026
COO	Michael Hartshorn continues as Group President & COO (board member since 2021)	No change

Assessment: The CFO transition to an internal candidate (Sheehan) provides continuity. The Board Chair transition from Balmuth (company insider) to Bjorklund (independent) is a governance positive — shifts to a fully independent chairman model. No red flags.

Model Impact: Neutral to slightly positive. Continuity in finance function; improved governance optics.

---

H. Competitor News Affecting ROST

Competitor	News	Impact on ROST
TJX Companies	Market leader with ~68% off-price share; strong 2025 results; aggressive international expansion	Validates off-price secular trend; ROST benefits from same macro tailwinds
Burlington Stores	Shifting to smaller store formats; plans 400 net new stores over 4 years; -5.5% stock YTD	Burlington's smaller format enters urban areas where Ross is dominant — modest competitive pressure
Macy's	Closing 150 underperforming stores by 2026 (announced 2024)	Direct tailwind — displaced Macy's shoppers are prime off-price converts
Kohl's	Closed 27 underperforming stores by April 2025	Direct tailwind — same dynamic as Macy's closures
Department stores broadly	Continued secular decline accelerating in 2025-2026	Structural market share shift to off-price accelerating

Model Impact: Highly favorable competitive backdrop. Department store closures create a multi-year tailwind of customer acquisition for off-price. Burlington's small-format strategy is worth monitoring but not an immediate threat.

---

I. Legal/Regulatory Developments

• FLSA overtime class action: Ongoing (see Step 14); no major new developments in the period
• No new material litigation disclosed in Q4 earnings or 10-K
• UFLPA compliance: Ongoing supply chain monitoring given China-origin merchandise concentration; no enforcement actions against Ross
• SEC climate disclosure: Evolving rules could require more comprehensive environmental reporting; Ross not yet preparing for Scope 3 disclosure

---

2. Materiality Assessment — Model Adjustment Recommendations

News Item	Materiality	Model Adjustment
Q4 earnings beat	HIGH	Raise FY2026 revenue assumption by 2-3%; confirm margin expansion trajectory
FY2026 guidance (+3-4% comps)	HIGH	Use +4-5% base case (historically sandbagged); EPS midpoint $7.19 as floor
New CEO execution	HIGH	Improved execution supports higher sustainable comp trajectory; reduce execution discount
110 new stores in FY2026	MEDIUM	Unit growth already in model at ~5%; confirm dd's acceleration
$2.55B buyback	MEDIUM	~3.5% of market cap over 2 years; incorporate into share count decline
10% dividend increase	LOW	Confirms shareholder return commitment; immaterial to valuation
Department store closures	MEDIUM	Supports elevated near-term comps (+100-200 bps tailwind)
Tariff recapture	LOW	Modest FY2026 margin tailwind; already in guidance
Analyst upgrades	LOW	Sentiment indicator, not a model input
Management transitions	LOW	Internal promotions = continuity

---

3. Pending Catalysts — Next 6-12 Months

Catalyst	Expected Timing	Potential Impact
Q1 FY2026 earnings	Early June 2026	Guide implies +7-8% comps — beat would confirm momentum; HIGH impact
Self-checkout fleet-wide rollout	Throughout FY2026	Labor productivity gains; potential 20-40 bps margin benefit at scale
New tariff developments	Ongoing (trade policy dependent)	Additional China tariffs = more off-price inventory availability (tailwind)
dd's DISCOUNTS performance	Quarterly updates	25 new stores = meaningful data on long-term dd's potential
Jim Conroy's first Investor Day	Not yet announced (likely 2026-2027)	Could reset long-term financial targets; potential re-rating catalyst
Department store closures accelerating	2026-2027	Macy's 150 closures by 2026 deadline; potential incremental traffic gains
Potential SBTi validation	2026-2027	Would improve ESG positioning and potentially expand investor base
Index rebalancing / ESG fund inclusion	Ongoing	Improved ESG scores could drive passive inflow
Share repurchase execution	FY2026-2027	$2.55B program = ~$1.3B/year in buybacks; accretive to EPS
Consumer spending environment	Macro-dependent	Recession risk = off-price tailwind (trade-down effect); strong economy = spending tailwind

---

Summary

The last six months have been overwhelmingly positive for Ross Stores. The new CEO has delivered execution improvements visible in record Q4 results (9% comps, $6.64B revenue, $2.00 EPS — all above expectations). FY2026 guidance is strong, the capital return program has been significantly expanded, and the competitive backdrop (department store closures, tariff-driven inventory availability) is highly favorable.

Net news impact on model: POSITIVE. The key adjustments are:

1. Raise near-term comp assumptions by 50-150 bps given demonstrated momentum and Q1 guide
2. Confirm operating margin expansion to 12%+ for FY2026
3. Maintain 5% annual unit growth assumption with upside from dd's acceleration
4. Factor in ~1.5-2% annual share count reduction from buyback program

The primary risks to monitor are: (1) whether the +9% Q4 comp is a one-time spike or sustainable trajectory, (2) any material escalation in tariff costs beyond guidance, and (3) Burlington's competitive positioning in urban markets. None of these risks are sufficient to offset the overwhelmingly positive news flow.

Biggest upcoming catalyst: Q1 FY2026 earnings (June 2026) — the +7-8% comp guide sets a high bar. A beat would confirm the thesis that Conroy has structurally improved execution; a miss would raise questions about sustainability.