Narrow-Moat Ross’ Value Proposition Preserves Sales and EPS Growth Despite Macroeconomic Uncertainty

We don’t expect to materially alter our $105 per share fair value estimate for narrow-moat Ross Stores after incorporating fourth-quarter results that modestly edged our forecast and a more tepid 2023 company outlook. In the fourth quarter, Ross delivered sales of $5.2 billion and EPS of $1.31, representing 3% and 26% growth, respectively. Sales were supported by a return to positive same-store sales growth (1%) and profits benefited from lower logistics and compensation costs in the period, which led to 90 basis points of operating margin expansion (10.7%). As consumers continue to shift away from goods to services, same-store sales have taken time to stabilize, as indicated by positive fourth-quarter comps, but full-year comps still contracted 4%.