Group 1 - The article emphasizes the importance of seasonality in trading, suggesting that it has been a reliable backdrop for price action despite external factors like tariffs and budget bills [1] - The recommended trade setup is a long trade on Ross Stores (ROST), extending into January 2026, with a focus on identifying overlooked opportunities rather than chasing headlines [2][3] - ROST's current resistance is around $160, with support near $120, indicating potential volatility in the coming weeks [3] Group 2 - The proposed trading strategy is a "long call butterfly," which combines a long call spread and a short call spread sharing the same short strike and expiration date, aiming for profit if the price rises [3][5] - The current debit for the long call butterfly is $3.28, with a breakeven price at $138.23 plus commissions, and a potential profit of $1,672 on a risk of $328 [5] - The strategy allows for multiple exit strategies, including selling the butterfly when profit goals are met or loss thresholds are breached, typically aiming for a 100% to 300% return [6][9] Group 3 - The specific trade details include buying 1 ROST 16 Jan26 135 calls, selling 2 ROST 16 Jan26 150 calls, and buying 1 ROST 16 Jan26 165 calls [8] - Traders are advised to set alerts for key price levels, particularly around $150, to monitor the trade's performance as it approaches expiration [4] - Advanced traders may consider adjusting short strikes if the price continues to rise, providing flexibility in managing the trade [6]

Core Insights - Ross Stores, Inc. operates a chain of off-price retail apparel and home accessories stores, utilizing a successful business model that appeals to cost-conscious consumers [1] - The company is facing significant macroeconomic and geopolitical challenges, including tariff pressures and persistent inflation, which are impacting its cost structure and visibility into future performance [2][4] Financial Performance and Guidance - Management has withdrawn fiscal 2025 sales and earnings guidance due to uncertainties related to tariffs and macroeconomic conditions, leading to a more cautious outlook for the second quarter [3][10] - The Zacks Consensus Estimate for fiscal 2025 EPS indicates a year-over-year decline of 1.4%, while fiscal 2026 EPS is expected to grow by 9% [10] Market Position and Valuation - Ross Stores' shares have decreased by 15.7% year to date, contrasting with the industry's growth of 2.3% [8] - The company trades at a forward price-to-earnings ratio of 19.66X, significantly lower than the industry average of 31.86X [9] Merchandise Sourcing and Cost Pressures - More than half of Ross Stores' merchandise is sourced from China, making the company vulnerable to rising tariff-related costs [4][10] - Although the company is implementing mitigation strategies such as supply-chain diversification and vendor negotiations, these may not fully alleviate the financial pressures [5]

Company Performance - Ross Stores (ROST) closed at $127.59, reflecting a -2.73% change from the previous day, underperforming the S&P 500's 0.4% loss [1] - In the past month, shares of Ross Stores gained 0.02%, while the Retail-Wholesale sector and the S&P 500 gained 4.14% and 4.97%, respectively [1] Earnings Projections - The upcoming EPS for Ross Stores is projected at $1.54, indicating a 3.14% decline compared to the same quarter last year [2] - Revenue is estimated at $5.53 billion, representing a 4.68% increase from the prior-year quarter [2] Annual Estimates - For the annual period, earnings are anticipated at $6.23 per share and revenue at $21.99 billion, reflecting shifts of -1.42% and +4.07% from the previous year [3] - Recent adjustments to analyst estimates are crucial as they indicate short-term business trends [3] Valuation Metrics - Ross Stores has a Forward P/E ratio of 21.04, which is lower than the industry average of 21.39, suggesting it is trading at a discount [6] - The PEG ratio for Ross Stores is 2.51, compared to the industry average of 2.81, indicating a relatively favorable valuation in terms of growth expectations [7] Industry Ranking - The Retail - Discount Stores industry has a Zacks Industry Rank of 155, placing it within the bottom 38% of over 250 industries [7] - The strength of industry groups is measured by the Zacks Industry Rank, with the top 50% rated industries outperforming the bottom half by a factor of 2 to 1 [8]

Core Insights - The discount retail sector, represented by Ross Stores, Inc. (ROST) and Dollar Tree, Inc. (DLTR), is thriving as consumers prioritize value and affordability amid economic uncertainty [1][2][3] Group 1: Company Overview - Ross Stores is the leading off-price retailer in the U.S., known for offering recognizable brands at lower prices than traditional department stores, demonstrating strong operational efficiency and profitability [4][7] - Dollar Tree has solidified its position in the discount retail sector, focusing on its core Dollar Tree banner and divesting Family Dollar, which has led to increased traffic and sales [8][10][12] Group 2: Financial Performance - Ross Stores reported steady comparable sales with improved customer traffic and strong performance in key categories like cosmetics and women's apparel [5][6] - Dollar Tree experienced broad-based comparable sales growth in fiscal Q1 2025, driven by increased traffic and average ticket sizes, particularly in consumables [10][11] Group 3: Strategic Initiatives - Ross Stores employs an agile buying model and a "packaway" approach to maintain product freshness and value, appealing to a diverse demographic [6][7] - Dollar Tree is expanding its multi-price strategy with "3.0" stores, moving beyond the traditional pricing model to enhance its product mix and store conditions [11][13] Group 4: Market Positioning - Ross Stores is expanding its physical footprint and modernizing its brand experience, indicating confidence in continued demand for its value-driven model [7] - Dollar Tree's transformation and focus on higher-income consumers, along with its effective execution in the value retail space, position it favorably against competitors [12][13] Group 5: Stock Performance and Valuation - Ross Stores has a forward P/E ratio of 20.18X, below the industry average, while Dollar Tree's forward P/E stands at 17.76X, indicating a reasonable valuation for both [18][19] - In the past six months, Dollar Tree's stock surged 38.3%, outperforming Ross Stores' 15.8% decline, reflecting investor confidence in Dollar Tree's growth strategy [19][23] Group 6: Future Outlook - The Zacks Consensus Estimate suggests Ross Stores will see a 3.9% sales growth but a 1.6% decline in EPS for fiscal 2025, while Dollar Tree is expected to achieve a 6.5% growth in EPS despite a significant sales decline [15][16] - Current market dynamics favor Dollar Tree as a stronger investment option due to its robust transformation and growth roadmap [23][24]

[PART I. FINANCIAL INFORMATION](index=3&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) [Financial Statements (unaudited)](index=3&type=section&id=Item%201.%20Financial%20Statements%20(unaudited)) For the first quarter of fiscal 2025, Ross Stores reported a **2.6% increase in sales to $5.0 billion**, while net earnings slightly decreased to **$479 million from $488 million** year-over-year, with diluted EPS rising to **$1.47 from $1.46** aided by share repurchases, and cash decreasing to **$3.8 billion** due to debt repayment and stock buybacks, while cash flow from operations improved to **$410 million** [Condensed Consolidated Statements of Earnings](index=3&type=section&id=Condensed%20Consolidated%20Statements%20of%20Earnings) In Q1 2025, sales increased to **$4.98 billion from $4.86 billion**, operating income rose to **$606.5 million**, net earnings slightly declined to **$479.2 million from $488.0 million**, and diluted EPS increased to **$1.47 from $1.46** due to reduced shares outstanding Q1 2025 vs Q1 2024 Earnings | Financial Metric | Three Months Ended May 3, 2025 | Three Months Ended May 4, 2024 | | :--- | :--- | :--- | | Sales | $4,984,971,000 | $4,858,067,000 | | Operating income | $606,470,000 | $591,113,000 | | Net earnings | $479,249,000 | $487,990,000 | | Diluted EPS | $1.47 | $1.46 | [Condensed Consolidated Balance Sheets](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of May 3, 2025, total assets decreased to **$14.3 billion from $14.9 billion**, cash and cash equivalents dropped to **$3.8 billion from $4.7 billion** due to debt repayment, merchandise inventory increased to **$2.67 billion from $2.44 billion**, and total stockholders' equity grew to **$5.58 billion** Key Balance Sheet Items ($000) | Account | May 3, 2025 | February 1, 2025 | May 4, 2024 | | :--- | :--- | :--- | :--- | | Cash and cash equivalents | $3,783,413 | $4,730,744 | $4,654,316 | | Merchandise inventory | $2,669,849 | $2,444,513 | $2,461,699 | | Total assets | $14,304,616 | $14,905,332 | $14,491,782 | | Total current liabilities | $4,435,759 | $4,661,825 | $4,885,549 | | Long-term debt | $1,016,897 | $1,515,080 | $1,513,200 | | Total stockholders' equity | $5,576,078 | $5,509,195 | $4,947,952 | [Condensed Consolidated Statements of Stockholders' Equity](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders'%20Equity) For Q1 2025, total stockholders' equity increased from **$5.51 billion to $5.58 billion**, driven by **$479.2 million in net earnings**, partially offset by **$264.4 million in stock repurchases** and **$133.3 million in dividends** - During Q1 2025, the company repurchased common stock for **$264.4 million** (inclusive of excise tax) and declared dividends of **$133.3 million** (**$0.4050 per share**)[13](index=13&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash from operating activities increased to **$409.7 million** in Q1 2025, investing activities used **$207.4 million** due to higher capital expenditures, and financing activities used **$1.15 billion**, primarily due to a **$700 million debt repayment** Cash Flow Summary ($000) | Cash Flow Activity | Three Months Ended May 3, 2025 | Three Months Ended May 4, 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $409,715 | $368,921 | | Net cash used in investing activities | ($207,378) | ($136,249) | | Net cash used in financing activities | ($1,149,809) | ($450,033) | | Net decrease in cash | ($947,472) | ($217,361) | [Notes to Condensed Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) Key notes include the **$700 million Senior Notes repayment**, a new **$2.1 billion stock repurchase program**, a **$0.4050 per share quarterly dividend**, an effective tax rate increase to **25%**, and the company operating as a single reportable segment - In April 2025, the company repaid the **$700 million** principal amount of its **4.600% Senior Notes** at maturity[50](index=50&type=chunk) - In March 2024, the Board approved a two-year, **$2.1 billion** stock repurchase program, under which the company repurchased **2.0 million shares** for **$262.5 million** in Q1 2025[30](index=30&type=chunk) - The company has one reportable segment, aggregating its two operating segments, Ross and dd's DISCOUNTS, due to similar economic characteristics[57](index=57&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=18&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management reported a **2.6% sales increase** in Q1 2025, driven by **78 net new stores**, with comparable store sales flat and operating margin stable at **12.2%**, while navigating macroeconomic pressures and executing a **$700 million debt repayment**, **$262.5 million in share repurchases**, and plans for **90 new stores** Q1 2025 Key Performance Indicators | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Sales growth | 3% | 8% | | Comparable store sales growth | 0% | 3% | | Operating margin | 12.2% | 12.2% | | Net earnings margin | 9.6% | 10.0% | - The company opened **19 new stores** in Q1 2025 (**16 Ross, 3 dd's DISCOUNTS**) and plans to open approximately **90 new stores** for the full fiscal year[69](index=69&type=chunk)[70](index=70&type=chunk) - The company repaid **$700 million** of Senior Notes in April 2025, repurchased **$262.5 million** of common stock, and paid **$133.3 million** in dividends during the quarter[81](index=81&type=chunk)[91](index=91&type=chunk)[96](index=96&type=chunk) - Management expects merchandise margin to decrease in Q2 2025 due to announced tariffs and distribution costs to increase from the opening of a new distribution center[73](index=73&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=26&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's primary market risk is interest rate changes affecting interest income from cash balances, with no variable-rate borrowings outstanding and all Senior Notes at fixed rates, and a **100 basis point change** in rates is not expected to be material - The company's primary market risk is from changes in interest rates affecting interest income on cash and cash equivalents[105](index=105&type=chunk)[107](index=107&type=chunk) - As of May 3, 2025, the company had no borrowings outstanding under its variable-rate credit facility, and all outstanding Senior Notes are fixed-rate[106](index=106&type=chunk) - A hypothetical **100 basis point change** in interest rates is not expected to have a material impact on the company's financial position, results of operations, or cash flows[108](index=108&type=chunk) [Controls and Procedures](index=27&type=section&id=Item%204.%20Controls%20and%20Procedures) Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of May 3, 2025, with no material changes to internal control over financial reporting during the first quarter - Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective at the reasonable assurance level as of the end of the reporting period[110](index=110&type=chunk) - Management concluded that no changes in internal control over financial reporting occurred in Q1 2025 that have materially affected or are reasonably likely to materially affect these controls[112](index=112&type=chunk) [PART II. OTHER INFORMATION](index=27&type=section&id=PART%20II.%20OTHER%20INFORMATION) [Legal Proceedings](index=27&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in various legal and regulatory proceedings, including class action lawsuits concerning wage and hour laws, which management believes will not have a material adverse effect on its financial condition or results - The company is named in class/representative action lawsuits, primarily in California, alleging wage and hour law violations, which remain pending[32](index=32&type=chunk)[113](index=113&type=chunk) - Management's opinion is that the resolution of currently pending litigation will not have a material adverse effect on the company's financials[34](index=34&type=chunk) [Risk Factors](index=27&type=section&id=Item%201A.%20Risk%20Factors) The company faces significant risks from macroeconomic factors like inflation and geopolitical conditions impacting consumer spending, high reliance on merchandise from China making it susceptible to U.S. trade policy changes, and potential supply chain disruptions - The business is subject to macroeconomic risks, including inflation, interest rates, and geopolitical conditions, which can negatively affect consumer confidence and spending[115](index=115&type=chunk)[117](index=117&type=chunk) - A predominant portion of merchandise sold originates from other countries, with **more than half from China**, making the company highly susceptible to changes in U.S. trade policy, tariffs, and quotas[116](index=116&type=chunk)[118](index=118&type=chunk)[120](index=120&type=chunk) - Risks associated with importing merchandise include supply chain disruptions, shipping delays, higher freight costs, and geopolitical instability[119](index=119&type=chunk)[121](index=121&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=29&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) In Q1 2025, Ross Stores repurchased approximately **2.0 million shares** for **$262.5 million** under its **$2.1 billion** repurchase program, with **$787.5 million** remaining as of May 3, 2025 Q1 2025 Share Repurchases | Period | Total Shares Purchased | Average Price Paid | Shares Purchased Under Program | Remaining Authorization ($000) | | :--- | :--- | :--- | :--- | :--- | | March 2025 | 1,457,767 | $125.95 | 975,411 | $926,040 | | April 2025 | 1,008,676 | $137.85 | 1,004,809 | $787,500 | | **Total** | **2,466,443** | **$130.82** | **1,980,220** | **$787,500** | - The repurchases are part of a two-year, **$2.1 billion** program approved by the Board of Directors in March 2024[122](index=122&type=chunk) [Exhibits](index=30&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the Form 10-Q, including the company's Certificate of Incorporation, Bylaws, executive employment agreements, and required CEO and CFO certifications under Sarbanes-Oxley Act - The filing includes certifications from the CEO and CFO as required by Sections 302(a) and 1350 of the Sarbanes-Oxley Act[125](index=125&type=chunk) [Signatures](index=31&type=section&id=Signatures) The Form 10-Q report was officially signed on **June 10, 2025**, by Jeffrey P. Burrill, Senior Vice President, Chief Accounting Officer, and Corporate Controller, on behalf of Ross Stores, Inc - The report was duly signed and authorized on **June 10, 2025**, by Jeffrey P. Burrill, Senior Vice President, Chief Accounting Officer and Corporate Controller[127](index=127&type=chunk)[128](index=128&type=chunk)

Core Insights - Ross Stores Inc. (ROST) experienced a significant trading signal known as Power Inflow, indicating potential upward momentum in the stock price [3][4] - The Power Inflow occurred at a price of $130.50, suggesting a bullish trend for traders looking to capitalize on expected price increases [4][8] - Following the Power Inflow, ROST's stock reached a high price of $137.77, resulting in returns of 5.6% and a close price of $137.46, yielding a 5.3% return [8] Trading Signals - Power Inflow is a crucial indicator for traders, reflecting institutional activity and guiding trading decisions [4][6] - Order flow analytics, which includes the analysis of buy and sell orders, helps traders interpret market conditions and identify opportunities [5][7] - The Power Inflow typically occurs within the first two hours of market opening, influencing the stock's direction for the remainder of the trading day [6] Market Implications - The occurrence of Power Inflow is interpreted as a bullish signal by active traders, indicating a potential entry point for investments [4][5] - Incorporating order flow analytics into trading strategies can enhance trading performance and decision-making [7] - The importance of a trading plan that includes profit targets and stop losses is emphasized to manage risk effectively [8]

Group 1 - The article discusses concerns regarding the consumer spending environment, particularly in discretionary spending, which has led to a hold rating on Ross Stores (NASDAQ: ROST) [1] - The removal of FY25 guidance by Ross Stores raises additional concerns about the company's future performance [1] Group 2 - The author emphasizes a diverse investment approach, incorporating fundamental, technical, and momentum investing strategies to enhance the investment process [1]

Core Viewpoint - The stock market is facing a new economic regime influenced by trade tariffs, leading to uncertainty in growth, margins, and earnings for companies affected by these tariffs [1] Group 1: Ross Stores Overview - Ross Stores' stock has recently declined by 12.5%, attributed to broader market sell-offs and its quarterly earnings results [5][4] - The company reported flat sales growth compared to last year, which is better than declining figures from peers in the retail sector [7] - Despite the challenges, Ross Stores has a strong cash flow, reporting a net operating cash flow of $409.7 million for the quarter, an 11% increase from $368.9 million last year [10] Group 2: Tariff Impact and Company Strategy - Ross Stores imports a small portion of its merchandise, allowing it to manage costs better amidst tariff increases [8] - The company has guided for 3% to 4% comparable sales growth for the second quarter, indicating potential demand despite inflationary pressures [10] - Management plans to increase store count by 3.6% over the year, signaling confidence in future demand [10] Group 3: Financial Metrics and Forecast - Ross Stores has generated a return on invested capital (ROIC) of 17.6%, providing room to absorb tariff costs while maintaining its low-cost retail position [13] - The stock price forecast for Ross Stores is $158.67, indicating a 15.60% upside potential from the current price of $137.26 [12] - The company has announced a $1 billion stock repurchase plan for 2025, which could support stock recovery during market dips [14]

Investment Rating - The report maintains an "Overweight" rating for Ross Stores with a price target of $141.00, lowered from a previous target of $161.00 [2][19][20]. Core Insights - Ross Stores reported an adjusted 1Q EPS of $1.47, exceeding the Street estimate of $1.44 and within management's guidance of $1.33 to $1.47, driven by flat same-store sales growth and stable operating margins [1][16]. - Management has withdrawn FY25 guidance due to uncertainties surrounding tariff announcements but has provided expectations for 2Q25, forecasting EPS of $1.40 to $1.55, which is below the Street estimate of $1.65 [1][14]. - The company is positioned favorably in the off-price retail sector, with a target of 2,500 stores implying over 10 years of annual square footage growth of 5-6% [10][19]. Financial Performance - For 1Q, Ross Stores achieved flat same-store sales growth, with April showing a notable improvement to +3% compared to previous months [1][16]. - The company reported a 12.2% EBIT margin, above the Street's expectation of 11.9%, and gross margin remained flat year-over-year at 28.2% [1][18]. - The report indicates a revenue growth of 2.6% for 1Q, with net income of $479 million and an adjusted EPS of $1.47 [18]. Future Outlook - Management expects 2Q same-store sales to be flat to +3%, which represents a significant acceleration compared to 1Q [1][14]. - The anticipated operating margin for 2Q is projected to decline to 10.7-11.4%, below the Street's expectation of 12.4% [1][14]. - The report highlights potential headwinds from tariffs, estimating a quarterly EPS impact of $0.11 to $0.16 due to tariff-related costs [7][14]. Valuation Metrics - The revised price target of $141 is based on approximately 22 times the revised 2026 EPS, reflecting a low-double-digit growth algorithm [11][20]. - The report outlines adjusted EPS estimates for FY25 at $6.16, down from a previous estimate of $6.60, with a projected operating margin of 11.4% [2][14]. Market Position - Ross Stores is well-positioned to capture market share from department stores, benefiting from a strong value proposition that offers prices 20-60% lower than competitors [10][19]. - The company has a robust balance sheet, ending 1Q with $3.8 billion in cash against $1.5 billion in debt, supporting its growth strategy [16][18].

Market Performance - The S&P 500 index declined approximately 2.3% this week, while the Dow Jones Industrial Average fell about 2.5% [1] - The Nasdaq index dropped around 2.4%, and the Nasdaq 100 index also saw a decline of about 2.4% [1] - The semiconductor index experienced a significant drop of 4.4%, and the banking index fell approximately 4.2% [1] - The index tracking the seven major U.S. tech stocks decreased by about 2.8%, and the "Trump Tariff Losers Index" fell by 5% [1] - Small-cap stocks declined by 3.3%, while the biotechnology index saw a slight increase of 0.4% [1] Daily Performance - On Friday, the S&P 500 index initially closed down by 0.6%, with the technology sector dropping 1.2% [1] - Other sectors such as telecommunications, consumer discretionary, and financials saw declines of up to 0.9%, while the utilities sector rose by 1.2% [1] - The Nasdaq 100 index initially closed down by 0.9%, with notable declines in stocks like Workday (down 12.4%), Copart (down 11.6%), and Ross Stores (down 9.9%) [1] - Conversely, stocks such as CrowdStrike (up 2.9%), Grail (up 3.6%), and Intuit (up 8.2%) experienced gains [1]