Ross Stores Beat Earnings and Gained 68% in a Year. Reddit Is Still Betting Against It.

Core Viewpoint - Ross Stores reported strong Q4 FY2026 results with a 9% growth in comparable store sales and an EPS of $2.00, surpassing the consensus estimate of $1.85, while also announcing a $2.55 billion buyback program and a 10% increase in quarterly dividends to $0.445 per share [2][5]. Financial Performance - Q4 FY2026 comparable store sales increased by 9%, building on a 3% increase from the previous year [5]. - EPS for Q4 FY2026 was $2.00, exceeding the consensus estimate of $1.85 [2][5]. - Operating margin reached 12.3%, above the management's guidance range of 11.5% to 11.8% [2][5]. - The stock has appreciated 66% over the past year and is up 18% year-to-date [5]. Management Guidance - Management provided a confident outlook for Q1 FY2026, projecting comparable store sales growth of 7% to 8% [3][5]. - The company plans to open 110 new locations in fiscal 2026 and has authorized a new $2.55 billion buyback program, which is 21% larger than the previous authorization [7]. Market Sentiment - Despite strong performance, sentiment on Reddit's r/wallstreetbets is bearish, with a score of 18 out of 100, primarily driven by concerns over valuation and competition [6]. - The bearish thesis highlights challenges in differentiation within a crowded discount retail landscape and competitive pressures from private labels and online brands [6][8]. Consumer Sentiment and Economic Context - The University of Michigan Consumer Sentiment index is at 53.3, indicating low consumer confidence, which supports the trade-down thesis favoring off-price retail [7]. - Tariff pressures from China, which impacted earnings by approximately $0.16 per share in FY2025, may pose risks to future performance [8].