Telsey Advisory Group upgraded Ross Stores to an Outperform rating after analyst Dana Telsey described the company's year-end results as a "strong finish to FY25." The firm pointed to accelerating momentum that it says has carried into early FY26.
In the fourth quarter, Ross reported earnings per share of $2.00, topping the consensus estimate of $1.90. Telsey attributed the upside to sales growth and gross margin leverage.
Revenue for the quarter climbed 12.2 percent to $6.64 billion, a result that exceeded both company guidance and market expectations. Comparable sales rose 9 percent, a rate that Telsey noted was more than double the high end of prior guidance.
Telsey highlighted that the strength was broad-based, observing robust performance across departments and geographies. The analyst credited improved assortments and a better in-store experience for supporting the top-line gains.
Gross margin expanded to 27.2 percent, a level Telsey described as well above consensus, while operating margin reached 12.3 percent, outpacing both internal guidance and external forecasts.
For FY26, Telsey presented a constructive outlook. The firm expects total sales to increase in the range of 5 percent to 7 percent, with comparable sales growth projected at 3 percent to 4 percent. Management has signaled that the momentum observed late in FY25 has persisted into the new fiscal year.
Reflecting that ongoing strength, Ross guided first-quarter sales growth of 10 percent to 12 percent and comparable sales growth of 7 percent to 8 percent, figures Telsey characterized as well ahead of prior forecasts.
The firm also noted that Ross plans to increase investments in store growth while aiming to preserve a healthy margin profile and a well-controlled cost structure. Alongside those plans, Ross has raised shareholder returns by increasing its dividend and authorizing a new $2.55 billion share repurchase program.
In response to the stronger results and outlook, Telsey Advisory Group raised its price target on Ross Stores to $240 from $220.
Context and implications
The upgrade to Outperform and the higher price target reflect Telseys assessment that recent operational improvements and margin gains provide a stronger platform for growth and shareholder distributions early in FY26. The firm's projections for sales and comparable-store growth, together with elevated guidance for the first quarter, underscore management's confidence in demand and execution.
Investors will be watching whether Ross can sustain assortment and in-store improvements while executing on planned store investment and maintaining its cost controls.