Ross Stores stock doesn't look like the best option in discount retailing for investors in 2022, Wells Fargo said Monday.
Ross Stores (ticker: ROSS) stock is trading lower Monday, down 0.3% to $113.95, following a 2021 that saw it fall 7%. Shares faired poorly compared with those of peers TJX (TJX), parent of T.J. Maxx and Marshalls, and Burlington Stores (BURL), which rose 11.2% and 11.5%, respectively, last year. In fact, Wells Fargo prefers T.J. Maxx and Burlington, both rated at Overweight. Yet shares of all three companies far underperformed the 27% rise in the S&P 500 index in 2021.
Wells Fargo analyst Ike Burochow downgraded Ross Stores stock to Equal Weight from Overweight, and cut the price target to $120 from $135. In a research report, he cited "growing concern over the low-end consumer (where Ross Stores plays more so than any other name under coverage)" and a "challenging first-half setup for Ross Stores, along with valuation that seems fair."
"We are seeing fundamental tailwinds on consumer spending continue," wrote Burochow, who added that "pressures are indeed mounting against the lower-end consumer." These pressures include lack of scheduled stimulus payments in 2022, child-tax-credit uncertainty, and the potential lapsing of student-debt payments.