2 Off-Price Retail Titans: Which Stock Has More Upside in 2025?

Key Points

• Off-price retailers TJX and Ross Stores had a banner year, while big box and discount retailers suffered from the impact of high interest rates and soft consumer spending.
• TJX firmly beat Q3 top and bottom line consensus estimates but issued downside Q4 2024 EPS guidance.
• TJX announced $2.25 to $2.50 in stock buybacks into Feb. 1, 2025, causing shares to surge to new 52-week highs at $128.00 following the Q3 earnings release.

2024 was the year of the off-price retail shopping trend in the retail sector that found consumers flocking to retailers offering brand-name apparel at deeply discounted prices. Consumers embraced the thrill of the treasure hunt, religiously showing up on delivery drop days at TJX Companies Inc. NYSE: TJX and Ross Stores Inc. NASDAQ: ROST. These off-price retailers took market share away from big box and discount retailers, as evidenced in the earnings reports and stock price drops in shares of Target Co. NYSE: TGT, Kohl’s Co. NYSE: KSS, and Nordstrom Inc. NYSE: JWN. Investors may wonder which off-price leader may be the better investment in 2025: TJX or Ross Stores? Here's a breakdown analysis of both to help you make a more informed decision.

The TJX Companies: Off-Price Apparel and Home Décor Under One Loyalty Program

The TJX Companies operates under the TJ Maxx, Marshalls, HomeGoods, Sierra, and HomeSense brands. TJ Maxx and Marshalls stores (also referred to as Marmaxx) are known for offering premium designer brands like Versace from Capri Holdings Ltd. NYSE: CPRI, Valentino, Christian Louboutin, Saint Laurent, Fendi, Gucci and Christian Dior at prices slashed up to 60% off. It also offers home décor and kitchen items at its HomeGoods off-price stores. Customers can earn TJX rewards by shopping at any of their store locations, and that synergy has been a growth driver.

Solid Top and Bottom Line Beat for Q3

TJX reported a third-quarter 2024 EPS of $1.14, beating consensus estimates by 5 cents. Revenues rose 6% YoY to $15.06 billion, firmly beating consensus estimates of $13.95 billion. Consolidated comparable store sales rose 3% YoY at the high end of its guidance, driven entirely by customer transactions.

This indicates that its product selection and value proposition are resonating well with its loyal customers, which has been the case for the past three quarters. HomeGoods was the star of the quarter with 3% YoY comps growth on top of the 9% YoY comps growth a year ago. Marmaxx was impressive, with its 2% YoY growth lapping last year's 7% YoY comps growth.

The pretax profit margin rose 30 bps to 12.3%, which was well above the company’s forecast. The company plans to expand into Spain in early 2026 as it grows its international presence.

TJX Issued Weaker Q4 Guidance But Offsets with $2.25 Billion of Stock Buybacks

Despite a solid Q3, TJX was conservative with its forward guidance. TJX issued downside guidance for Q4 with EPS of $1.12 to $1.14 versus $1.18 consensus analyst estimates. Comp sales are expected to rise 2% to 3% YoY. The change to the Q4 profit margin and EPS guidance is due to the expected reversal of the Q3 benefit of the timing of certain expenses.

To offset this, the company is expected to buy back $2.25 billion to $2.50 billion of stock during the fiscal year ending Feb. 1, 2025. This caused shares to absorb any selling from the lower guidance and surge to 52-week highs at $128.00 in the following days. TJX stock is trading up 34.06% year-to-date (YTD) as of Dec. 2, 2024. 

Ross Stores: Expanding To Meet the Affluent Off-Price Shopper

The Ross Stores operates under its flagship banner, Ross Dress for Less, and dd's DISCOUNTS brand names. It is the largest off-price retailer in the nation, operating 1,800 stores throughout 43 states and the District of Columbia. Ross has been pushing to cater to affluent off-price shoppers by bolstering its premium luxury brand offerings with 20% to 70% slashed prices. Brands include Kate Space and Coach from Tapestry Inc. NYSE: TPR, Calvin Klein and Tommy Hilfiger from PVH Co. NYSE: PVH, as well as DKNY from G-III Apparel Group Ltd. NASDAQ: GIII and Michael Kors from Capri Holdings Ltd. NYSE: CPRI.

Expanding at a Breakneck Pace

Ross is determined to remain the largest off-price chain as it continues to open stores at a breakneck pace. Ross opened 89 new stores in 2024, including 43 new Ross and four dd's DISCOUNTS stores in two months between September and October across 22 states.

Solid Q3 Performance, But CEO Is Tough to Please 

Ross Stores reported Q3 EPS of $1.48, beating consensus estimates by 8 cents. Revenues rose 3.6% YoY to $5.1 billion, falling short of $5.15 billion consensus estimates. Same-store comps rose 1% YoY.

Ross Stores issued downside guidance for Q4 of EPS of $1.57 to $1.64 versus $1.67 consensus analyst estimates. The guidance includes 3 cents per share of the unfavorable impact of the timing of pack-away-related expenses that benefitted Q3. However, comp sales are expected to rise 2% to 3% YoY. For the full-year 2025, Ross Stores issued in-line guidance of EPS of $6.10 to $6.17 versus $6.13.

Ross Stores CEO Barbara Rentler made no excuses, bluntly stating, “We are disappointed with our third quarter sales results as business slowed from the solid gains we reported in the first half of 2024. Although our low-to-moderate income customers continue to face persistently high costs on necessities pressuring their discretionary spending, we believe we should have better executed some of our merchandising initiatives.”

Rentler concluded, “In addition, a combination of severe weather during the quarter from Hurricanes Helene and Milton, along with unseasonably warm temperatures, also negatively impacted our results.”

Ross Store stock is up 11.9% YTD as of Dec. 2, 2024.