Evercore ISI has selected three discount retailers as its preferred stocks within the global retail, apparel and luxury brands sector, pointing to opportunities for stronger performance during the second half of the year.
The firm’s assessment focuses on companies where comparable sales trends, easier comparison periods or operational improvements could provide meaningful support despite an uncertain consumer and market backdrop.
1. Ross Stores Inc (NASDAQ:ROST)
Ross Stores Inc (NASDAQ:ROST) is Evercore ISI’s leading pick, carrying an Outperform rating and a $276 price target.
A key question for investors is whether Ross Stores can sustain its recent momentum as third-quarter comparisons become increasingly difficult.
Evercore ISI believes several initiatives remain at an early stage and could generate further improvements. These include increased marketing, broader merchandise assortments, enhancements to the in-store experience, more efficient staffing and efforts to strengthen relationships across the supplier network.
If those measures continue to gain traction, the firm sees a strong probability that Ross Stores will accelerate its two-year comparable sales trend during the second half of the year. Such an outcome could provide a particularly supportive backdrop for the shares.
2. Burlington Stores Inc (NYSE:BURL)
Burlington Stores Inc (NYSE:BURL) remains among Evercore ISI’s Top 5 selections, with an Outperform rating and a $400 price target.
The firm sees an unusually favourable setup for Burlington during the third quarter, partly because its comparison base is more accommodating than those facing many other U.S. retail companies.
Current consensus forecasts already allow for some moderation in Burlington’s two-year comparable sales stack, which Evercore ISI views as relatively uncommon among its retail peers. At the same time, improvements in operations and store locations could help support performance.
The opportunity is not based solely on easier year-on-year comparisons. Burlington’s third quarter has historically underperformed the broader off-price sector as the company reduced its exposure to weather-sensitive merchandise without fully replacing those sales elsewhere.
Evercore ISI believes this creates scope for stronger performance if merchandising improvements begin to close that gap during the second half.
3. The TJX Companies Inc (NYSE:TJX)
The TJX Companies Inc (NYSE:TJX) is the third stock highlighted by Evercore ISI, which maintains an Outperform recommendation and a $175 price target.
Investor sentiment towards the retailer has become more cautious following indications that trends at Marmaxx slowed during the second quarter.
Although Evercore ISI acknowledges that performance moderated, its field research suggests the weakness could have resulted from merchandise handling issues rather than a broader deterioration in the underlying business.
TJX has not experienced a significant problem of this kind for approximately a decade and has historically demonstrated an ability to resolve such operational difficulties quickly.
If the issue proves temporary and third-quarter trends improve, Evercore ISI believes the current cautious sentiment could create an attractive risk-reward setup for the shares.
Discount Retailers Offer Different Routes to Growth
Evercore ISI’s selections reflect three different potential catalysts across the discount retail sector.
For Ross Stores, the investment case centres on operational initiatives potentially driving stronger comparable sales. Burlington could benefit from favourable comparisons and improvements to its merchandising and store operations, while TJX offers potential upside if its recent Marmaxx weakness proves temporary.
With all three stocks carrying Outperform ratings, Evercore ISI sees opportunities for investors across the off-price retail segment as companies enter the second half of the year.