Analysts at Bank of America are reducing their stock price objectives (PO) on the off-price retailers they track—TJX Cos., Ross Stores and Burlington.
Analysts Lorraine Hutchinson and Mary Sport said in a research note that they were cutting back their PO estimates by 3 for TJX Cos. and Ross Stores and 6 percent for Burlington “to reflect higher freight costs” beginning in Q2 2027 when contracts renew. They said that April 2027 rates will ultimately determine the headwind, but they modeled a 15 percent increase for domestic freight and an 80 percent increase in ocean freight.
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Still, the analysts said they expect the off-price sector to outperform in an inflationary environment “that constrains purchasing power.” As a result, the analysts are retaining their “Buy” ratings on TJX Cos., Ross Stores and Burlington.
“Higher prices for necessities, combined with persistently elevated fuel prices, leaves consumers with less to spend on discretionary goods and should reinforce value-seeking behavior,” they said. “We think off-price is well positioned to capitalize on that.”
In formulating their analysis, Hutchinson and Sport looked at historical data to help inform their view. They also sought out their colleagues at the firm. “Rather than wait for April, we worked with our Global Transport team to assess where rates could settle and have incorporated 60 [basis points] of incremental freight pressure starting in 2Q,” the analysts said.
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