Ross Stores Inc.'s shares fell Wednesday after a Citi analyst downgraded the retailer on limited growth opportunities.
THE SPARK: Analyst Oliver Chen lowered Ross Stores to "Neutral" from "Buy" and reduced his target price to $60 from $70 with more conservative margin and sales estimates.
THE BIG PICTURE: The Pleasanton, Calif.-based company runs about 1,000 Ross Dress for Less stores across the country, which sell discount clothing, shoes and housewares. The company reported healthy traffic during its fiscal third quarter but offered a weak holiday forecast.
THE ANALYSIS: Chen said Ross had strong sales growth in 2012, but he does not expect the retailer will be able to sustain that. The analyst said Ross has been plagued by poor traffic, mixed weather in December and more competition from online businesses.
While Ross has plans to expand into new markets, Chen views competitor TJX Companies Inc. more favorably, because of its growth potential in Europe, the strength of its Homegoods brand and the benefits of a recent acquisition.
SHARE ACTION: Ross shares fell 15 cents to $53.94 in afternoon trading. They dropped as low as $53.04 earlier in the session, bucking a rally in the broader market.