Jenny Harrington, CEO, Gilman Hill Asset ManagementRoss Stores Inc.ROSTHOLDNov 23, 2022

Shares are popping after reporting a beat, and he likes the momentum after this report. They faced tough comps. Shares haven't done much this year until this move. He's been very negative the consumer, but next year he expects retail stocks to do much better.

It reported a strong beat, and it reflects the middle-income consumer. High-income consumers haven't changed their spending, and low-income spenders are facing a lot of pressure, as seen in Dollar General's performance. This reflects the trade down and like has more momentum ahead

It just reported a strong, reflecting how consumers are buying off-price (discounts).

Just sold it. Share are up 21% in last three months off the lows and trades at 22x earnings, but peers like Ralph Lauren are up only 12-13%. Ross is higher because of the notion that 2022's inventory surplus will be good for 2023, so share ran up in anticipation of that.

A discount US retailer found in strip malls. They buy excess inventory from big department stores like Nordstrom. ROST is like Homesense. High margins, low debt. They will thrive as consumers watch their money. Like Dollarama, this is defensive. With some big retailer likely to close, like J. Crew this opens an opportunity for ROST to buy a lot of inventory. (Analysts’ price target is $100.73)

(A Top Pick July 10/17 Up 57%). This is a core holding for him. This was the only stock on the S&P500 that was up in 2008. They are building their store count and buying back shares – all good things.

All 3 of his top picks have an element of defensiveness to them. Out of 500 companies in the S&P 500, this was the only company to post a positive rate of return in 2008. They buy excess inventories from some of the upper-class US stores for their outlet stores. When companies close stores or are having problems, this is good for the likes of this company. ROE is at about 40% and are actively buying back shares. One of the few retailers that are still opening stores. Dividend yield of 1.1%. (Analysts’ price target is $72.50.)

(A Top Pick March 2/15. Up 19.12%.) A great management team. If you own, she would consider trimming because it has done so well relative to anything else.

This and T.J. Maxx (TJX-N) would be the big retailers on the discount side in the US. This one had a little bump recently on their earnings, but you are looking at very deep discounted fashions. They still have the wherewithal to grow their business. Given that small businesses are still continuing to grow, he imagines it will continue to help the low end consumer. If this were to correct more and get into a better valuation, he would probably recommend that you dip your toes in.

US retail. This company is pretty good. Had an earnings miss recently and the stock was beaten up a little. Has moved into a negative earnings revision cycle. Feels the company is pretty well run, but the industry is running into some strong headwinds. If you own, he would recommend using a stop loss.