ROST reports after the close tonight — and the gap between where options traders and short sellers are positioned has never been wider heading into a print.
Options defensiveness has escalated sharply since the last note. The put/call ratio closed Tuesday at 1.83, a full 3.4 standard deviations above its 20-day average of 1.21. That's the most extreme defensive reading in months — last comparable levels came in early July, when the ratio touched 2.5 before retreating. Monday and Tuesday alone saw the ratio jump from 1.25 to 1.46 and then to 1.83, a two-session surge that suggests real demand for downside protection into the earnings release, not just routine hedging. The stock has dropped 6.1% on the week to $236.38, underperforming close peer TJX, which fell around 3% over the same stretch. BURL and BKE also declined roughly 6%, so the sector is under pressure — but ROST's options skew has moved harder than peers.
Short sellers tell the opposite story. SI has eased further to 2.9% of free float, down another 6.7% on the week and 11% over the past month. Borrow costs, at 0.45%, are near their lowest of the year and well below any level that would signal stress. Availability is effectively unlimited — shares available to borrow dwarf actual short interest by a factor of thousands. Bears are not building a position ahead of tonight's release. That is the central tension: options traders are paying up for puts while short sellers are walking away.
The analyst community sits firmly in the bull camp. Evercore ISI raised its target to $276 on Monday — the same session the stock fell — while Telsey Advisory Group lifted to $280 just last Friday. Both maintained Outperform ratings. Most of the Street is above current levels: the mean target is $257.50, about 9% above yesterday's close. Wells Fargo is the outlier, having downgraded to Equal-Weight back in June. On valuation, the stock trades around 29.6x trailing earnings — a premium to the sector, consistent with ROST's historical multiple. EPS momentum over 90 days ranks in the 67th percentile, and the days-to-cover rank scores at the 70th percentile, reflecting a tidy but undemanding short base.
The most recent comparable earnings reaction — May's Q1 print — produced a 7.8% one-day gain. That followed a beat on both revenue and margins, with the company raising full-year guidance. The setup tonight is similar: analysts expect another solid quarter from the off-price model, underpinned by resilient value-seeking consumer demand and new CEO Jim Conroy's early operational focus on in-store experience and continued store openings. The bull case rests on those dynamics persisting. Bears point to the aggressive $2.55 billion buyback authorization and accelerated store-opening targets as signals of a management team working harder to sustain momentum than the headline numbers suggest.
What to watch tonight is whether the guidance range on full-year earnings per share confirms or undercuts the analyst consensus — the put/call surge suggests the market is less confident in a repeat of May's upside surprise than the target-raising would imply.
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