Ross Stores' (ROST) new CEO is likely to close the store productivity gap with TJX (TJX) through better merchandising, tighter store operations and higher marketing spend, which should sustain comparable-sales growth beyond this year, UBS said in a note Monday.

UBS said the market underappreciates the marketing opportunity. Ross spent about 0.4% of sales on marketing in calendar 2025 versus 1.1% at TJX, and the bank expects the rate to rise as CEO Jim Conroy applies strategies that worked at Boot Barn.

UBS also said a weak consumer backdrop and continued share losses at department stores should favor off-price retailers, citing Evidence Lab data showing discount stores as the top channel for holiday shopping.

UBS raised its fiscal 2026-2028 EPS estimates by 2% to 23% and models revenue growing at about an 8.5% CAGR over the next two years, roughly 260 basis points above the Street. Near-term risks include tough comparisons and elevated diesel prices.

UBS upgraded the stock to buy from neutral and raised its price target to $315 from $239.

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