As inflation and new U.S. tariffs continue to squeeze retailers, Ross Stores, the popular off-price chain, is facing mounting pressure to adjust its pricing strategy. With over 50% of its merchandise sourced from China—a country heavily impacted by recent trade policies—Ross is navigating a delicate balance between maintaining its value proposition and offsetting rising import costs. In this in-depth analysis, we explore the latest updates from Ross Stores’ leadership, the potential impact of tariffs on consumer prices, and how the company plans to mitigate financial strain while keeping shoppers loyal.
Ross Stores Warns of Possible Price Hikes Amid New Tariffs
Ross Stores CEO Jim Conroy confirmed during the company’s May 22 earnings call that price increases are under consideration as tariffs and inflation weigh on profitability. The first quarter of 2025 saw flat sales compared to the previous year, with net income dropping nearly 2% to $479 million. Additionally, foot traffic declined by 2.7%, signaling a shift in consumer behavior as shoppers prioritize essential goods over discretionary purchases 15.
Will Ross Stores Raise Its Prices Due to Tariffs? Here’s What the Company Said
The looming threat of higher tariffs—set to escalate in July 2025—has forced Ross to reassess its pricing model. President Donald Trump’s recent 10% baseline tariff on imports, coupled with the expiration of reciprocal tariff pauses, means that roughly 60 countries, including China, will soon face steeper trade taxes. Conroy emphasized that the company is exploring “the right combination of pricing versus merchandise margin compression” to soften the blow 19.
How Tariffs Are Impacting Ross Stores’ Supply Chain
More than half of Ross Stores’ inventory originates from China, making it particularly vulnerable to tariff fluctuations. While the company does not directly import most of its goods, suppliers are passing on increased costs, squeezing profit margins. In Q1 2025, merchandise margins declined by 45 basis points due to higher freight expenses and early tariff effects 79.
To counter these challenges, Ross is accelerating its supply chain diversification strategy, shifting production to alternative markets like Vietnam, India, and Malaysia. However, this transition is expected to take until 2026, meaning short-term price adjustments may be unavoidable. COO Michael Hartshorn noted that customers could see changes as early as June or July 2025, though the company remains cautious to avoid alienating budget-conscious shoppers 111.
Consumer Behavior Shifts and Ross’s Pricing Strategy
With 83% of U.S. shoppers already altering spending habits in anticipation of higher prices, Ross must tread carefully. Conroy observed a noticeable shift toward functional items (e.g., basics, household essentials) over discretionary purchases, reflecting broader economic anxieties 113. This trend aligns with Numerator survey data showing consumers increasingly hunting for discounts, delaying non-essential purchases, and relying on coupons 5.
Ross’s off-price model—built on offering branded goods at steep discounts—positions it well to attract cost-conscious buyers. However, the company acknowledges that selective price hikes may be necessary, particularly on margin-sensitive categories. Hartshorn stressed that Ross will avoid leading the market in raising prices, instead ensuring its value gap versus mainstream retailers remains intact 15.
Financial Performance and Market Reactions
Ross Stores withdrew its full-year 2025 guidance due to tariff uncertainty, sparking an 11% drop in its stock price. Q2 earnings projections of $1.40–$1.55 per share (below analysts’ $1.65 estimate) reflect anticipated tariff-related costs of $0.11–$0.16 per share 36. Despite these headwinds, Q1 sales edged past expectations at $4.98 billion, demonstrating resilience in a tough retail climate 3.
Investors remain divided on Ross’s outlook. Some view the stock’s decline as a buying opportunity, citing the company’s long-term supply chain adjustments and history of navigating economic downturns. Others worry that prolonged tariff pressures could erode margins if consumer spending weakens further 611.
Competitive Landscape: How Ross Compares to TJX and Burlington
While Ross grapples with tariffs, competitors like TJX Companies (parent of TJ Maxx) have maintained annual targets, betting on supply chain flexibility to absorb costs. Burlington Stores, meanwhile, has doubled down on elevated product assortments, blending national brands with value pricing to attract both low- and middle-income shoppers 13.
Ross’s focus on opportunistic inventory buys—such as packaway merchandise acquired pre-tariff—could provide a buffer. However, its heavier reliance on Chinese imports compared to rivals leaves it more exposed in the near term 911.
Conclusion: What Shoppers Can Expect
Ross Stores is walking a tightrope between protecting margins and preserving its reputation for unbeatable deals. While modest price increases are likely in certain categories by mid-2025, the company aims to minimize sticker shock through supplier negotiations and long-term sourcing shifts. For now, bargain hunters may still find steals, but the era of ultra-cheap imports at Ross could be fading.
As trade policies evolve, Ross’s ability to adapt will determine whether it remains a go-to destination for discounted fashion and home goods. Investors and shoppers alike should monitor upcoming earnings calls for further clarity on pricing strategies post-July tariff adjustments 1911.
Key Takeaways:
- Ross Stores may raise prices in select categories by June/July 2025 due to tariffs.
- Over 50% of its inventory comes from China, making cost pressures significant.
- The company is diversifying its supply chain but expects delays until 2026.
- Consumer shifts toward essentials and discounts are influencing Ross’s strategy.
- Stock fell 11% after guidance withdrawal, but some see a buying opportunity.
