I’m the first to admit that our SIGMA charts are next to impossible to interpret for anyone that has not spent 15 minutes on the phone with someone on my team. But if you can’t interpret the chart below and either a) you can short stocks or b) own ROST, then you should give us a call.
The crux of it is that the delta on sales/inventory spread is turning down after 6+ quarters on cloud 9 at the same time we have visibility on comping against increasingly tougher Gross Margins and favorable SG&A. ROST drives its business in large part on packaways, meaning that it buys all it can when the going is good, and pulls out of inventory to sell when appropriate. Right now, the 2H buys that were subsequently packed away are keeping this company alive and kicking. Yeah, it has another quarter of great top and bottom-line visibility. But then the simple fact that it is at peak margins and full valuation with slowing momentum will start to matter.