Ross Stores faces 2025 headwinds: Tariffs, Inflation, and Pricing Strategy

Ross Stores, one of America’s most prominent discount retailers, is making difficult but necessary adjustments in response to market pressures. As economic challenges mount—including inflation, tariffs, and declining foot traffic—Ross finds itself at a crossroads. In its Q1 2025 earnings report, the company revealed a mixed outlook that could affect both its bottom line and loyal customers' wallets.

In this article, we’ll explore the current state of Ross Stores, the strategic decisions it’s making to weather economic uncertainty, and what shoppers can expect in the coming months. If you’re a fan of Ross Dress for Less, these changes may directly impact how you shop.

Ross Stores' Financial Performance in Q1 2025: Flat Sales and Fewer Shoppers

In its Q1 2025 earnings report, Ross Stores reported flat comparable sales compared to the same period in 2024. Net income fell to $479 million, a nearly 2% decline year-over-year. These figures, while not alarming on their own, signal deeper shifts in consumer behavior and macroeconomic challenges.

According to retail analytics firm Placer.ai, average customer visits to Ross locations dropped by 2.7% year-over-year. This decline highlights a significant concern: fewer customers are visiting brick-and-mortar locations, likely due to economic pressure and changing shopping habits.

Jim Conroy, CEO of Ross Stores, attributed the decline in performance to a “slower start to the spring selling season” and prolonged inflation, which has altered the purchasing patterns of its core customer base.

“There’s a shift toward more functional items versus discretionary items,” Conroy noted during a May 22 earnings call.

The data confirms what many discount retailers are experiencing: inflation is driving consumers to prioritize necessities over indulgences.

How Ross Stores is Handling Inflation and Tariffs in 2025

Perhaps the most pressing challenge Ross Stores faces in 2025 is the reemergence of high tariffs on imported goods. The recent 10% baseline tariff introduced by President Donald Trump is set to impact approximately 60 countries starting July. With more than half of Ross’ merchandise sourced from China, the financial strain is imminent.

President Donald Trump delivers remarks on the reciprocal tariff policy in the Rose Garden on April 2, 2025.

© REUTERS/Carlos Barria

Ross executives voiced concerns during the earnings call, especially about how tariff-related cost pressures might be passed on to consumers. While Ross is known for offering quality brands at lower prices, this pricing advantage is under threat.

"The volatility of trade policies and the corresponding impact on the economy, the consumer, and our profitability is highly unpredictable," Conroy emphasized in the earnings report.

Rather than absorb these cost increases entirely, Ross is weighing a range of options to maintain its margins while protecting its value proposition.

Strategic Pricing and Supplier Negotiation

Ross is taking a cautious approach to price hikes. Conroy made it clear that price increases will be selective and based on product categories. Functional items, like household essentials, may experience different pricing strategies than discretionary goods like fashion accessories.

Michael Hartshorn, Chief Operating Officer, stated, "We want to be very careful with price increases. We don’t want to be the first one to raise prices, and we want to maintain our pricing gap versus mainstream retail."

In parallel, Ross is negotiating with suppliers to reduce import costs and exploring alternative sourcing countries. However, executives clarified that supply chain shifts take time. Any meaningful reduction in tariff-related costs through sourcing changes will likely be seen in 2026, not in the immediate quarters.

What Customers Can Expect from Ross Stores Moving Forward

Shoppers will likely begin seeing price adjustments at Ross Stores by mid-2025. While executives remain committed to preserving the brand's reputation for deep discounts, inflation and tariffs are expected to push some prices upward.

This move reflects a broader trend in U.S. retail. A recent survey from Numerator revealed that 83% of Americans are changing their shopping habits in anticipation of tariff-related price increases. Common behaviors include delaying purchases, searching for sales, and avoiding imported goods.

Ross's strategy is twofold:

1. Price Optimization: Items that are functional and inelastic (e.g., cleaning supplies) may see slight increases, while non-essential goods could remain competitively priced to attract foot traffic.

2. Supply Chain Diversification: Ross will gradually source goods from lower-tariff countries, minimizing exposure to Chinese imports.

Despite these changes, Ross is focused on retaining customer loyalty by maintaining its core identity as a value-driven retailer.

“We’re being very strategic in terms of what’s the end use of that item, and how much leeway we have to change prices,” Conroy stated.

Timing and Transparency

Customers can expect changes in pricing strategies to roll out between June and July 2025. These adjustments won’t be across-the-board hikes but rather targeted changes designed to minimize impact while preserving profitability.

Moreover, Ross is committed to transparency. Executives have openly communicated these potential changes in earnings calls and public reports, reflecting a customer-centric approach even amid tough decisions.

Ross Stores' Long-Term Strategy and Industry Outlook

Ross Stores is no stranger to navigating turbulent retail landscapes. In previous decades, the company has weathered recessions, e-commerce disruptions, and competitive pressures. The current headwinds—tariffs, inflation, and shifting consumer preferences—represent the latest test of its resilience.

The company’s leadership has articulated a cautious yet flexible strategy:

• Maintain Value Leadership: Continue to offer lower prices than mainstream retailers.

• Monitor Competitive Landscape: Avoid being the first to raise prices, ensuring that Ross remains an attractive option for budget-conscious consumers.

• Invest in Supplier Relationships: Negotiate better deals to buffer the impact of tariffs.

• Expand Global Sourcing: Reduce dependency on Chinese imports by exploring new sourcing hubs in Southeast Asia and Latin America.

With these moves, Ross aims to protect its market share while preparing for a more stable economic environment in 2026 and beyond.

Conclusion: The Evolving Landscape of Ross Stores

Ross Stores' journey through 2025 is one marked by caution, adaptability, and strategic foresight. The discount giant finds itself at a pivotal moment—balancing customer expectations with economic realities.

While price increases may become a necessary part of doing business, Ross Stores is making every effort to ensure that its customers continue to find value in every visit. With inflation and tariffs reshaping the retail industry, Ross’ ability to pivot will be crucial for its continued success.

For shoppers, staying informed and flexible will be key. And for Ross Stores, the mission remains the same: to deliver incredible value, even in uncertain times.