Jim Cramer on the Off-Price Divergence: Why Ross Stores Is Outpacing TJX in 2026

Off-price retail is supposed to be a defensive corner of the consumer sector — a place where shoppers retreat when they want deals and where chains like TJX and Ross Stores tend to grind out steady gains. But 2026 has told a very different story for the two rivals. While TJX has fallen 8.9% year-to-date, Ross Stores has surged roughly 30%, creating one of the more striking divergences in the retail space this year.

Jim Cramer addressed the split on his August 17 show, noting that TJX appears to be struggling in the market despite putting up solid operating numbers. He pointed to the company's CEO as a factor in the share-price weakness, while giving Ross's leadership credit for that chain's outperformance. It was a classic Cramer framing: management matters, and the market is paying attention to who is steering the ship.

For TJX, the turbulence came into sharper focus after its fiscal second-quarter earnings release on the 19th, when shares closed down 4.2%. The company reported a 4% rise in comparable same-store sales, raised its full-year profit margin outlook to 11.2%, and lifted its EPS guidance to a range of $4.09 to $4.13. On paper, those are solid numbers. But the market zeroed in on the third-quarter margin guide of 11.8% to 11.9% — a tighter range than expected, which fueled concerns about higher global shipping costs and rising domestic wages. Adding to the caution, TJX's Q3 same-store sales and EPS guidance both came in below analyst estimates, suggesting the retailer may already be feeling some pinch from a more cautious consumer.

Valuation only amplifies the concern. After the year's earlier run-up, TJX now trades at roughly 27 times forward earnings — near the top of its historical range. That leaves little room for disappointment, and the stretched multiple makes the stock vulnerable to any hiccup in execution or consumer spending.

Ross Stores, by contrast, has been the clear favorite this earnings season. The stock jumped 4.4% on the 21st after the company reported earnings the prior day. Ross beat revenue and profit estimates by wide margins, and operating profit grew even when tariff refunds were stripped out. Comparable store sales rose a strong 10%, and management raised its full-year earnings outlook. That kind of momentum has been hard to ignore in a sector where many retailers are struggling to find growth.

Still, Ross is not without its own risks. The same wage inflation and non-discretionary cost pressures that hang over TJX could hit Ross just as hard. If comparable sales eventually settle back to the chain's historical 3% to 4% range, the stock could face meaningful headwinds. And like its rival, Ross's valuation is rich — the forward P/E sits around 29.8, which leaves limited tolerance for disappointment.

Institutional interest is roughly balanced between the two names. Of the 1,021 funds in Insider Monkey's Q1 database, 83 held stakes in both companies. But short interest tells a slightly different story: Ross's short interest as a percentage of float stands at 3.53%, more than double TJX's 1.76%. That suggests the market sees more potential downside in Ross if the rally stalls.

Both retailers are high-quality operators with proven off-price models. But the 2026 divergence reflects more than just quarterly results — it's also about leadership credibility, guidance credibility, and the premium investors are willing to pay for momentum. TJX may look inexpensive by comparison, but its valuation still leaves little margin for error. Ross, for now, is the market's darling — but with a short interest that hints some investors are waiting for the other shoe to drop.

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Disclosure: None.