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Investing.com -- Citi has made a series of rating adjustments across U.S. retail stocks, reacting to a shifting macro backdrop marked by higher tariffs and rising recession risks.

The Wall Street firm upgraded BJs Wholesale Club Holdings Inc (NYSE:BJ), Ross Stores (NASDAQ:ROST), and TJX Companies (NYSE:TJX) to Buy, while downgrading Best Buy (NYSE:BBY) and RH (NYSE:RH) to Neutral, citing relative positioning and exposure to trade headwinds.

BJ’s was upgraded to Buy with a new price target of $130. Citi sees BJ as “a tariff&trade down relative winner,” highlighting the company’s “defensive growth appeal” and insulation from tariff risk, thanks to its predominantly domestic sourcing and strong grocery business.

“We recognize shares trade at a premium to history, but we see upside potential on the multiple as BJ has attractive characteristics for SMID cap growth right now,” analysts led by Steven Zaccone said in a note.

Simultaneously, Best Buy was downgraded to Neutral. Analysts noted that despite some positives, including AI innovation and a healthy balance sheet, the outlook has turned more cautious.

They warn that BBY faces “significant risk to earnings” due to the combination of high import exposure and a product mix skewed toward discretionary, big-ticket items. The target price was cut to $70 from $93.

RH also saw its rating lowered to Neutral. Citi flagged its “significant sourcing exposure” to countries hit by new reciprocal tariffs and concerns over leverage if margins weaken.

The firm also cited downside risks to free cash flow and sales, especially given recent earnings and guidance misses. The new target price is $200, sharply lower from the previous $437.

Meanwhile, off-price retailers are viewed more favorably in the current climate.

In separate notes, Ross Stores and TJX were both upgraded to Buy. Citi expects these chains to benefit from a weakening consumer environment and an influx of inventory resulting from broader retail disruption.

“Tariffs are likely to create significant disruption in the market, greatly increasing the availability of product available to off-pricers at attractive prices,” analysts wrote in their note on Ross and TJX.

Ross is expected to benefit from improved traffic and margins as more consumers trade down, with Citi also highlighting potential stock upside given its valuation gap with TJX.

TJX, which serves a more affluent customer, is seen as particularly well-positioned due to its pricing power and continued momentum from a strong holiday season.

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