Off-price retailers are poised to outperform, and Ross Stores will be the leader, according to Credit Suisse. The firm just moved the stock to its top pick in this retail sector. While many retailers are grappling with a glut in inventory, high inflation and a potential recession, earnings reports from both Ross Stores and TJX Companies show the companies’ resilience . The off-price space benefits from excess inventory in the system. Off-price retailers pick up the extra items on the cheap to sell. At the same time, cash-strapped consumers tend to turn to these brands to hunt down bargains and stretch their budgets during weak economic periods. Other off-price retailers include Nordstrom Rack and Macy ‘s Backstage. On Thursday, Ross Stores reported fiscal third-quarter earnings-per-share of $1.00 , versus a StreetAccount estimate of 81 cents. Revenue came in at $4.57 billion versus the expected $4.37 billion. TJX’s third-quarter EPS was 86 cents , after excluding a tax gain, versus a StreetAccount estimate of 80 cents, but revenue came in lower than expected. Credit Suisse expects Ross Stores has the most potential upside, including the fact that its three-year same-store-sales growth acceleration in the third quarter was better than TJX’s Marmaxx division. Ross Store’s 2022 EBIT margins (or operating earnings over operating sales) guided nearly 300 basis points below 2019 levels, compared with 70 basis points by TJX, analyst Michael Binetti wrote in a note Thursday. “In our view, ROST now offers more torque/leverage to capture above-plan performance and moves to our Top Pick in Offprice,” Binetti said. He raised his price target on the stock to $123 from $99, implying 25% upside from Thursday’s close, and reiterated his outperform rating. The boost was based on 2024 calendar-year EPS versus 2023 EPS. “With ROST’s target multiple at ~20x (vs. our TJX target multiple of ~22x our CY24 EPS) and more room for margin expansion to return to pre-COVID levels vs. TJX, ROST could offer more potential for upside today, in our view,” Binetti wrote. Ross Stores shares are down less than 4% year to date, while shares of TJX, the parent of T.J. Maxx, Marshalls and HomeGoods, have gained nearly 4% during the same period. TJX hit a 52-week high of $79.99 in trading Friday. — CNBC’s Michael Bloom contributed reporting.