The Retail – Discount Stores industry remains a strong pillar of the broader retail sector, benefiting from its focus on value, efficiency and consumer accessibility. Even as households face ongoing inflationary pressures and shifting spending patterns, discount retailers continue to attract steady foot traffic by offering competitive pricing, compelling assortments and convenient store formats. Their ability to blend affordability with quality — spanning essentials, discretionary goods and private labels — has helped capture demand across income segments. Meanwhile, strategic investments in supply chain efficiency, store remodels and technology are enhancing productivity and customer experience, supporting both top-line growth and margin improvement.

Industry players are also sharpening their digital capabilities, integrating e-commerce with flexible fulfillment models. Loyalty programs, data-driven merchandising and disciplined inventory management remain key levers. As shoppers continue to seek value without compromising on convenience, companies with strong brand equity, scale advantages and operational discipline are well-positioned to thrive. Within this context, Costco Wholesale Corporation (COST Quick QuoteCOST - Free Report) , The TJX Companies, Inc. (TJX Quick QuoteTJX - Free Report) , Dollar General Corporation (DG Quick QuoteDG - Free Report) , and Dollar Tree, Inc. (DLTR Quick QuoteDLTR - Free Report) stand out as leading names in the Retail–Discount Stores industry.

About the Industry

The Retail – Discount Stores industry is a significant segment within the retail sector that caters to price-conscious consumers seeking value-for-money products. These stores specialize in offering a wide range of merchandise, including groceries, household items, apparel, electronics, cleaning products, pet supplies and more, at discounted prices compared to traditional retail outlets. Discount stores operate on a low-cost business model, focusing on cost-efficient operations, bulk purchasing and streamlined supply chains to offer competitive pricing. These stores often carry both national and private-label brands, providing a mix of products to cater to a diverse customer base. The Retail – Discount Stores industry has shown resilience, even during economic downturns, as consumers tend to prioritize value-oriented shopping.

4 Key Industry Trends to Watch

Consumers’ Willingness to Spend: The Retail–Miscellaneous industry is closely tied to consumers’ purchasing power. U.S. retail sales rose 0.6% in August, according to the U.S. Department of Commerce, indicating resilient consumer spending. Supporting this trend, the Federal Reserve’s recent interest rate cuts have lowered borrowing costs, giving consumers more flexibility to spend on discretionary items and fueling demand across the sector. Moreover, with the holiday season approaching, retailers can expect a further boost in demand as shoppers increase spending on gifts, fashion and seasonal apparel, creating an opportunity for stronger sales and revenue growth heading into year-end. According to Deloitte, U.S. holiday retail sales are projected to rise between 2.9% and 3.4% during the November-January period.

Shoppers Continue Seeking Better Bargains: Consumers are increasingly seeking better bargains, prompting industry players to sharpen their focus on affordability and value. Rising prices and stretched household budgets are driving shoppers — especially in low-to-middle-income brackets — to gravitate toward discount chains that combine convenience with competitive pricing. To meet this demand, retailers are innovating with compelling assortments, promotional pricing and enhanced digital engagement. Discount retailers are well-positioned to benefit from this “trade-down” effect, as households shift from premium retailers without compromising on quality. The appeal of everyday low pricing and curated private-label assortments continues to attract budget-conscious.

Omnichannel Capabilities Enhance Customer Reach: With evolving shopping behaviors, discount retailers are increasingly blending physical and digital channels to serve customers seamlessly. Companies are channeling resources toward digital platforms, optimizing store fleets, and strengthening supply chains to support faster and more flexible fulfillment. Initiatives such as same-day delivery, buy-online-pickup-in-store, and contactless payment options have enhanced convenience and consumer satisfaction. At the same time, retailers are modernizing stores through renovations, mobile point-of-sale systems, and improved checkout experiences to keep brick-and-mortar locations relevant. By aligning product assortments with consumer preferences and leveraging data-driven insights, industry players are replenishing shelves with in-demand merchandise.

Margin Discipline Key to Defending Profitability: Competition within the discount retail space remains intense, as companies vie for share through pricing, product variety, and faster go-to-market strategies. The growing influence of e-commerce has further heightened the need for digital investments and robust delivery networks. While these initiatives are crucial for sustaining sales momentum, they also come with elevated fulfillment, marketing, and store-related costs that weigh on margins. To counter these pressures, retailers are streamlining operations, optimizing supply chains, and implementing disciplined pricing strategies. Ongoing cost-control measures and operational efficiencies will be vital for protecting profitability amid persistent competition.

Zacks Industry Rank Indicates Bright Prospects

The Zacks Retail – Discount Stores industry is housed within the broader Zacks Retail – Wholesale sector. The industry currently carries a Zacks Industry Rank #26, which places it in the top 11% of more than 250 Zacks industries.

The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates encouraging near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1. The industry’s position in the top 50% of the Zacks-ranked industries is a result of a positive earnings outlook for the constituent companies in aggregate.

Looking at the aggregate earnings estimate revisions, it appears that analysts are gaining confidence in this group’s earnings growth potential. Since the beginning of June 2025, the industry’s earnings estimate has increased approximately 6%.

Before we present a few stocks that you may want to consider for your portfolio, let’s take a look at the industry’s recent stock-market performance and valuation picture.

Industry vs. Broader Market

The Zacks Retail – Discount Stores industry has underperformed the broader Retail – Wholesale sector and the Zacks S&P 500 composite over the past year.

Stocks in this industry have collectively advanced 6.6%. Meanwhile, the Zacks Retail – Wholesale sector has risen 10.9% and the S&P 500 has rallied 16% in the said time frame.

One-Year Price Performance

 

Industry's Current Valuation

Based on a forward 12-month price-to-earnings (P/E) ratio, which is commonly used for valuing retail stocks, the industry is currently trading at 30.3 compared with the S&P 500’s 23.26 and the sector’s 24.58.

Over the last five years, the industry has traded as high as 33.77X and as low as 28.73X, with the median being 31.47X, as the chart below shows.

Price-to-Earnings Ratio (Past 5 Years)

4 Retail Discount Store Stocks to Keep a Close Eye On

TJX Companies: It continues to demonstrate exceptional execution of its off-price retail model, driving strong comp sales and margin gains across all divisions. Its flexible global sourcing, broad customer appeal, and deep vendor relationships provide access to high-quality branded merchandise at compelling values. The company’s ability to consistently capture market share while maintaining profitability reflects the strength of its buying organization, operational discipline, and global growth runway. With a resilient business model and proven execution, TJX is well-positioned for sustained expansion and long-term shareholder value creation.

The Zacks Consensus Estimate for TJX Companies’ current financial-year sales and earnings per share (EPS) suggests growth of 7% and 8.9%, respectively, from the year-ago reported figure. TJX has a trailing four-quarter earnings surprise of 5.4%, on average.  Shares of this Zacks Rank #2 (Buy) company have advanced 23.6% in the past year. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Price and Consensus: TJX

Dollar General: The company’s focus on value, convenience, and disciplined execution continues to drive broad-based sales and market share gains across consumable and non-consumable categories. Strategic initiatives like Project Elevate remodels, digital expansion through delivery partnerships, and the growth of DG Media Network are enhancing customer engagement and productivity. Strong inventory management and margin improvement underscore operational strength and balance sheet discipline. With its vast store network and growing digital reach, Dollar General is positioned to deliver steady growth.

The Zacks Consensus Estimate for Dollar General’s current financial-year sales and EPS suggests growth of 4.7% and 3.6%, respectively, from the year-ago reported figure. DG has a trailing four-quarter earnings surprise of 11.3%, on average. Shares of this Zacks Rank #2 company have surged 29.9% in the past year.

Price and Consensus: DG

Dollar Tree: Following the Family Dollar divestiture, Dollar Tree has sharpened its focus on the core brand, leveraging its expanded multi-price assortment to attract a broader, higher-income customer base while reinforcing its value leadership. The company’s agile pricing strategy, strong execution, and cost-mitigation levers are sustaining margins amid tariff pressure. Store conversions, real estate expansion and digital initiatives are strengthening customer engagement and operational efficiency. With its resilient model, strengthened balance sheet and clear strategic priorities, Dollar Tree is poised for sustained growth.

The Zacks Consensus Estimate for Dollar Tree’s current financial-year earnings suggests growth of 8.2% from the year-ago reported figure. DLTR has a trailing four-quarter earnings surprise of 27.5%, on average. Shares of this Zacks Rank #2 company have rallied 41.5% in the past year.

Price and Consensus: DLTR

Costco: Its membership-based model continues to strengthen its competitive edge by fostering customer loyalty and ensuring stable revenues. Its efficient supply chain, disciplined cost management, and carefully selected product mix reinforce Costco’s reputation for quality and value, maintaining consistent store traffic and sales growth. The company’s focus on digital improvements and logistics investments is boosting convenience and broadening its omnichannel presence. With a loyal membership base, operational excellence and a flexible merchandising approach, Costco is well-positioned for lasting growth.

Costco has a trailing four-quarter earnings surprise of 0.2%, on average. The Zacks Consensus Estimate for current financial-year revenues and EPS suggests growth of 7.7% and 11.1%, respectively, from the year-ago reported figure. Shares of this Zacks Rank #3 (Hold) company have risen 7.9% in the past year.

Price and Consensus: COST