Back to top

Image: Bigstock

3 Discount Retail Stocks Charting the Course of Success

Read MoreHide Full Article

In the dynamic retail landscape, one industry has managed to defy economic uncertainties and shifting consumer preferences — the Retail – Discount Stores industry. Despite facing headwinds, discount retailers have proven resilient, demonstrating decent growth potential, even in the most challenging times.

When consumers tighten their purse strings and prioritize value, discount retailers emerge as trusted allies. Offering competitive pricing without compromising on quality has been key to success. By maintaining a diverse array of products and ensuring hassle-free shopping experiences, retailers remain the go-to destination for budget-conscious shoppers.

In the age of e-commerce dominance, discount retailers have not only survived but also thrived. Rather than viewing online retail as a threat, they've embraced digital platforms to enhance their offerings and expand their reach. Through innovative technology and omnichannel strategies, these retailers stay ahead of the curve, ensuring they remain relevant in the fast-paced digital landscape.

Exceptional service and value retention are paramount for discount retailers amid fierce competition. Many have invested in enhancing their private label offerings, providing consumers with quality products at affordable prices. This focus on value proposition further solidifies their position in the market, earning them customer loyalty.

The industry's outlook remains optimistic, driven by evolving consumer trends and technological advancements. The integration of cutting-edge technologies such as data analytics and artificial intelligence empowers retailers to optimize operations, personalize customer experiences and drive efficiency.

In light of these factors, we've identified three discount stocks from the Retail – Discount Stores industry. With a Zacks Industry Rank of #79, placing it in the top 31% of more than 250 Zacks industries, the sector holds promising investment opportunities for those seeking growth potential in the retail space.

Past 6-Month Price Performance

Zacks Investment Research
Image Source: Zacks Investment Research

3 Prominent Picks

Burlington Stores (BURL - Free Report) has adeptly responded to the challenges in the retail landscape by strategically emphasizing recognizable brands, implementing the best pricing strategy and targeting trade-down shoppers. The implementation of strategic initiatives aimed at enhancing merchandising capabilities, operational efficiency and store optimization is likely to support revenue growth. By focusing on initiatives such as store relocations and downsizing, Burlington Stores aims to improve store productivity. The ability to quickly respond to evolving market dynamics and adjust inventory levels based on real-time data insights has enabled the company to seize opportunities. Burlington Stores’ ambitious plan to open 500 net new stores and achieve a 10% operating margin by 2028 sets a robust foundation for sustained growth.

The Zacks Consensus Estimate for current fiscal year revenues implies 10.2% growth, while the same for earnings per share indicates a 22.3% increase from the corresponding year-ago reported figures. For the next fiscal year, the consensus estimate suggests a 10.6% rise in sales and 23.1% growth in earnings. This Zacks Rank #1 (Strong Buy) company has a trailing four-quarter earnings surprise of 10.1%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.

Target Corporation (TGT - Free Report) has been making multiple changes to its business model to adapt and stay relevant in the dynamic retail landscape. TGT has been deploying resources to enhance omnichannel capabilities, come up with new brands, refurbish stores and expand same-day delivery options to provide customers with a seamless shopping experience. These have been contributing to the top line. Furthermore, by streamlining inventory management and reducing markdown frequency, the company anticipates margin expansion. Through a strategic allocation of resources, the company prioritizes scaling operations, attracting new customers and optimizing its service and supply chain infrastructure. This comprehensive strategy, coupled with a focus on cost-containment measures, underscores Target's commitment to sustainable growth.

Target has a trailing four-quarter earnings surprise of 27.1%, on average. The Zacks Consensus Estimate for current fiscal year earnings per share indicates a 5% increase from the corresponding year-ago reported figure. For the next fiscal year, the consensus estimate suggests a 3.8% rise in sales and 12.5% growth in earnings. The stock currently carries a Zacks Rank #3 (Hold).

Dollar General's (DG - Free Report) strength lies in value-driven initiatives and a balanced product mix, fostering customer loyalty among low-to-middle-income demographics. Its commitment to better pricing, private label offerings, effective inventory management and merchandise initiative should drive sales. We remain encouraged by the host of initiatives such as DG Fresh, Fast Track, digitization and the expansion of the private fleet that should yield same-store sales improvements and margin expansion. Efforts to enhance distribution center productivity and transportation logistics promise cost efficiencies and improved stock levels.

The Zacks Consensus Estimate for current fiscal year revenues implies 6.1% growth from the corresponding year-ago reported figure. For the next fiscal year, the consensus estimate suggests a 5.4% rise in sales and 13.4% growth in earnings. This Zacks Rank #3 company achieved positive earnings surprises in each of the last two reported quarters.

See More Zacks Research for These Tickers

Normally $25 each - click below to receive one report FREE:

Target Corporation (TGT) - free report >>

Dollar General Corporation (DG) - free report >>

Burlington Stores, Inc. (BURL) - free report >>

Published in