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Buy 3 Big Discount Retailers to Gain From Solid Near-Term Price Upside
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Key Takeaways
ROST posted 13% sales growth and plans 115 store openings in fiscal 2026.
DLTR is expanding its multi-price assortment while using AI to improve customer engagement and performance.
DG raised its fiscal 2026 sales, same-store sales and EPS outlook amid improving execution.
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, elevated borrowing costs and shifting spending patterns, discount retailers continue to attract steady foot traffic by offering competitive pricing, compelling assortments and convenient store formats.
The Zacks-defined Retail – Discount Stores industry is currently in the top 11% of the Zacks Industry Rank. Since it is ranked in the top half of the Zacks Ranked Industries, we expect the Investment Bank industry to outperform the market over the next three to six months.
The chart below shows the price performance of our three picks year to date.
Image Source: Zacks Investment Research
Ross Stores Inc.
Ross Stores is well positioned for continued growth, supported by strong sales momentum, customer acquisition and a compelling value proposition. Second-quarter fiscal 2026 sales rose 13%, with broad-based strength across categories and regions.
ROST sees further upside from merchandising, marketing and store-execution initiatives that remain in the early stages. Store expansion adds another growth lever, with 115 openings planned for fiscal 2026. ROST also maintains a strong financial foundation, supported by healthy liquidity and cash generation.
ROST has an expected revenue and earnings growth rate of 12.4% and 32.7%, respectively, for the current year (ending January 2027). The Zacks Consensus Estimate for the current year’s earnings has improved 11.7% in the last 30 days.
Strong Price Upside Potential
The short-term average price target of brokerage firms represents an increase of 19.1% from the last closing price of $231.15. The brokerage target price is currently in the range of $234-$310. This indicates a maximum upside of 34.1% and no downside.
Dollar Tree Inc.
Dollar Tree is strengthening its competitive position by executing a focused transformation centered on value, convenience and an expanded multi-price assortment that is driving broader customer appeal and deeper everyday relevance.
DLTR continues to enhance its merchandising, store standards, targeted marketing and operational execution while leveraging data and artificial intelligence (AI) to better engage customers and optimize performance.
DLTR also sees meaningful opportunities to capture market share as value-conscious shoppers across income levels increasingly turn to the brand, supported by disciplined investments in assortment, store refreshes and supply-chain capabilities.
DLTR has an expected revenue and earnings growth rate of 6.7% and 34.6%, respectively, for the current year (ending January 2027). The Zacks Consensus Estimate for the current year’s earnings has improved 10.6% in the last 30 days.
Strong Price Upside Potential
The short-term average price target of brokerage firms represents an increase of 21.6% from the last closing price of $112.33. The brokerage target price is currently in the range of $98-$170. This indicates a maximum upside of 51.3% and a downside of 12.8%.
Dollar General Corp.
Dollar General is benefiting from disciplined execution, improving store standards and a sharper value proposition, supporting sustained traffic and market-share gains across income cohorts. DG’s extensive rural footprint, remodel program and expanding delivery capabilities reinforce convenience, while digital engagement and DG Media Network monetization provide additional growth and margin opportunities.
Better inventory control, lower shrink, reduced damages and supply-chain efficiencies are strengthening profitability and operating performance. DG raised its fiscal 2026 outlook for net sales growth of 4-4.3%, same-store sales growth of 2.5-2.9% and EPS of $7.80-$8.00, reflecting confidence in continued momentum. Ongoing store investments and productivity initiatives should support DG’s earnings growth and shareholder returns.
DG has an expected revenue and earnings growth rate of 4.1% and 12.9%, respectively, for the current year (ending January 2027). The Zacks Consensus Estimate for the current year’s earnings has improved 0.4% in the last seven days.
Strong Price Upside Potential
The short-term average price target of brokerage firms represents an increase of 15.4% from the last closing price of $121.91. The brokerage target price is currently in the range of $90-$176. This indicates a maximum upside of 44.4% and a downside of 26.2%.
View the Zacks #1 Rank List
Image: Bigstock
Buy 3 Big Discount Retailers to Gain From Solid Near-Term Price Upside
Key Takeaways
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, elevated borrowing costs and shifting spending patterns, discount retailers continue to attract steady foot traffic by offering competitive pricing, compelling assortments and convenient store formats.
The Zacks-defined Retail – Discount Stores industry is currently in the top 11% of the Zacks Industry Rank. Since it is ranked in the top half of the Zacks Ranked Industries, we expect the Investment Bank industry to outperform the market over the next three to six months.
At this stage, we recommend buying shares of three discount retail store bigwigs with a favorable Zacks Rank. The stocks are: Ross Stores Inc. (ROST - Free Report) , Dollar Tree Inc. (DLTR - Free Report) and Dollar General Corp. (DG - Free Report) . Each of our picks currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The chart below shows the price performance of our three picks year to date.
Image Source: Zacks Investment Research
Ross Stores Inc.
Ross Stores is well positioned for continued growth, supported by strong sales momentum, customer acquisition and a compelling value proposition. Second-quarter fiscal 2026 sales rose 13%, with broad-based strength across categories and regions.
ROST sees further upside from merchandising, marketing and store-execution initiatives that remain in the early stages. Store expansion adds another growth lever, with 115 openings planned for fiscal 2026. ROST also maintains a strong financial foundation, supported by healthy liquidity and cash generation.
ROST has an expected revenue and earnings growth rate of 12.4% and 32.7%, respectively, for the current year (ending January 2027). The Zacks Consensus Estimate for the current year’s earnings has improved 11.7% in the last 30 days.
Strong Price Upside Potential
The short-term average price target of brokerage firms represents an increase of 19.1% from the last closing price of $231.15. The brokerage target price is currently in the range of $234-$310. This indicates a maximum upside of 34.1% and no downside.
Dollar Tree Inc.
Dollar Tree is strengthening its competitive position by executing a focused transformation centered on value, convenience and an expanded multi-price assortment that is driving broader customer appeal and deeper everyday relevance.
DLTR continues to enhance its merchandising, store standards, targeted marketing and operational execution while leveraging data and artificial intelligence (AI) to better engage customers and optimize performance.
DLTR also sees meaningful opportunities to capture market share as value-conscious shoppers across income levels increasingly turn to the brand, supported by disciplined investments in assortment, store refreshes and supply-chain capabilities.
DLTR has an expected revenue and earnings growth rate of 6.7% and 34.6%, respectively, for the current year (ending January 2027). The Zacks Consensus Estimate for the current year’s earnings has improved 10.6% in the last 30 days.
Strong Price Upside Potential
The short-term average price target of brokerage firms represents an increase of 21.6% from the last closing price of $112.33. The brokerage target price is currently in the range of $98-$170. This indicates a maximum upside of 51.3% and a downside of 12.8%.
Dollar General Corp.
Dollar General is benefiting from disciplined execution, improving store standards and a sharper value proposition, supporting sustained traffic and market-share gains across income cohorts. DG’s extensive rural footprint, remodel program and expanding delivery capabilities reinforce convenience, while digital engagement and DG Media Network monetization provide additional growth and margin opportunities.
Better inventory control, lower shrink, reduced damages and supply-chain efficiencies are strengthening profitability and operating performance. DG raised its fiscal 2026 outlook for net sales growth of 4-4.3%, same-store sales growth of 2.5-2.9% and EPS of $7.80-$8.00, reflecting confidence in continued momentum. Ongoing store investments and productivity initiatives should support DG’s earnings growth and shareholder returns.
DG has an expected revenue and earnings growth rate of 4.1% and 12.9%, respectively, for the current year (ending January 2027). The Zacks Consensus Estimate for the current year’s earnings has improved 0.4% in the last seven days.
Strong Price Upside Potential
The short-term average price target of brokerage firms represents an increase of 15.4% from the last closing price of $121.91. The brokerage target price is currently in the range of $90-$176. This indicates a maximum upside of 44.4% and a downside of 26.2%.