In this article, we will look at the 10 Best Discount Store Stocks to Invest In.
Is Inflation and Slow Economic Growth on the Horizon for the US?
The market is abuzz with concerns about the economic growth of the US, with inflation-related worries infesting consumer confidence. These factors are gaining force as the tariff deadlines imposed by President Trump on Canada and Mexico steadily approach after a delay in February. Investors are also skeptical about the labor market impacts of the initiatives taken by Elon Musk’s Department of Government Efficiency (DOGE).
The Conference Board reported that the consumer confidence index fell 7 points to 98.3, experiencing its largest fall since August 2021 and below the Dow Jones forecast of 102.3. In addition, The Expectations Index dropped to a 72.9 reading, reflecting a decrease of 9.3 points. The measure has tumbled below the level consistent with recession for the first time since June 2024.
These trends show that consumers are becoming increasingly pessimistic about the country’s economic outlook, and this pessimism reached new heights in February due to skepticism surrounding rising inflation and a slowing economy, according to the Conference Board. CNBC reported that Brian Jacobsen, chief economist at Annex Wealth Management in Menomonee Falls, Wisconsin, said the following about the situation:
“The present situation index improved, but consumers expect dark skies ahead. Change can be scary, so it’s not surprising that confidence is falling.”
Joseph Trevisani, senior analyst at FXStreet in New York, expressed similar sentiments, as reported by CNBC:
“There’s going to be a lot of back and forth on Trump’s initiatives, and certainly markets in general long term, don’t like tariffs. There’s definitely nervousness out there because some of these things could go the wrong way. Certainly, inflation hasn’t shown any sign of further retreat.”
We discussed the major drop in consumer sentiment in a recently published article on the 10 Cheap Food Stocks to Buy According to Hedge Funds. Here is an excerpt from the article:
“Economists and experts opine that the situation is unpredictable and worrisome. Trump’s tariffs may ignite another bubbling of inflation in a scenario where the Federal Reserve is weighing the odds of whether to slash interest rates further or hold steady as experts and policymakers chalk out the effects of the President’s aggressive trade and fiscal policies, as reported by CNBC.
Consumers are reflecting the worries of economists and experts, as the 12-month inflation expectations rose to 6%, up from 5.2% in the last month and considerably higher than the Fed’s steady goal of 2%.
Treasury Secretary Scott Bessent rang caution bells regarding “sticky” inflation and the potential for slow growth. He attributed the cause to former President Biden’s administration, saying that he fostered an economy too dependent on government spending. He said the government’s plan now is to develop a more diverse economy through deregulation, tax cuts, and tariffs”.
READ ALSO: 10 Cheap Food Stocks to Buy According to Hedge Funds and 12 Best Grocery Store Stocks to Buy Now.
What Are American Consumers Feeling?
CNBC reported that the University of Michigan consumer survey for February reflected similar consumer sentiments. Respondents expect the inflation rate to be around 4.3% a year from now, reflecting a 1 percentage point jump from January and the highest level since November 2023. The news channel reported that Robert Frick, corporate economist at Navy Credit Union, said the following about the situation:
“Higher prices from tariffs are the number one financial concern for Americans, as the weight of inflation is still oppressive to family budgets, especially among those with lower incomes. Even slight increases in prices, especially in top pain points such as food, shelter, and transportation, would be acutely felt by millions.”
Since potentially higher prices in the future are a major concern for millions of Americans, consumers may increasingly direct their attention towards discount stores and value deals to make their way through the scenario. With these trends in view, let’s look at the 10 best discount store stocks to invest in.
A busy grocery store aisle stocked with the company’s weight management products.
Our Methodology
We sifted through stock screeners, online rankings, and ETFs to compile a list of 15 discount store stocks. We then selected the top 10 most popular stocks among elite hedge funds as of Q4 2024. We sourced the hedge fund sentiment data from Insider Monkey’s database. The list is sorted in ascending order of hedge fund sentiment.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
10 Best Discount Store Stocks to Invest In
10. PriceSmart, Inc. (NASDAQ:PSMT)
Number of Hedge Fund Holders: 22
PriceSmart Inc. (NASDAQ:PSMT) owns and operates American-style membership warehouse clubs in South America, the Caribbean, and Central America. It is often called the Costco of South America and operates through approximately 54 warehouse clubs in 12 countries and one US territory. It offers its members a wide array of services and merchandise, including categories such as consumables, health services, fresh food, hardline, and bakery.
PriceSmart Inc. (NASDAQ:PSMT) is running on positive financials. It reported net merchandise sales of $1.22 billion for fiscal Q1 2025, while total revenue reached $1.26 billion. Net merchandise sales increased by 7.8% or 8.2% in constant currency, while comparable net merchandise sales rose by 5.7% or 6.1% in constant currency.
The company’s food category grew approximately 1.8% in fiscal Q1 2025 compared to last year’s period. Its non-foods category also grew by approximately 10.2%, and food services and bakery categories grew by around 7.5%, reflecting PriceSmart Inc.’s (NASDAQ:PSMT) solid operations. The company takes the tenth spot on our list of the best discount store stocks to buy now.
9. Ollies Bargain Outlet Holdings (NASDAQ:OLLI)
Number of Hedge Fund Holders: 34
Ollies Bargain Outlet Holdings (NASDAQ:OLLI) operates as a value retailer of brand-name closeout merchandise and excess inventory. Principally, the company buys overstocked, overproduced, and closeout merchandise from wholesalers, manufacturers, brokers, distributors, and other retailers to sell to its customers. It operates in a warehouse format, featuring various categories ranging from hardware, clothing, and sporting goods to health and beauty, food, electronics, and much more.
With over 550 stores in 31 states, Ollies Bargain Outlet Holdings (NASDAQ:OLLI) is the largest buyer of closeouts and excess inventory, which gives it a competitive market advantage. It has opportunistically acquired various real estate sites, bolstering its new store pipeline and competitive positioning. These opportunities include the former 99 Cents Only Stores in Texas, which the company acquired out of bankruptcy in May 2024.
Ollies Bargain Outlet Holdings (NASDAQ:OLLI) also acquired closing Big Lots stores as another real estate opportunity. It took over 17 store locations and recently won the bid for an additional 7 stores. The company is prioritizing the opening of these acquired stores. It boasts a strong new store pipeline, and its record new store openings set for 2025 cast a positive light on the company.
Wasatch Small Cap Growth Strategy made the following comment about Ollie’s Bargain Outlet Holdings, Inc. (NASDAQ:OLLI) in its Q3 2023 investor letter:
“The third quarter’s top contributor to strategy performance was Ollie’s Bargain Outlet Holdings, Inc. (NASDAQ:OLLI). The company’s stores offer a constantly changing selection of close-out items and other brand-name merchandise at deeply discounted prices. A steady flow of inventory acquired from distressed retailers has attracted customers to Ollie’s and boosted sales. In the company’s most recent quarter, net sales rose a better-than-expected 13.7% year over year, driven by an increase of 7.9% in comparable-store sales and the addition of six new locations. With margins and earnings also exceeding estimates, management upped its guidance for fiscal year 2023. Because the discounts at Ollie’s help consumers stretch their dollars, we think the company is better situated than most other retailers in the current inflationary environment.”
8. BJ’s Wholesale Club Holdings (NYSE:BJ)
Number of Hedge Fund Holders: 43
BJ’s Wholesale Club Holdings (NYSE:BJ) is a membership-only warehouse chain offering an elaborate assortment of goods. These include a wide range of items, including groceries and general merchandise and services. The company also offers specialty services and operates approximately 244 clubs and 175 gas locations across 20 states.
The company reported a 1.5% year-over-year growth in comparable club sales in fiscal Q3 2024. Comparable club sales, excluding gasoline sales, increased by 3.8% year-over-year. This growth was attributed to strong traffic. Similarly, BJ’s Wholesale Club Holdings (NYSE:BJ) reported a 30.0% growth in digitally enabled comparable sales growth, reflecting a two-year stacked comparable growth of 47.0%.
BJ’s Wholesale Club Holdings (NYSE:BJ) opened four new gas stations and three new clubs in the quarter, reflecting the strength of its operations. It also delivered robust membership growth and hit a milestone of 7.5 million members. In November, the company authorized a $1 billion buyback, 10% of its market cap at the time. BJ’s Wholesale Club Holdings (NYSE:BJ) ranks eighth on our list of the 10 best discount store stocks to invest in.
ClearBridge SMID Cap Growth Strategy stated the following regarding BJ’s Wholesale Club Holdings, Inc. (NYSE:BJ) in its Q2 2024 investor letter:
“Stock selection in the consumer staples sector also proved beneficial, primarily driven by our holdings in Casey’s General Stores (CASY) and BJ’s Wholesale Club Holdings, Inc. (NYSE:BJ). BJ’s, which operates warehouse clubs providing perishable, general merchandise, gasoline and other ancillary services, continues to exceed expectations. With inflation continuing to weigh on consumer spending, the company’s membership channel continues to grow due to its perceived value to customers.”
7. Five Below, Inc. (NASDAQ:FIVE)
Number of Hedge Fund Holders: 48
Five Below, Inc. (NASDAQ:FIVE) is a specialty value retailer offering various products, including licensed merchandise and select brands. Its product offerings include fashion, leisure, snacks, seasonal, electronic accessories, party, and more.
The company reported a 15% growth in sales in fiscal Q3 2024 to $844 million, while adjusted EPS was $0.42. These results were ahead of the company’s expectations, as it saw an overall improvement in sales across a range of its categories compared to fiscal Q2 2024. Five Below, Inc. (NASDAQ:FIVE) improved operational execution across all aspects of its business, driving a better customer experience.
The company’s performance for new stores also surpassed expectations. It opened a record 82 stores in fiscal Q3 2024, delivering an 18% growth versus last year’s fiscal Q3 store count. These new stores were located across 31 states, including Five Below, Inc.’s (NASDAQ:FIVE) 44th state of Wyoming. The company’s operations in the holiday period from November 3, 2024 through January 4, 2025 also showed strength. Its net sales increased 8.7% in the season to $1.19 billion, up from $1.10 billion in the comparable nine-week period between November 5, 2023 and January 6, 2024. Five Below, Inc. (NASDAQ:FIVE) ranks seventh on our list.
6. Dollar General (NYSE:DG)
Number of Hedge Fund Holders: 53
Dollar General (NYSE:DG) is a retailer that offers an elaborate array of merchandise in its stores, including consumables, beverages, seasonal items, and more. Its merchandise collection includes its own private brands and brands from manufacturers.
In fiscal Q3 2024, the business generated cash flows of $2.2 billion from operations, an increase of 52% due to improvements in Dollar General’s (NYSE:DG) working capital position, mainly through inventory management. Its net sales grew by 5% to $10.2 billion in fiscal Q3 2024. The company raised its market share in both dollars and units in highly consumable and non-consumable product sales during the quarter. Its same-store sales also rose by 1.3%, attributed to 1.1% growth in the average transaction amount, including the average unit retail price per item and the increase in average items per basket.
The company’s primary priority is investing in its business, including its existing store base and organic growth opportunities, such as strategic initiatives and new store expansion. Dollar General (NYSE:DG) has strong growth projections and estimates a 7% increase in cash flow and 11% growth in earnings annually over the coming years.
5. Target Corporation (NYSE:TGT)
Number of Hedge Fund Holders: 56
Target Corporation (NYSE:TGT) is a retail giant operating over 2,000 discount department stores and hypermarkets across the US and Canada. It serves its customers an array of items, including food, everyday essentials, differentiated merchandise at discounted prices, and general merchandise. Its merchandise categories span food and beverages, home furnishing and decor, and others.
In January, the company announced that it is focusing on its commitment to wellness, with plans to introduce more than 2,000 new items across multiple categories, including more than 600 Target exclusives.
Over the past year, the company has increased its operating income steadily while preserving a strong financial foundation. It benefits from strong liquidity, supported by a clean balance sheet free of intangible assets and a robust return on invested capital (ROIC) of 11.5%. In the first nine months of 2024, the company generated $4.07 billion in operating cash flow and held $3.4 billion in cash and cash equivalents by the end of the quarter. Target Corporation (NYSE:TGT) also has a 53-year streak of continuous dividend growth and offers a quarterly dividend of $1.12 per share with a dividend yield of 3.56% as of February 24.
4. Dollar Tree, Inc. (NASDAQ:DLTR)
Number of Hedge Fund Holders: 64
Dollar Tree, Inc. (NASDAQ:DLTR) operates discount department stores and offers a wide range of merchandise under the business segments Dollar Tree and Family Dollar. Dollar Tree stores offer consumable merchandise, seasonal goods, and variety merchandise. The Family Dollar segment operates as general merchandise retail discount stores that offer a range of affordable merchandise in convenient neighborhood stores.
The company reported a revenue of $7.56 billion in fiscal Q3 2024, exceeding the forecast of $7.446 billion. Its net sales also grew significantly, primarily due to its non-comparable stores. This growth was attributed to the company’s continued merchandising efforts for Family Dollar and Dollar Tree. Despite some macroeconomic challenges, Dollar Tree, Inc. (NASDAQ:DLTR) is maintaining strong operational results.
The company is focusing on boosting the growth of its Dollar Tree brand and is converting stores to its in-line multi-price 3.0 format. It is opening new stores and improving the in-store experience for its customers through customer service enhancements and renovations. In fiscal Q3 2024, the company converted another 720 stores to the 3.0 format, bringing the total number of converted Dollar Tree stores to around 2,300. These stores produced around 30% of the company’s total net sales in fiscal Q3 2024.
3. The TJX Companies, Inc. (NYSE:TJX)
Number of Hedge Fund Holders: 74
TJX Companies, Inc. (NYSE:TJX) operates in the Marmaxx and HomeGoods, TJX International, and TJX Canada segments. Its stores offer an assortment of value home decorations, apparel, decorative accessories, footwear, accessories, giftware, and more.
The company’s overall sales surpassed $56 billion in fiscal Q4 2025, while full-year comparable store sales grew by 4%. The TJX Companies, Inc. (NYSE:TJX) attained a significant increase in profitability, along with a double-digit increase in earnings per share (EPS). In addition, the company’s net sales grew to $16.4 billion, a 5% increase versus last year’s adjusted sales. A 5% growth in its fiscal Q4 2025 consolidated comps sales also exceeded the company’s expectations. This growth was attributed to an increase in customer transactions.
The TJX Companies, Inc. (NYSE:TJX) opened its 5,000th store in the quarter, marking another significant milestone for the company. In fiscal 2025, it returned $4.1 billion to shareholders through its buyback and dividend programs. The company ranks third on our list of the 10 best discount store stocks to invest in.
Bretton Fund stated the following regarding The TJX Companies, Inc. (NYSE:TJX) in its Q4 2024 investor letter:
“Pre-pandemic, The TJX Companies, Inc. (NYSE:TJX) and Ross were usually in lockstep operationally and performance-wise. The main difference is TJX is much larger and has more divisions: TJ Maxx has higher-end goods; Marshalls has lower price points and is very similar to Ross; HomeGoods and Homesense offer furniture and household goods. But as inflation spiked up, TJX was better able to push through price increases, helped in part due to its relatively higher-income shoppers being less sensitive to inflation. TJX’s earnings growth and share price have outperformed Ross the past few years, but we expect that to converge in the near term. TJX’s and Ross’s earnings increased an estimated 9% and 11%, respectively, and their stocks returned 31% and 10%.”
2. Costco Wholesale Corporation (NASDAQ:COST)
Number of Hedge Fund Holders: 96
Costco Wholesale Corporation (NASDAQ:COST) operates membership-only big box warehouse club stores and is one of the most popular department stores in the US. It offers an extensive collection of value furniture, electronics, clothing, consumables, and more to its customers. Costco Wholesale Corporation’s (NASDAQ:COST) retail approach lends it a competitive market position. The company is attracting a growing number of loyal shoppers worldwide by offering membership-based pricing and discounts on bulk items. In addition, its stock has surged by nearly 36% in the past 12 months.
Costco Wholesale Corporation (NASDAQ:COST) generated revenue of $62 billion in fiscal Q1 2025, marking a 7.5% increase compared to the same quarter last year. It also ended the quarter with 77.4 million paid household members, reflecting a 7.6% growth compared to last year and highlighting its continued popularity.
To continue this demand, the company is expanding its operations, opening new stores, and consolidating its presence in 47 US states. It attained its target of opening 30 new warehouses in fiscal 2024. It is also expanding its presence internationally and has plans to take on 12 of its 29 planned openings outside the US.
Madison Investments made the following comment about Costco Wholesale Corporation (NASDAQ:COST) in its Q3 2024 investor letter:
“Costco Wholesale Corporation (NASDAQ:COST) continues to demonstrate its commitment to sustainability by lowering its emissions. For example, it has converted its Kirkland Signature laundry packs from plastic tubs to a pouch. This has reduced plastic packaging by 80%. It has also moved to localize production of bulky items such as water, paper, and laundry detergents. Manufacturing these goods closer to the countries in which they are sold reduces emissions associated with shipping.”
1. Walmart Inc. (NYSE:WMT)
Number of Hedge Fund Holders: 116
Walmart Inc. (NYSE:WMT) is an omnichannel retailer operating retail and wholesale stores, clubs, e-commerce websites, and mobile applications. It offers an elaborate array of items, ranging from general merchandise and electronics to food, groceries, and more.
In February, Walmart Inc. (NYSE:WMT) Canada announced plans to spend $4.51 billion on new stores, reflecting supply-chain expansion. As part of the initiative, the company plans to open dozens of stores nationwide, starting with opening five supercenters in Ontario and Alberta by 2027, two of which are set to open this year.
The company reported sales growth of 5.2% in fiscal Q4 2025, along with a 9.4% adjusted operating income growth in constant currency. Walmart Inc. (NYSE:WMT) is continually gaining market share across income levels and countries. Unit volumes and transaction counts were up across all its markets in the year’s first three quarters, reflecting its healthy top line. The company’s prices are low, and it is becoming increasingly convenient, resulting in its growing popularity.
Overall, WMT ranks first among the 10 best discount store stocks to invest in. While we acknowledge the potential of discount store stocks, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than WMT but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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