Discount Retail Stocks Are Soaring This Year. Should You Invest?

Core Insights - Discount retailers are currently one of the biggest trends in the retail sector, significantly outperforming the S&P 500 index in 2026 [1][2] - The S&P 500 index has increased by approximately 1% year-to-date and 14% over the past 52 weeks [1] Performance of Discount Retail Stocks - The five discount retail stocks in the S&P 500 have shown strong performance, with all but Target and Costco outperforming the S&P 500 over the past year [2] - Year-to-date performance for key discount retailers includes: - Walmart: up 5.8% - Costco: up 13.7% - Target: up 10.1% - Dollar General: up 9.9% - Dollar Tree: up 3.1% [6] Consumer Behavior Trends - Inflation is driving consumers, both low-income and high-income, to discount stores [4] - As of September 2025, 28% of high-income Americans shopped at discount chains, up from 20% four years prior [5] - For low-income consumers, the percentage increased from less than 84% in 2021 to over 88% in 2025, while middle-income households rose from 47.5% to over 59% [5] Sales Performance - In Q4 2025, same-store sales increased by: - 5.7% at Costco - 4.2% at Walmart - 4.2% at Dollar Tree [6] - Despite a decrease in inflation from a peak of about 9% in June 2022, the current rate remains elevated at around 2.7%, above the Federal Reserve's target of 2% [6][7]