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 — ...

Core Insights - Costco Wholesale Corporation (COST) demonstrated consistent comparable sales growth in June, driven by its appeal to value-conscious consumers amid inflationary pressures [2][6] - The company's competitive pricing and quality merchandise, available in-store and online, continue to resonate with shoppers [2][6] Sales Performance - For the five weeks ending July 6, 2025, Costco reported a 5.8% year-over-year increase in total comparable sales, with U.S. sales up 4.7%, Canada up 6.7%, and Other International markets up 10.9% [3][8] - Adjusted comparable sales, excluding gasoline price fluctuations and foreign exchange impacts, showed U.S. comps climbing 5.5%, Canada up 7.9%, and Other International markets up 8.2%, leading to an overall growth of 6.2% [4][8] - E-commerce sales surged 11.5%, or 11.2% when adjusted for fuel and currency headwinds, continuing a trend of double-digit growth from previous months [5][8] Financial Highlights - Costco's net sales for June increased by 8% to $26.44 billion, compared to $24.48 billion in the same period last year, following sales improvements of 6.8% in May and 7% in April [5][8] - The company's resilient business model, characterized by a membership-based structure, high membership renewal rates, and efficient supply-chain management, supports competitive pricing and customer loyalty [6][8] Market Performance - Shares of Costco have advanced 15.3% over the past year, outperforming the Retail – Discount Stores industry's rise of 5.2% [9]

Core Insights - The discount retail sector, represented by Ross Stores, Inc. (ROST) and Dollar Tree, Inc. (DLTR), is thriving as consumers prioritize value and affordability amid economic uncertainty [1][2][3] Group 1: Company Overview - Ross Stores is the leading off-price retailer in the U.S., known for offering recognizable brands at lower prices than traditional department stores, demonstrating strong operational efficiency and profitability [4][7] - Dollar Tree has solidified its position in the discount retail sector, focusing on its core Dollar Tree banner and divesting Family Dollar, which has led to increased traffic and sales [8][10][12] Group 2: Financial Performance - Ross Stores reported steady comparable sales with improved customer traffic and strong performance in key categories like cosmetics and women's apparel [5][6] - Dollar Tree experienced broad-based comparable sales growth in fiscal Q1 2025, driven by increased traffic and average ticket sizes, particularly in consumables [10][11] Group 3: Strategic Initiatives - Ross Stores employs an agile buying model and a "packaway" approach to maintain product freshness and value, appealing to a diverse demographic [6][7] - Dollar Tree is expanding its multi-price strategy with "3.0" stores, moving beyond the traditional pricing model to enhance its product mix and store conditions [11][13] Group 4: Market Positioning - Ross Stores is expanding its physical footprint and modernizing its brand experience, indicating confidence in continued demand for its value-driven model [7] - Dollar Tree's transformation and focus on higher-income consumers, along with its effective execution in the value retail space, position it favorably against competitors [12][13] Group 5: Stock Performance and Valuation - Ross Stores has a forward P/E ratio of 20.18X, below the industry average, while Dollar Tree's forward P/E stands at 17.76X, indicating a reasonable valuation for both [18][19] - In the past six months, Dollar Tree's stock surged 38.3%, outperforming Ross Stores' 15.8% decline, reflecting investor confidence in Dollar Tree's growth strategy [19][23] Group 6: Future Outlook - The Zacks Consensus Estimate suggests Ross Stores will see a 3.9% sales growth but a 1.6% decline in EPS for fiscal 2025, while Dollar Tree is expected to achieve a 6.5% growth in EPS despite a significant sales decline [15][16] - Current market dynamics favor Dollar Tree as a stronger investment option due to its robust transformation and growth roadmap [23][24]

Industry Overview - The Retail – Discount Stores industry is facing challenges from shifting consumer behaviors, intense competition, and evolving tariff policies, which are expected to impact the sector's trajectory [1] - Inflation is affecting household budgets, leading to more cautious spending even in traditionally resilient discount categories [1] - Rising labor and sourcing costs are significant hurdles for retailers operating on thin margins [1] - To regain momentum, discount retailers need to rebuild consumer confidence and spending capacity through strategic pricing, inventory optimization, and operational efficiencies [1] Key Industry Trends - **Muted Consumer Demand Raises Revenue Concerns**: Inflation and geopolitical issues are straining consumer purchasing power, with the consumer sentiment index dropping to 50.8 from 57.0, marking the fourth consecutive month of decline [4] - **Cost Overhang Likely to Keep Margins Under Pressure**: The competitive landscape, particularly from e-commerce, is pressuring margins due to high costs associated with digital enhancements and marketing [5] - **Consumers Seek Better Bargains**: There is a growing demand for discounted prices among low- to middle-income groups, prompting retailers to innovate and enhance their digital capabilities [6] - **Digitization Key to Sector's Resilient Growth**: Retailers are investing in digital platforms and improving supply chains to adapt to changing consumer shopping patterns, including curbside pickup and contactless payment solutions [7] Industry Performance - The Zacks Retail - Discount Stores industry currently ranks 167, placing it in the bottom 32% of over 250 Zacks industries, indicating bleak near-term prospects [8][9] - The industry's earnings estimate has declined by 5.6% since the beginning of 2025, reflecting a negative earnings outlook [10] Market Comparison - Over the past year, the Zacks Retail – Discount Stores industry has outperformed the broader Retail – Wholesale sector and the S&P 500, with a collective stock advance of 15.8% compared to 11.5% and 5.5% respectively [11] Current Valuation - The industry is trading at a forward 12-month price-to-earnings (P/E) ratio of 31.47, significantly higher than the S&P 500's 19.94 and the sector's 22.09 [14] Notable Companies - **Costco**: The company is benefiting from growth strategies, better price management, and strong membership trends, with a projected revenue growth of 7.8% and EPS growth of 11.6% [17][18] - **Target**: Target is evolving its business model with a focus on omnichannel capabilities and advanced technologies, expecting sales growth of 0.9% and EPS growth of 1.4% [21][22] - **Dollar General**: The company is leveraging its value-creating initiatives and defensive product mix, with a projected sales growth of 3.7% [25][26] - **Burlington Stores**: The company is adapting to consumer trends and enhancing its merchandising capabilities, with expected revenue growth of 7.8% and EPS growth of 12.6% [29][30]

Costco Wholesale Corporation (COST) continued with its decent comparable sales growth in February. The performance reflects Costco’s ability to attract value-conscious shoppers with its competitive pricing and high-quality offerings.Decoding COST’s February CompsCOST’s comparable sales for February illustrate its market strength. For the four weeks ended March 2, 2025, comparable sales in the United States and Canada grew 8.6% and 3.2%, respectively, while Other International markets saw a decrease of 0.6%. ...