President Donald Trump’s 90-day pause on reciprocal tariffs returned a semblance of stability to the markets instead of the continued bloodbath following the initial “Liberation Day” announcement on April 2. However, the global economic order remains on tenterhooks due to the looming threat of a recession and heightened inflation expectations as tariffs are expected to ultimately hit the end consumer.
As apprehensions soar around the twin devils of inflation and recession, leading to a scenario of stagflation, consumer spending would shrink. And as investors, this appears to be creating an opportune moment to load up on the shares of two of the most popular discount retailers in the country.
Stock #1: Dollar General
Dollar General (DG) is a prominent American discount retailer known for its extensive network of small-format stores, primarily serving rural and underserved communities. It offers a wide range of products, including household essentials, food, apparel, and seasonal items, often at competitive prices.
Valued at a market capitalization of $19.5 billion, DG stock is up 17.9% on a year-to-date basis while offering a dividend yield of 2.6%.
Dollar General reported a beat on both revenue and earnings in the most recent quarter. Net sales increased by 4.5% to $10.3 billion, supported by a same-store sales increase of 1.2% in the same period. Although adjusted earnings per share declined by 8.2% on a yearly basis to $1.68, they came in ahead of the consensus estimate of $1.50.
The company’s emphasis on essential, non-discretionary goods and its reliance on locally sourced merchandise place Dollar General in a strong position as the broader retail sector grapples with tariff-related challenges and tightening margins. The company has recently renewed its focus on execution, with improvements in inventory flow and ongoing upgrades across its store network already showing encouraging signs.
The company’s massive scale — encompassing more than 20,000 stores in 48 U.S. states and Mexico — offers it a considerable edge, especially given its deep penetration into rural and often overlooked markets. This expansive footprint makes it the leading discount retail chain in the country. Following a difficult stretch marked by excess inventory and strategic missteps, the current management has initiated a “back to basics” strategy, concentrating on efficient store rollouts, streamlined inventory practices, rapid stock replenishment, and a focus on driving repeat foot traffic.
Citi analysts recently upgraded Dollar General from “Sell” to “Neutral,” setting a $101 price target.
Analysts have attributed an overall rating of “Moderate Buy” for the stock with a mean target price of $89.56 which indicates limited upside potential from current levels. However, the high target price of $110 denotes upside potential of about 24% from current levels. Out of 28 analysts covering the stock, 10 have a “Strong Buy” rating, one has a “Moderate Buy” rating, and 17 have a “Hold” rating.
Stock #2: Dollar Tree
Founded in 1986, discount variety store operator Dollar Tree (DLTR) is recognised for its extensive network of stores across North America. Just like Dollar General, Dollar Tree offers a range of products, including household essentials, food, and seasonal items, often at competitive prices. Its market cap is currently at $15.4 billion.
In 2025, DLTR stock is down 2.3% with the company reporting a mixed results for the recent quarter.
In Q4 2024, Dollar Tree’s net sales stood at $5 billion, almost flat from the previous year, but it managed to surpass the Street estimates. However, earnings fell by 15.3% from the previous year to $2.11 while also missing the consensus estimate of $2.18.
Overall, the company is expecting revenue to be in the range of $4.5 billion to $4.6 billion in Q1 2025, the midpoint of which would denote a yearly decline of 40.4%.
However, Dollar Tree is actively working to strengthen its financial footing, with one of the most notable initiatives being its multi-price point (MPP) approach. This strategy is proving effective in boosting same-store sales growth and driving margin improvement, aided by strong customer acceptance of items at elevated price tiers. The recent divestiture of Family Dollar for approximately $1 billion has further streamlined the company’s structure, eliminating a long-standing operational challenge and enabling management to concentrate on enhancing core performance and profitability.
Citi also feels bullish on Dollar Tree, raising its rating all the way from a “Sell” to a “Buy” and setting a $103 price target.
Overall, analysts have deemed DLTR stock a “Moderate Buy” with a mean target price of $81.32, which indicates upside potential of about 11% from current levels. Out of 23 analysts covering the stock, seven have a “Strong Buy” rating, 15 have a “Hold” rating, and one has a “Moderate Sell” rating.
