Discount Retailers Are Winning Back Shoppers In the Era of Inflation After Years of Losing Them to Legacy Chains

Everyone’s trying to stretch a dollar like it’s resistance band training — and value retailers are here for it. As economic uncertainty grows, discount and off-price retailers are drawing in more value-conscious shoppers. The sector that stumbled through 2024 is now driving the retail rebound, overtaking the same big-name chains that were outperforming them not long ago.

Bargaining for a miracle: As prices continue to rise and more people pull back on spending, shoppers are growing more cautious about where their money goes. So while traditional retailers like TargetTGT

and Best BuyBBY

are left trying to offload unsold inventory, bargain chains have been able to attract more customers due to their ability to keep prices low and adapt quickly to shifting demand. Many shoppers are trading down to stores like Dollar GeneralDG

and Ollie’s Bargain OutletOLLI

to stretch their budgets, especially as lower-income households face ongoing financial pressure. Some are even stocking up early, anticipating price hikes from upcoming tariffs.

• In Q1 2025, Dollar General posted a 5.3% increase in revenue and raised its full-year sales outlook to 4.7%, fueled by strong demand for essentials and budget buys.
• Simultaneously, Ollie’s reported a strong 13.4% year-over-year jump in quarterly revenue, with its shares rising 40% this past year.

The Discount Divide

The discount retail sector may be holding up well, but not all dollar stores are feeling the same boost. While Dollar General and Ollie’s Bargain Outlet are celebrating strong growth, bargain retailers Dollar TreeDLTR

and Five BelowFIVE

have been bracing for impact from tariffs. As these chains rely more heavily on imported goods, they are more vulnerable to rising costs and supply chain disruptions.

• Since Dollar Tree’s imports make up 43% of their purchases, they warned that profits could fall by as much as 50% due to tariffs on Chinese goods, with its stock down 25% over the past year.
• Similarly, Five Below halted China shipments and hiked prices to fight tariff pressure but could still face up to $50M in added costs, with their shares declining 11% YTD.

Low prices, high ambition: With more shoppers building bargain chains into their weekly routines, companies like Dollar General, Dollar Tree, Ollie’s, and Five Below are expanding fast. Ollie’s has added 25 new stores and grown its loyalty program, while Dollar General is pushing further into rural areas and upgrading thousands of locations. Five Below is also leaning into growth, opening 150 new stores and expanding into higher-priced products to broaden its revenue mix. As traditional retailers continue to grapple with inventory overhang, discount chains are well-positioned to benefit from rising foot traffic and budgets that only stretch so far.