American consumers are losing trust in the U.S. economy. Exhibit A is the latest Conference Board Consumer Confidence Index, which showed the index decline by 1.3 points in August, to 97.4. The Board’s Present Situation Index is also sliding, as it’s down 1.6 points for the month.
Perhaps most telling is the Conference Board’s most recent Expectations Index, which tracks where consumers believe business and labor market conditions are headed. That index is also down, falling 1.2 points to 74.8. According to the Board’s metrics, any EI digits below 80 typically signal that a recession is on the way.
This bodes poorly for the markets, but is a good sign for discount retailers that cater to shoppers looking to save money.
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“Consumer confidence dipped slightly in August but remained at a level similar to those of the past three months,” said Stephanie Guichard, senior economist, global indicators at The Conference Board. “The present situation and the expectation components both weakened. Notably, consumers’ appraisal of current job availability declined for the eighth consecutive month, but stronger views of current business conditions mitigated the retreat in the Present Situation Index. Meanwhile, pessimism about future job availability inched up, and optimism about future income faded slightly.”
That’s not good news for the U.S. economy, especially as the Labor Day weekend has retailers looking ahead to the 2025 holiday shopping season. Any major economic metric that’s flaring bright red right now is worrisome to economists, consumers, and retailers alike.
That scenario, however, is good news for bargain shopping outlets that specifically cater to shoppers who’ll go out of their way to save a buck and take their chances that the sales racks will have the clothes and apparel they’re seeking.
“Consumers are obviously pinching pennies right now, but the research shows they’re doing so strategically rather than lowering spending in general,” said Tyler Denk, consumer behavior specialist and co-founder of Beehiiv in Los Angeles, CA. “According to McKinsey’s State of the U.S. Consumer report for Q1 2025, around 75% of U.S. customers traded down to cheaper brands, smaller sizes, or lower-priced stores. Furthermore, 49% stated they are waiting for reductions before making a buy.”
Other consumer marketing experts say that real inflection points aren’t when people cut back, but when their definition of “value” permanently shifts.
“I see discount retail stocks as a long-haul story,” said Conrad Wang, customer data specialist and managing director at EnableU. “When consumers move downmarket in a downturn, they don’t just save money – they discover new behaviors.”
Wang said that, after 2008, it wasn’t the low prices at TJX or Ross that locked in loyalty; it was the “treasure hunt” experience, especially the constant refresh of inventory, that rewired shopping into something more dynamic than a mall visit. “That behavioral shift compounded into higher foot traffic even after the economy rebounded,” he said.
Fast forward to today, where companies like Temu are accelerating a different kind of rewiring. “They’re training consumers to accept long shipping times in exchange for ultra-low prices,” Wang said. “That’s not a short-term trade-off; it’s a normalization of delayed gratification in e-commerce. If consumers internalize that, it permanently broadens the competitive set for bargain platforms.”
For investors, the best strategic play isn’t just riding recessions, potential or otherwise, it’s backing the companies that can lock in these rewired expectations. “That’s why I think the bargain retail leaders will keep compounding well beyond the current cycle,” Wang added.
3 Discount Retail Stocks To Buy Right Now
With US consumers shifting into bargain mode, these three discount retailers offer the best opportunity for investors to achieve significant returns.
T.J. Maxx
Year-to-Date Share Growth: 13.2%
In August, T.J. Maxx (NYSE:TJX) shares returned 9.1%, and the company recently reported an earnings-per-share figure of $1.21, up 6.1% over the same quarter in 2024. TJX reported 7% sales growth and 11.4% pretax margin last quarter. Its subsidiaries are also showing signs of busting out.
Off-price chains usually extend gains during inventory gluts, and TJX is no exception.
“For example, TJX still grew earnings per share by 15% year over year in the second quarter,” said David Beahm, president and CEO of retail precious metals firm Blanchard and Company. “Some of these chains have good moats protecting them, too. Their scale and long-standing vendor relationships give them first pick of excess merchandise, letting them stock shelves with coveted brands at prices smaller rivals can’t match.”
That value proposition keeps traffic resilient even in challenging macro environments. “More specifically, it can be a rare retail winner when inventories are piling up at other stores,” he added.
Burlington
Year-to-Date Share Growth: 1.9%
New Jersey-based Burlington’s (NYSE:BURL) shares may only be up modestly in 2025, but the stock has popped over the past three months, up 27.3%.
Last week, the retailer issued updated guidance for 2025 after a robust Q2 earnings performance. Burlington hiked sales growth to 7% to 8%, while comparable store sales rose 1% to 2%. In the company’s last guidance statement, sales growth was projected to be 6% to 8%, and comparable store sales were expected to be 0% to 2%. Burlington’s share price rose almost 9% the day the news was reported, although shares have slid back over the past two days of trading.
The company has also performed exceptionally well on the operational front.
“Burlington’s Store-Experience 2.0 plus automated distribution centers cut sourcing costs by 50 basis points,” said David Beahm, president and CEO of retail precious metals firm Blanchard and Company. “The company also plans to open 100 new stores this year and another 100 next year.”
Dollar Tree
Year-to-Date Share Growth: 45.7%
Dollar Tree (NASDAQ:DLTR) shares have soared in 2025, up 45.7% for the year and up 22% over the past three months. Company management says in-store foot traffic is up 1.5% in the past year, while Q2 earnings per share stood at $1.86 per share, easily besting the 1.58% consensus analyst estimate. Net sales were up 5.8%, as well.
Retail analysts increasingly view DLTR as a bargain retailer with a value proposition shoppers don’t want to pass up.
“We see upside potential for the next several years at Dollar Tree as it evolves its multi-price point strategy, while remaining a value-first retailer that wins customers across income demographics, especially higher income households,” said Telsey Advisory Group’s Joseph Feldman. Overall, Telsey hiked its target share from $100 to $130.
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