3 Dirt-Cheap Retail Stocks to Buy Before They Take Off


  • These beaten-down retail stocks are great opportunities for patient investors willing to ride out temporary headwinds and win during the rebound.
  • Dollar General (DG): Trading at just 18-times forward earnings, despite a proven discount retail model.
  • Target (TGT): Dividend King with 3.1% yield and a current price reflecting an attractive entry point.
  • Ollie’s Bargain Outlet (OLLI): Debt-free balance sheet and discounted price-earnings multiple is attractive given its growth prospects.
retail stocks - 3 Dirt-Cheap Retail Stocks to Buy Before They Take Off

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The retail sector took a major hit last year as stocks across the industry plunged. High inflation and depressed consumer sentiment created the perfect storm, driving share prices lower. As we move into 2024, many retail stocks remain beaten down, trading at bargain-basement valuations. However, there are signs inflation may be cooling, and the consumer is persevering. This spells opportunity. Now could be the ideal time to grab certain retail stocks while they’re down, before the inevitable recovery.

In my experience, quality retail stocks demonstrate resilience over the long-run, moving in step with the American consumer. Temporary economic turbulence might dampen performance for a few quarters, but sound fundamentals tied to strong brands, smart management, and lean operations should win out. The stocks I’m highlighting today have the pedigree to recover and thrive on the other side of this downturn. The market may have overreacted to downside catalysts, making this the perfect chance to buy. Let’s take a look!

Dollar General (DG)

Dollar General (DG) store front with yellow store sign, midday
Source: Jonathan Weiss / Shutterstock.com

I view Dollar General (NYSE:DG) as the most undervalued retail stock on the market right now. Unlike most retail stocks trading at premiums thanks to reliable performance, Dollar General has been excessively punished due to forecasted cuts and temporarily low demand. Make no mistake about it, these are short-term issues. Dollar General boasts well-established operations poised to bounce back stronger than ever once headwinds shift to tailwinds.

The company’s management team expects near-term troubles, like a projected 30% earnings per share decline in 2023 (FY2024 ending in January) and revenue pressures from reduced discretionary spending from consumers. But once rates fall, unleashing pent-up consumer demand, Dollar General looks primed to recover in earnest. Consensus suggests smooth sailing ahead, too, with double-digit annual earnings per share growth predicted through 2033. Despite the temporary dip, shares trade at just 18-times forward earnings, presenting a discounted entry point.

I suggest buying DG stock up around current prices to hold through what may prove to be the darkest days for this company. The stock’s reliable 1.7% dividend yield will pay you to remain patient. Dollar General’s established discount retail model should once again fire on all cylinders when inflation cools off, and consumers find more discretionary income freed up.

Target (TGT)

an image of bullseye the target dog in a target store
Source: Robert Gregory Griffeth / Shutterstock.com

Similarly, Target (NYSE:TGT) faced indiscriminate selling pressure last year, with shares falling over 30% from 2021’s peak. However, unlike most retail names still languishing at or near 52-week lows, Target has sharply rebounded almost 30% off its bottom. Yet, I believe prices still fail to properly reflect Target’s staying power, and the stock has ample room to recover further in 2024.

It’s genuine euphoria that caused Target’s valuation to be disconnected from fundamentals in 2021. But today’s prices represent a reversal to value territory. If economic trends stabilize this year without worsening, TGT stock could reach $160 to $180 per share, as an achievable milestone by December. A double-digit percentage gain may seem underwhelming compared to previous years, but would mark a healthy recovery for this embattled retailer.

Beyond price appreciation potential, Target also delivers attractive income prospects as a Dividend King with a 3.1% yield. For a best-in-class retailer weathering temporary storms, buying TGT stock around current prices provides steady income, to pay you to be patient through the company’s turnaround.

Ollie’s Bargain Outlet (OLLI)

The exterior of an Ollie's Bargain outlet retail location
Source: George Sheldon / Shutterstock.com

While likely unfamiliar to most investors, Ollie’s Bargain Outlet (NASDAQ:OLLI) operates a rapidly-expanding chain of discount closeout retailers across America. Ollie’s offers rare growth potential in the struggling retail space, thanks to a uniquely-resilient business model capitalizing on inflationary pressures.

Ollie’s stands out having posted exceptional growth despite economic challenges crushing peers. Revenue jumped 15% last quarter to reach $480 million on steep consumer demand for discounted goods. Expanding profitability also paints a bullish picture, with net income up 38% to $32 million. Consensus estimates suggest double-digit top and bottom-line expansion persisting for years.

Inflationary forces disproportionately benefit Ollie’s model, sourcing inventory from distressed sellers at ultra-low costs. A squeezed consumer with reduced discretionary income still needs to shop, and Ollie’s discounts on closeout merchandise provide just that. Even if broader retail recovers, rising inequality and migration trends support discount retailers capturing greater market share over time.

On the date of publication, Omor Ibne Ehsan did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Omor Ibne Ehsan is a writer at InvestorPlace. He is a self-taught investor with a focus on growth and cyclical stocks that have strong fundamentals, value, and long-term potential. He also has an interest in high-risk, high-reward investments such as cryptocurrencies and penny stocks. You can follow him on LinkedIn.

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