Is This the Best Discount Retailer Buy?

Discount retailers are a classic defensive play. Whatever happens in the economy, people still need to buy the things that make their lives go. And when financial pressures mount, consumers flock to discount stores.

Getting into the numbers
Who are the major discount retailers and how do they stack up to one another?

Retailer

Market Cap (in Millions)

Revenue, LTM (in Millions)

Free Cash Flow, LTM (in Millions)

Q1 Comparable-Store Sales

CAPS Rating (out of 5)

Wal-Mart (NYSE: WMT  )

$188,673

$413,820

$11,511

(1.4%)

***

Target (NYSE: TGT  )

$39,556

$66,117

$4,444

2.8%

***

Dollar General (NYSE: DG  )

$10,220

$12,128

$357

6.7%

*

Dollar Tree (Nasdaq: DLTR  )

$5,349

$5,383

$386

6.5%

***

Big Lots (NYSE: BIG  )

$2,731

$4,820

$323

6.0%

**

BJ's Wholesale (NYSE: BJ  )

$2,072

$10,481

$106

7.8%

***

99 Cents Only Store (NYSE: NDN  )

$979

$1,355

$40

3.5%

**

Data from Capital IQ, a division of Standard & Poor's, and the Motley Fool CAPS database.
*2009 Q4 results.

It's important to keep track of revenue, but free cash flow gives us a better sense of what the company is doing with that revenue -- and whether the company will have the funds to invest in the business later. Same-store sales figures help us understand sales trends after expansion and contraction have been backed out of the equation.

Wal-Mart is obviously the 10-ton gorilla of the discount retailing world, and its economies of scale give it amazing abilities to lower its costs -- and therefore grab more market share by reducing its prices. But that position means it's also the retailer people love to hate.

Which discount retailer do you like, and why? Let us know in the comments.

Fool editor Julie Clarenbach doesn't own any of the companies mentioned here. Wal-Mart is a Motley Fool Inside Value recommendation. Try any of our Foolish newsletter services free for 30 days. The Motley Fool has a disclosure policy.


Read/Post Comments (3) | Recommend This Article (9)

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  • Report this Comment On June 22, 2010, at 3:19 PM, kristm wrote:

    Where's SHLD? Where's FDO? This article isn't complete at all..

  • Report this Comment On July 01, 2010, at 3:00 PM, philkek wrote:

    Thanks for this article and kristm comments with symbols. I prefer 4 and 5 star ratings by MF. Stocks here have max of 3 stars which are still worth investigating. MF tells us fools to begin our own homework on ALL items listed B 4 investing any real money. MF is often entertaining and sometimes profitable. Fool on.

  • Report this Comment On July 06, 2010, at 2:43 PM, mmi1226 wrote:

    i lost virtually everything in the market and so am now pretty broke so i shop at discounters all the time. i really like the 99 cent store as they carry everything you could imagine from fresh produce to toothpaste. the only thing they don't have is fresh meat and a wide selection of clothes. if you just want functional quality at a cheap price, they beat everyone else "hands down" and the stuff is often name brands and never past the exp. date. so i'm looking to invest in them if their debt isn't too high.

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