Retail is not healthy. Forget the headline reports of 50% gains from last April. It's not hard to produce such growth when you're going up against a month when almost all stores were closed. 

The real health check is in the sequential numbers, which were flat as the impact of government stimulus checks faded. That suggests that without taxpayers paying people to spend, retailers aren't going to see growth.

That's not universal, though, as some businesses are still notching some very big gains. Those are the stocks investors want to focus on -- the ones that will not just survive, but also thrive during the retail apocalypse. These two stocks should be able to withstand any downdraft.

abandoned storefronts

Image source: Getty Images.

Costco

Because Costco (COST -0.24%) has been such a standout performer during the pandemic, many investors forget that not too long ago the market was concerned about the threat both Amazon.com and Walmart potentially posed to its long-term growth aspirations.

Yet the warehouse club doesn't make money on the products it sells, but rather on its memberships. Over the first six months of Costco's fiscal year, it generated over $2.1 billion in net profits, or just a little more than the $1.7 billion it sold in memberships, which are almost all pure profit.

If you look at its sales, it sold $86.2 billion worth of goods, but had $76.5 billion in merchandise costs and $8.6 billion in selling expenses, giving it about $1 billion in operating profits. That means the balance comes from its membership drive -- so as long as it can keep people coming back, it will continue to grow. Costco renewal rates were at 91% in the U.S. and 88% in Canada at the end of 2020, and are consistently that high year after year.

Since it doesn't mark up its products very much, it lures customers in and keeps them returning for more.

Dollar Tree

Dollar Tree's (DLTR -0.16%) 2015 acquisition of Family Dollar was a drag on the deep discounter's performance for years, but last year it was able to turn the chain around so that it is now the top performer. While Dollar Tree has done well for itself, there were concerns the $8.5 billion purchase would doom it to forever lag behind rival Dollar General (DG -0.59%)

That was the case originally, but not anymore. Over the past year Dollar Tree's value proposition has become apparent, and its stock has outperformed its rival better than 3-to-1. That could be because Dollar Tree was the last national chain adhering fairly strictly to the $1-per-item price point. Both Family Dollar and Dollar General can offer goods of up to $10 or more, even though most of the items they sell are under $5.

And despite Dollar Tree no longer being quite a pure-play dollar chain, now offering items for up to $5 -- and combining Family Dollar and its namesake stores under one roof, but with two banners -- the product and brand selection has increased such that it is still an excellent value for price-sensitive customers.

It was once believed that dollar stores were only for low-income shoppers, but the Great Recession over a decade ago found even well-heeled customers going down-market -- and when times got better, not all of them abandoned the dollar retail stores. That ebb and flow continues today so that there is a good demographic mix among deep-discount store consumers, promising to keep Dollar Tree generating way more than pennies on the dollar on its bottom line.