These Consumer Stocks Are Rejuvenated. They Have to Prove the Market Right in 2026.

Dollar General’s stock is on an upswing. It has to prove itself to keep going in 2026. (Scott Olson/Getty Images)

Key Points

• The Invesco S&P 500 Equal Weight Consumer Discretionary Exchange-Traded Fund is up 9% this year after significant volatility.
• Starbucks and Chipotle Mexican Grill have seen their stocks rise 10% and 27% respectively from their 2025 lows.
• Dollar Tree and Dollar General stocks have roughly doubled from their 2025 lows, with Dollar Tree selling its Family Dollar unit.

Several consumer stocks have ripped higher this year on signs that their businesses are coming back to life. They now need to prove the market right if they want their shares to keep gaining.

The Invesco S&P 500 Equal Weight Consumer Discretionary Exchange-Traded Fund, which reflects a true average of stocks in the sector, is up 9% this year.

But it was a violent ride upward. It dropped by double digits in April after the initial tariff scare. The sector shook off those concerns, rose to records by September, then tumbled double digits again in late November. The concern: amid waning demand for nonessential goods and services, the market was also uncertain that the Federal Reserve would reduce interest rates. Once it did, these stocks rebounded.

That included a few major stocks, all of which have underperformed the S&P 500 in the past five years. Starbucks is up 10% from its 2025 low, and Chipotle Mexican Grill is up 27% from its low. Both companies have hopes for better financial performance next year.

Dollar Tree and Dollar General have both seen their stocks roughly double from 2025 lows. Dollar Tree sold its struggling Family Dollar unit for $1 billion to a group of private equity investors, freeing up money for investment into the core Dollar Tree stores.

All these companies need to show they can generate the profit the market expects for 2026. If they don’t, the stocks will likely reverse course. If they do, they could keep rising.

Starbucks is the best example because the stock is now highly expensive, at 34 times the earnings forecast by analysts for the coming 12 months. That’s almost 12 points above the S&P 500’s multiple of just over 22 times. In the past few years, as the brand has struggled, that’s about the highest it has reached. When the market is most concerned, Starbucks has traded at a discount to the index’s multiple over that time.

The current valuation shows the market is anticipating that analysts’ downward revisions to next year’s earnings estimates have already bottomed. In that case, profits can grow, justifying the higher stock price.

Analysts expect same-store-sales to rise 3% in 2026, according to estimates tracked by FactSet, and total revenue to rise 4% to $39 billion. This is after same-store-sales dropped in 2024 and were flat this year. Relatively new CEO Brian Niccol, who came from Chipotle, is sharpening the company’s focus on the U.S.

Starbucks exited most of its China business this fall and will use the proceeds of selling those assets to invest more at home. On the agenda: improving the mobile app experience for the millions of users who could return to using it again, and making the in-store experience more comfortable.

The resulting growth could be high enough to eventually lift profit margins. That’s why analysts project 19% annual earnings growth over the coming two years. If Starbucks proves in its January fourth quarter earnings release that it’s on track to deliver those higher profits, the stock could keep gaining.

Chipotle now trades at 31 times earnings, versus an almost identical multiple to the S&P 500 before its recent rally. The onus is on management, now lead by former chief operating officer Scott Boatwright, to prove the market right.

Same-store-sales next year are expected to rise 1.7% after having fallen by that percentage this year. Total revenue can grow just over 9% as the company continues to add more store locations throughout the country.

“We have seen a modest improvement in quarter to date same-store-sales trends in recent weeks, giving us incremental confidence that Chipotle’s near-term traffic trajectory is stabilizing,” writes Evercore analyst David Palmer, who cites the addition of protein options to the menu.

Analysts expect 13% annual earnings growth over the coming two years, which could lift the stock.

Dollar Tree and Dollar General now both trade at just over 18 times earnings, far closer to the S&P 500’s price/earnings ratio than when these two stocks traded for below 13 times. The market is reflecting higher earnings next year, especially as their results have been strong enough for analysts to lift earnings estimates during the second half of this year from their lowest points.

Both companies now need to execute on the acceleration in same-store-sales growth to the low single digits that analysts expect. Doing so with stronger volumes of goods sold, showing that any price increases aren’t pushing customers away too much, would help uphold expectations for sustained growth. It would also help if consumers continue to trade down from more expensive stores, helping the dollar stores take market share and grow faster.

The pressure is on next year for these resurgent stocks.

Write to Jacob Sonenshine at jacob.sonenshine@barrons.com