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As inflation continues to be a burden on the consumer, from increasing wholesale prices and rising oil prices (BZ=F, CL=F), discount retailers like Dollar General (DG) and Dollar Tree (DLTR) stand to benefit the most from consumers trading down on goods. While Dollar Tree looks to close stores, Dollar General plans to open just as many locations. Can these discount stores continue to take advantage of the consumer environment?

Jefferies Vice President of Equity Research Corey Tarlowe and Zacks Investment Management Client Portfolio Manager Brian Mulberry join Yahoo Finance to discuss the strength of the consumer amidst rising prices and whether discount stores can truly stand to take advantage of the economic backdrop for consumers.

"One of things you monitor and think about when it comes to dollar stores is especially when it crosses that $4 a gallon threshold, you do tend to see traffic pick up at the dollar stores. So as you have seen really robust inflation cooling some, but still sticky, potentially oil prices going up, it does spell for a consumer that is still very value-conscious," Tarlowe says on consumer pressures. "We are starting to see some early signs of improvement in general merchandise at certain retailers, but it's still very, very early days there, so you're still seeing a prioritization of needs over wants."

Mulberry elaborates on which consumers truly feel the pressure and how Dollar General is capitalizing on this: 

"Where we find a clear dividing line for the consumer is whether or not you own your own home. Those people that owned a home and were able to refinance at a low fixed rate aren't feeling the pinch of inflation as much as those people who have been renting since 2020. They are feeling everything, rents are up 12-20% nationwide, now we've have energy costs rising on the back of insurance costs rising. And that's really causing a change in the behavior of consumers, where they're having to go and save money somewhere else. "

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Editor's note: This article was written by Nicholas Jacobino