Dollar General raises outlook on heels of strong quarter
Dollar General reported better-than-expected second-quarter earnings and sales, driven by customer traffic growth and comparable sales growth across all its merchandising categories.
On the earnings call, CEO Todd Vasos said that Dollar General's core customers continue to be financially constrained, with a variety of factors impacting their budget. The company is continuing to emphasize its $1 assortment, including more than 2,000 items at or below $1, and more than 600 rotating "Value Valley" items priced at $1.
"During Q2, we expanded our $1 off-shelf display presence in more than 9,000 stores," he told analysts. "We are encouraged by the early results, and these stores are already driving incremental comp sales greater than the rest of the chain. Looking ahead, we are excited about our plans for an expanded $1 presence in our fall and holiday set in the back half of the year. We know this price point is important to our customers."
The extreme discounter raised its financial guidance to reflect its strong first half results and improved outlook for the remainder of the year.
Second Quarter
Dollar General reported net income of $550.3 million for the quarter ended July 31, compared to $411.4 million in the year ago period. Earnings per share were $2.48, easily topping analysts' estimates of $2.01 per share, compared to $1.86 per share in the second quarter of last year, including an estimated benefit from tariff refunds, after related reinvestments, of approximately $0.25.
Net sales rose 5.2% to $11.3 billion. Same-store sales increased 3.5%, reflecting increases of 2.0% in customer traffic and 1.5% in average transaction amount. It was the company’s fifth consecutive quarter of customer traffic growth and the sixth consecutive quarter of positive comparable sales growth across all four of its merchandising categories (consumables, seasonal, home products and apparel).
Gross profit as a percentage of net sales was 32.6% compared to 31.3% in the second quarter of fiscal 2025, an increase of 127 basis points. The rate increase was primarily attributable to tariff refunds, a lower LIFO provision and lower distribution costs, partially offset by increased markdowns and increased transportation costs.
These results, which exceeded our expectations even before considering the benefit from tariff refunds after related reinvestments, are a testament to the strong execution, strategic direction and continued dedication of our team,” Vasos stated in the earnings release. “This broad-based performance reflects the strength of our unique combination of value and convenience and the important role Dollar General plays in the communities we serve."
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The company confirmed its plans to open approximately 450 new stores in the U.S. and approximately 10 new stores in Mexico during its current fiscal year, along with remodeling approximately 4,250 stores through "Project Renovate” (the company's traditional remodel program) and “Project Elevate (an incremental remodel program for stores not yet old enough to be part of a full remodel pipeline.) It opened 125 new stores in the U.S. and one new store in Mexico during the second quarter, and remodeled 665 stores.
Guidance
Dollar General now expects net sales growth in the range of approximately 4.0% to 4.3%, compared to its previous expectation in the range of 3.7% to 4.2%. Same-store sales growth is expected between 2.5% to 2.9%, compared to its previous expectation of 2.2% to 2.7%
Earnings per share are now expected in the range of approximately $7.80 to $8.00, compared to its previous expectation in the range of $7.20 to $7.45.
"As we move through the back half of the year, we remain confident in our strategy, our long-term financial framework and our ability to continue driving value for our customers, associates and shareholders," stated Vasos.
Dollar General ended the quarter with 21,148 stores.
