- Firm posts forecast-busting Q2
- Full-year guidance raised
- Tariffs driving price increases
A budget-conscious US consumer is a boon for businesses like Dollar General (DG:NYSE), the discount store operator which is now seeing more affluent customers make a beeline for its affordable essentials.
With cash-strapped US shoppers flocking to its stores against a backdrop of inflation and tariff concerns, the Tennessee-based retailer delivered forecast-beating second-quarter results (28 August) and raised its annual sales and earnings per share guidance.
However, in a classic case of it being ‘better to travel than arrive’, Dollar General shares dropped 0.5% to $111.25 in pre-market trading on Wall Street, having already gained the best part of 50% year-to-date.
BLOWOUT QUARTER
For the three months to 1 August 2025, Dollar General’s same-stores sales increased by 2.8%, topping the 2.5% rise the market expected, driven by growth in customer visits and average spend per visit.
Operating profit at Dollar General perked up 8.3% to $595.4 million. ‘We are pleased with our strong second-quarter results, including earnings growth that significantly exceeded our expectations,’ commented chief executive Todd Vasos.
‘Our improved execution, along with our progress advancing key initiatives, is resonating with both existing and new customers as we further enhance our value and convenience proposition.’
With positive trading momentum at its heels, Dollar General now expects full-year 2025 sales growth of 4.3% to 4.8%, up from its prior forecast of between 3.7% and 4.7%.
The retailer also hiked its annual earnings per share target to between $5.80 and $6.30, an upgrade on earlier guidance in the $5.20 to $5.80 range.
Retail bellwether Walmart (WMT:NYSE) also raised its annual sales target earlier this month as more Americans shop for cheaper everyday essentials, but these retailers need to strike a balance between keeping prices low for value-seeking customers and passing on some of the impact of higher costs from import tariffs.
EXPERT VIEWS
‘The dollar stores have seen customers shopping more frequently this year as they seek value. Most have called out seeing a trade-down customer,’ said Joe Feldman, analyst at broker Telsey Advisory.
AJ Bell head of financial analysis Danni Hewson explained how trading down is ‘a smart and efficient way to make budgets stretch further, allowing middle income shoppers to splurge on nice-to-haves whilst switching out brands for generic products which help keep till totals down.
‘Just like Walmart, Dollar General has tried to cushion its consumer from tariff price rises - a smart move for a brand synonymous with low, everyday prices. And once shoppers are through the doors, persuading them to do more of their shopping in-store gets easier, creating an opportunity to increase market share.
‘If it can do that, then it boosts the chances of Dollar General being able to deliver another lift to annual targets like the one which has won over investors today.’
DISCLAIMER: Financial services company AJ Bell referenced in this article owns Shares magazine. The author of this article (James Crux) and the editor (Ian Conway) own shares in AJ Bell.
