Why Dollar General Stock Popped Today
Key Points
Dollar General's new and upgraded stores are generating higher sales and profits.
Management sees plenty of room for further expansion.
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Shares of Dollar General (NYSE: DG) climbed 14% on Thursday after the retailer boosted its full-year profit forecast.
Image source: Dollar General.
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Saving people money is good for business
Dollar General's net sales rose 4.6% year over year to $10.6 billion in the third quarter. The gains were driven by new store openings, renovations, and higher sales at existing locations.
The discount chain opened 196 new stores and remodeled 1,175 locations during the quarter. These upgrades are helping to boost same-store sales, which grew by 2.5%.
During a conference call with analysts, CEO Todd Vasos said the retailer's low-priced wares are resonating with bargain-seeking shoppers. "With our unique combination of value and convenience, we believe we are well-positioned to increase market share with customers across all income brackets," Vasos said.
Better still, Dollar General is becoming more profitable as it upgrades its store base. Its gross margin improved to 29.9%, up from 28.8% in the year-ago period. Higher inventory markups and lower shrink -- a retail industry term for merchandise losses resulting from theft and damage -- contributed to the gains.
In turn, Dollar General's operating profit leaped 31.5% to $425.9 million. The company's net income increased by an even more impressive 43.8% to $282.7 million, or $1.28 per share. That was well above Wall Street's estimates, which had called for per-share profits of $0.93.
Store openings and remodels should drive profits higher in 2026
These robust results prompted Dollar General to lift its full-year earnings targets. Management now projects earnings per share of $6.30 to $6.50 in 2025, up from a prior forecast of $5.80 to $6.30.
Looking ahead to 2026, Dollar General said it plans to open 450 new stores in the U.S. and 10 in Mexico. The company also intends to remodel 4,250 stores in the coming year.
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Joe Tenebruso has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
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