Why Dollar General Stock Is Up Today
Key Points
Shoppers are prioritizing value and affordability.
That just happens to be Dollar General's specialties.
- 10 stocks we like better than Dollar General ›
Shares of Dollar General (NYSE: DG) rose on Thursday after the low-price retailer boosted its full-year profit forecast.
Image source: Dollar General.
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People are hunting for bargains
Dollar General's net sales climbed 5.2% year over year to $11.3 billion in its fiscal second quarter, which ended on July 31. The gains were driven by store openings and higher sales at existing locations.
The retailer opened 126 new stores during the quarter. It also remodeled 1,376 stores through a combination of light-touch optimization upgrades and more extensive renovations.
These investments are helping to boost revenue at the company's older locations. Dollar General's same-store sales grew 3.5%.
During a conference call with analysts, CEO Todd Vasos said higher gas prices were forcing shoppers to search for bargains closer to home. With over 21,000 stores situated within five miles of three-quarters of the U.S. population, Dollar General is well-positioned to benefit from these trends.
"We were especially pleased to see our [market] share gains accelerate in the quarter, which we believe demonstrates the strength and broad appeal of our unique combination of value and convenience, particularly in rural communities across America," Vasos said.
All told, Dollar General's net income surged 33.8% to $550.3 million, or $2.48 per share, with tariff refunds accounting for $0.25 of those gains.
Store openings and remodels should continue to drive earnings higher
This impressive first-half performance prompted Dollar General to increase its full-year financial projections.
Management now sees same-store sales rising by 2.5% to 2.9%, up from a prior forecast of 2.2% to 2.7%. It also expects earnings per share of $7.80 to $8.00, up from $7.20 to $7.45.
The discount chain plans to open a total of 450 stores in the U.S. and 10 in Mexico in fiscal 2026. It also expects to remodel as many as 4,250 locations.
Notably, Dollar General's leadership seems to think its shares are still undervalued even after their recent gains. The company intends to buy back up to $700 million worth of its stock in the second half of the year.
Should you buy stock in Dollar General right now?
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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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