Dollar General Corporation

Second-quarter net sales increased 0.2% to $11.3 billion versus $10.7 billion a year ago. Same-store sales rose 3.5%, driven by 2% traffic growth and 1.5% average basket growth. Gross profit margin was 32.6%, up 127 basis points, and operating margin was 6.8%, up 126 basis points. Operating profit increased 29.2% to $769 million; net interest expense fell to $42.9 million from $57.7 million; the effective tax rate was 24.2% versus 23.5%; and EPS increased 33% to $2.48, including an approximate $0.25 benefit from tariff refunds after related reinvestments. For fiscal 2026, the company now expects net sales growth of 4%-4.3%, same-store sales growth of 2.5%-2.9%, and EPS of $7.80-$8, with an effective tax rate of about 24.5% and up to $700 million of share repurchases in the back half. Management said gross margin should expand in the second half despite higher fuel costs, while SG&A should see modest deleverage in 2026 as it continues to invest.

Todd Vasos said the quarter showed “balanced top-line growth,” healthy margin expansion, and strong EPS growth, all ahead of expectations. He emphasized that Dollar General is benefiting from a strained consumer, strong value positioning, and the company’s convenience footprint, while calling out continued gains in traffic, non-consumables, and delivery. His tone was confident and upbeat, with repeated references to strong execution, offensive pricing actions, and being well positioned for the back half.

Donny Lau highlighted gross profit margin of 32.6%, up 127 basis points, with tariff refunds, a lower LIFO provision, and lower distribution costs helping offset markdowns and transportation pressure. He noted SG&A was 25.8% of sales and flat year over year, while operating profit rose 29.2% to $769 million and EPS rose 33% to $2.48, including an approximate $0.25 tariff-refund benefit. He also said year-to-date operating cash flow was $1.5 billion, inventories were $6.6 billion and down 2.7% per store on average, and the company plans to repurchase up to $700 million of stock in the second half while keeping leverage below three times adjusted debt to adjusted EBITDA.

Analysts focused on gross margin sustainability, pricing promotions, the durability of the comp trend, delivery incrementality, shrink and damage improvements, and the SG&A outlook. Management said second-half gross margin should still expand despite elevated fuel costs, that promotional activity is being used strategically and not as a permanent step-up, and that delivery incrementality is stable while also bringing in new customers. On shrink and damages, Donny said shrink is improving faster than originally planned and remains expected to contribute about 50 basis points of incremental gross margin expansion off the 2025 base.