It was a classic case of "good news, bad news" for Dollar General (DG) on Thursday. The discount retailer delivered a fourth-quarter earnings report that looked pretty solid on paper, but investors focused on the future—and what they saw sent the stock down over 6%.
Let's start with the good stuff. For the quarter, Dollar General posted net sales of $10.91 billion, a 5.9% jump that beat the consensus estimate of $10.82 billion. The growth was fueled by a 4.3% increase in same-store sales, which is a healthy number. That same-store sales figure breaks down into more customers coming through the doors (traffic up 2.6%) and those customers spending a bit more on average (transaction size up 1.7%). Sales grew across all major categories: consumables, seasonal items, home products, and apparel.
Even better, the company's profitability improved significantly. Gross profit margin expanded to 30.4% from 29.4% a year ago, helped by factors like lower shrink (that's retail-speak for theft and loss) and higher markups. The big story was operating profit, which soared 106.1% to $606.3 million. To be fair, that huge percentage gain is partly because the year-ago quarter was weighed down by $232 million in charges related to a store portfolio review. Still, it's a strong result. Earnings per share came in at $1.93, comfortably beating the Street's estimate of $1.65.
So far, so good, right? Here's where the mood shifted. When Dollar General laid out its expectations for the full fiscal year 2026, the growth story looked less robust. The company projected net sales in a range of $44.31 billion to $44.52 billion, which is roughly in line with analysts' consensus estimate of $44.36 billion. The issue is the growth rate implied by that range: about 3.7% to 4.2%. That's a step down from the 5.2% sales growth the company achieved in fiscal 2025.
The outlook for same-store sales growth also suggests a moderation. The company is forecasting an increase of approximately 2.2% to 2.7% for the year. On the earnings front, the guidance of $7.10 to $7.35 per share brackets the consensus estimate of $7.23. It's not a miss, but it's not an inspiring beat either. For a market that often rewards companies for promising accelerating growth, this forecast for a slower pace was apparently enough to trigger a sell-off.
Despite the cautious sales outlook, Dollar General isn't pulling back on its physical footprint. The company reiterated plans for a massive 4,730 real estate projects in fiscal 2026. That ambitious plan includes opening about 450 new stores in the U.S. and 10 in Mexico, remodeling roughly 2,000 stores through something called "Project Renovate" and another 2,250 through "Project Elevate," and relocating about 20 stores. It's a clear bet that expanding and upgrading its stores is still a path to future success, even if near-term sales growth is expected to cool.
In other news, the company recently put a price-related legal issue behind it. In January, Dollar General agreed to a $15 million settlement to resolve nationwide claims that shoppers were charged prices at checkout that didn't match the prices advertised on shelves. It's worth noting the company did not admit to any wrongdoing as part of the settlement.
By the end of trading Thursday, the market's verdict was clear. Dollar General shares were down 6.45% at $135.50. Investors seemed to decide that a strong past quarter wasn't enough to offset the prospect of a slower-growing future.
