Dollar General Corp. (NYSE: DG) shares got a nice boost Thursday after the discount retailer posted a solid fiscal second-quarter earnings beat and lifted its full-year outlook. The stock was up nearly 6% in afternoon trading.
The company reported net sales of $11.29 billion, up 5.2% from a year ago and ahead of the $11.197 billion analysts were looking for. Earnings came in at $2.48 per share, a 33% jump that crushed the Street's $2.01 estimate. That number included a roughly 25-cent benefit from tariff refunds, which came after the company made related reinvestments.
Dollar General also said it plans to restart share repurchases in the third quarter, with up to $700 million in buybacks expected in the second half of the year. Management cited strong cash flow and liquidity as reasons for the move.
But here's the thing: while the numbers look good, the company's core customer is still feeling the pinch. On the earnings call, Dollar General said stubborn inflation and gas prices of $4 or more in some states continue to strain its core shopper. Customers are "watching every penny" and buying less per trip because they're uncertain about what's ahead.
Customer Traffic Keeps Growing
Same-store sales rose 3.5% from the year-ago quarter. Customer traffic increased 2%, while the average transaction amount grew 1.5%. That marks the fifth consecutive quarter of traffic growth and the sixth straight quarter of positive comparable sales across all four merchandising categories.
Gross margin expanded 127 basis points to 32.6%, helped by tariff refunds, a lower LIFO provision, and reduced distribution costs. Higher markdowns and transportation expenses partially offset those gains.
Expanding the $1 Offering
CEO Todd Vasos said on the call that core customers remain financially constrained. "Most notably, higher and more volatile fuel prices have forced customers to further prioritize purchases with a focus on value and affordability," he said.
To meet that demand, Dollar General's Value Valley assortment now includes more than 600 rotating items priced at $1 each. The company also expanded its $1 off-shelf displays to more than 9,000 stores during the quarter.
Raising the Full-Year Outlook
Dollar General raised its fiscal 2026 earnings guidance to between $7.80 and $8.00 per share, up from its previous range of $7.20 to $7.45. The consensus estimate is $7.41 per share.
The company also increased its sales forecast to between $44.43 billion and $44.56 billion, compared with its prior range of $44.31 billion to $44.52 billion. Wall Street expects sales of $44.43 billion.
Same-store sales growth is now expected to be 2.5% to 2.9%, up from the previous forecast of 2.2% to 2.7%.
DG Price Action: Dollar General shares rose 5.99% to $130.14 at the time of publication Thursday.
