Dollar General (DG) has staged an impressive rebound this year, gaining more than 50% year-to-date. Most of that rally occurred in the first half of the year, while the stock has traded sideways since June amid worries about Amazon’s grocery expansion and skepticism over whether recent margin improvements came too early.
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Despite these concerns, I believe Dollar General still has meaningful room to run, supported by its strong growth potential even amid ongoing consumer budget pressures. I remain bullish heading into the company’s upcoming results, scheduled for publication tomorrow.
Earnings Call Expectations Roundup
Dollar General will report its fiscal Q3 2025 earnings, with current consensus estimates calling for EPS of $0.95 and revenue of $10.62 billion. EPS expectations have been revised downward by nearly 10% over the past year, while revenue expectations remain essentially unchanged.
The downward revisions reflect investor concerns about consumer spending patterns and competitive pressures, but they also set a bar that Dollar General should be able to overcome. Across the past three quarters, Dollar General beat both EPS and revenue expectations, aided by improvements in in-store execution, stronger inventory discipline, and better operating leverage.
This quarter, I expect another modest beat. My EPS expectation is $0.96, slightly above consensus, supported by continued margin discipline and improving cost efficiency. Street estimates call for same-store sales growth of 2.3%, and I believe DG can exceed this benchmark, although by a narrow margin, at best.
Dollar General has raised guidance in each of the last two quarters. For fiscal 2025, the company’s initial same-store sales outlook of 1.2% to 2.2% was raised to 1.5% to 2.5% after Q1, and then lifted again to 2.1% to 2.6% following Q2.
With a new CFO, Donny Lau, joining in October, management may opt for a slightly more conservative posture. Still, given the momentum in key categories and better in-store performance, I believe the company may again slightly raise the range.
Key Growth Initiatives Continue to Gain Traction
Dollar General is in the middle of a multi-quarter effort to strengthen its in-store experience, expand its non-consumables offerings, and advance its digital partnerships. Together, these initiatives are helping the company stabilize traffic, broaden its relevance across households, and improve margin consistency.
One of the most significant changes has been the company’s renewed focus on store operations. Enhancements to inventory processes, shelf management, and labor allocation have meaningfully improved conditions inside stores, reversing some of the operational challenges seen in 2023.
Digital initiatives continue to grow as well. The DoorDash (DASH) partnership now spans more than 17,000 stores, offering DG customers convenience and incremental purchase options, particularly in rural markets where delivery penetration has traditionally lagged. Management expects sales from this channel to expand further in 2025 as coverage increases.
Non-consumables remain another important long-term growth lever. These categories—home, seasonal, and apparel—generated more than $7 billion in sales last year. Dollar General aims to increase the mix of non-consumables by at least 100 basis points by the end of 2027 and ultimately return the category toward 20% of total sales over the next several years. That mix shift is essential because non-consumables generally carry higher margins and help diversify DG’s revenue base beyond everyday essentials.
Amazon Concerns Appear Overdone
A narrative weighing on Dollar General shares in recent months has been Amazon’s (AMZN) accelerated push into grocery. While Amazon remains a formidable competitor, concerns that it will materially disrupt DG’s customer base appear overstated. Dollar General’s core shopper is highly value-conscious and often located in rural or lower-density markets—areas where Amazon still lacks the logistical efficiency and price advantage needed to take significant share.
Additionally, fears that DG pulled forward too much gross margin improvement have been front and center. I believe these concerns ignore the operational discipline the company has implemented over the past year. Many of the margin gains reflect structural improvements, not short-lived benefits, and DG still has significant room to improve shrink, sourcing, and supply chain execution.
Overall, Dollar General’s defensive business model positions it well for periods of economic uncertainty. In an environment where lower-income consumers are under pressure, and households increasingly trade down, DG’s value proposition becomes even more compelling.
Stock Premium Supported by DG’s Trajectory
Dollar General trades at a slight premium relative to peers, but valuations remain reasonable compared to its own multi-year history. The stock trades at a forward P/E of 17.6, below its five-year average of 18.85, and only slightly above the sector median of 16.15. Its EV/EBITDA multiple of 13.17 is also lower than its historical average of 14.74, and only modestly above the sector median of 11.01.
Using a combination of valuation methods—including P/E multiples, 10-year DCF, and multi-stage dividend models—I estimate fair value at approximately $120 per share. This implies nearly 9% upside from current levels. While the valuation is not deeply discounted, it is attractive enough given DG’s defensiveness, improving fundamentals, and extended runway for mid-single-digit comp and margin expansion.
Is Dollar General a Buy, Sell, or Hold?
According to leading Wall Street analysts tracked by TipRanks, the stock carries a Moderate Buy consensus rating, with four Buy recommendations and seven Holds. The average analyst price target stands at $122.27, implying ~9% upside over the next 12 months.
A Favorable Setup Ahead of Earnings
With guidance likely to edge higher and Q3 results positioned for a modest beat, I remain bullish on Dollar General and see this as an attractive opportunity heading into earnings.