Dollar General (DG): Three factors that work in favor of this dollar store

Shares of Dollar General Corporation (NYSE: DG) rose over 1% on Tuesday. The stock has gained 13% in the past three months. The company’s performance in the second quarter of 2025 was impressive and its outlook for the full year is encouraging. Here’s a look at the factors that work in its favor and help in driving growth:  

Growth in sales and profits

Dollar General delivered strong growth in sales and profits in the second quarter of 2025. Net sales increased 5.1% year-over-year to $10.7 billion, driven by robust performance from both new and mature stores. Earnings grew 9.4% YoY to $1.86 per share.

Strong business performance

DG saw strong performance in its business during the second quarter. In Q2, same-store sales grew 2.8%, helped by a 1.5% rise in customer traffic and a 1.2% growth in average transaction amount, or average basket.

As mentioned on its earnings call, the company gained customers from all income groups. It benefited from a rise in spending by its core customer as well as trade-in growth with middle and higher-income customers. The growth in average basket was driven by increases in average unit retail price per item and average items per basket. Same-store sales results reflected growth across both the consumables and non-consumable categories.

Gross margin in the quarter expanded by 137 basis points to 31.3%, driven by lower shrink, higher inventory mark-ups, and lower inventory damages. The company anticipates shrink to be a continued tailwind through the rest of the year.

Dollar General continues to benefit from its efforts in expanding and improving its store fleet. In Q2, the company opened 204 new stores and relocated 15 stores. DG is making progress on its remodel projects, Project Renovate, which involves fully remodeling older stores, and Project Elevate, which involves improvements to mature stores.

During the quarter, it remodeled 729 stores through Project Elevate and 592 stores through Project Renovate. Project Renovate stores are expected to deliver first-year annualized comp sales increases of 6-8% while Project Elevate stores are expected to deliver increases of 3-5%.

The discount retailer is also expanding its delivery options. Its partnership with DoorDash now serves over 17,000 stores, with a 60% growth in sales during Q2. Its partnership with UberEats has expanded to around 4,000 stores, and plans to reach 14,000 stores in the near future.

Guidance hike

Dollar General raised its outlook for the full year of 2025 based on its strong performance in the second quarter and an optimistic view for the latter half of the year. Net sales are now expected to grow 4.3-4.8% versus the previous outlook of 3.7-4.7%. Same-store sales growth is now projected to be 2.1-2.6% versus the prior range of 1.5-2.5%. EPS is now expected to be $5.80-6.30 versus the previous expectation of $5.20-5.80.