Sign in
DG

DOLLAR GENERAL CORP (DG)·Q1 2026 Earnings Summary

Executive Summary

  • Q1 2026 delivered a clean beat and raise: revenue $10.44B (+5.3% YoY), gross margin 31.0% (+78 bps YoY), and diluted EPS $1.78 (+7.9% YoY), with management raising FY2025 guidance for net sales, comps, and the EPS floor .
  • Strength stemmed from shrink improvements (≈61 bps tailwind), broader category growth, and execution gains; comps rose 2.4% on a +2.7% basket and only -0.3% traffic decline .
  • Guidance increased despite tariff uncertainty; FY2025 now calls for net sales growth 3.7–4.7%, comps 1.5–2.5%, EPS $5.20–$5.80, tax rate ~23.5%, and no buybacks; dividend maintained at $0.59 .
  • Near‑term watch items: management flagged Q2 EPS to decline YoY given incentive comp normalization (~$180–$200M headwind for FY), and broader tariff pass‑through risk to consumer spend .
  • Stock catalysts: a broad-based beat, raised annual guide, visible shrink tailwind, and scaling delivery/media initiatives (DoorDash and DG Digital Solutions) offer multiple drivers; tariff path and Q2 EPS cadence are key to narrative .

What Went Well and What Went Wrong

What Went Well

  • Same-store sales +2.4% on a healthier basket; comps positive across consumables, seasonal, home, and apparel, with non-consumables resonating in Easter/early spring .
  • Gross margin expanded 78 bps YoY to 31.0% driven by lower shrink and higher markups; shrink improved ~61 bps YoY, with damages slightly favorable (~3 bps) .
  • Operating cash flow up 27.6% to $847.2M; early $500M note repayment strengthened balance sheet (cash $850M) .

Quote: “We are pleased with our start to the year, including strong same-store sales and EPS results… These efforts contributed to market share gains in sales of both consumables and non-consumables” — Todd Vasos, CEO .

What Went Wrong

  • SG&A delevered +77 bps to 25.4% on retail labor, incentive comp, and repairs/maintenance; clearance tied to store closures added some markdown pressure .
  • Traffic declined 0.3% (tough lap of +4.3% last year), and management expects Q2 EPS to be down YoY due to incentive comp normalization and first‑half project timing .
  • Tariff uncertainty: exposure (direct mid–high single digits, indirect ≈2× direct) could pressure consumer spending as price increases ripple; mitigation plans may not fully offset demand effects .

Financial Results

MetricQ3 2025Q4 2025Q1 2026
Revenue ($USD Billions)$10.18 $10.30 $10.44
YoY Revenue Growth %5.0% 4.5% 5.3%
Diluted EPS ($)$0.89 $0.87 $1.78
Gross Margin %28.83% 29.40% 30.96%
Operating Margin %3.18% 2.86% 5.52%
Same-Store Sales %1.3% 1.2% 2.4%
Category Sales ($USD Billions)Q3 2025Q4 2025Q1 2026
Consumables$8.45 $8.32 $8.64
Seasonal$0.94 $1.11 $1.02
Home Products$0.52 $0.59 $0.51
Apparel$0.28 $0.28 $0.27
Total Net Sales$10.18 $10.30 $10.44
KPIs – Q1 2026Value
Basket Growth+2.7%
Traffic-0.3%
Shrink Improvement~61 bps YoY
Damages Improvement~3 bps YoY
Cash from Ops$847.2M
Inventory per store-7% YoY
Store ActivityOpened 156, remodeled 668 (Elevate), remodeled 559 (Renovate), relocated 23; ending stores 20,582
Delivery footprintDG same-day delivery >3,000 stores; DoorDash program >16,000 stores

Actual vs Consensus (S&P Global)

MetricQ3 2025Q4 2025Q1 2026
EPS – Actual ($)$0.89 $0.87 $1.78
EPS – Consensus ($)$0.94*$1.50*$1.48*
Revenue – Actual ($B)$10.18 $10.30 $10.44
Revenue – Consensus ($B)$10.14*$10.26*$10.29*
EPS # of Estimates25*26*25*
Revenue # of Estimates23*22*22*

Values with asterisk (*) retrieved from S&P Global.

Results vs Consensus:

  • Q1 2026: EPS and revenue beat (bold) — $1.78 vs $1.48*, $10.44B vs $10.29B* .
  • Q4 2025: EPS miss — $0.87 vs $1.50*, revenue modest beat — $10.30B vs $10.26B* .
  • Q3 2025: EPS slight miss — $0.89 vs $0.94*, revenue beat — $10.18B vs $10.14B* .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Net Sales GrowthFY20253.4%–4.4% 3.7%–4.7% Raised
Same-Store SalesFY20251.2%–2.2% 1.5%–2.5% Raised
Diluted EPSFY2025$5.10–$5.80 (tax ~23.5%) $5.20–$5.80 (tax ~23.5%) Raised floor
Capital ExpendituresFY2025$1.3B–$1.4B $1.3B–$1.4B Maintained
Share RepurchasesFY2025None assumed None assumed Maintained
Real Estate ProjectsFY2025~4,885 total (575 opens; up to 15 Mexico; 2,000 Renovate; 2,250 Elevate; 45 relocations) Reiterated same Maintained
DividendNext payable$0.59 declared (Jun 2, 2025) $0.59 payable on/before Jul 22, 2025 Maintained

Rationale: Guidance raised to reflect Q1 outperformance but tempered by dynamic tariff risks and potential consumer pressure .

Earnings Call Themes & Trends

TopicQ3 2025Q4 2025Q1 2026Trend
Shrink/DamagesShrink tailwind (+29 bps); damages an issue Shrink tailwind (+68 bps); damages headwind persists Shrink +61 bps; damages +3 bps improving Improving
Supply Chain/OTIFOTIF up; exited temp DCs; automation scaling Continued improvements; inventory optimization Higher in-stock; OTIF sustainable >2 quarters Improving
Tariffs/MacroHeightened promo backdrop; core customer constrained Mitigation plan; risk to value customer Mitigation via sourcing, concessions, re‑engineering; consumer spend risk remains Ongoing risk
Digital/DeliveryLaunched DG same-day pilot (~75 stores) Target up to 10,000 delivery stores in 2025 DG delivery >3,000 stores; DoorDash sales +50% YoY; SNAP/EBT integrated Scaling
Non-ConsumablesSoftness vs consumables; treasure hunt approach Goal to lift non-consumable mix +100 bps by 2027 Positive comp across non-consumables; strong Easter performance Improving
Real Estate/RemodelsElevated remodel focus; DGTP scope Project Elevate 3–5% comp lift; Renovate 6–8% 668 Elevate; 559 Renovate in Q1; majority projects done by Q3 Accelerating
Incentive Comp/WagesWage pressure offset by execution gains SG&A deleverage; incentive comp normalization FY headwind $180–$200M; Q2 most impacted Near‑term headwind

Management Commentary

  • Strategic positioning: “We are uniquely well‑positioned to serve our customer in a variety of economic environments… market share gains in sales of both consumables and non-consumables” — Todd Vasos, CEO .
  • Tariff strategy: “We have successfully reduced our China exposure to less than 70% of direct imports… expect tariffs to result in some price increases as a last resort, though we intend to minimize them” — Todd Vasos .
  • Margin drivers: “Gross profit… increase primarily attributable to lower shrink and higher inventory markups… shrink improvement of 61 bps” — Kelly Dilts, CFO .
  • Remodeling ROI: “Project Renovate comp lifts 6–8%; Project Elevate 3–5%, with IRRs higher than new store returns” — Kelly Dilts .
  • Delivery/media: “DoorDash sales increased >50% YoY; DG Media Network retail media volume grew >25% YoY” — Todd Vasos .

Q&A Highlights

  • Comp sustainability and traffic: Traffic turned positive in May (period one of Q2); focus on retaining trade‑in customers and driving mature‑store lifts via Elevate/Renovate .
  • Gross margin cadence: Shrink tailwind expected throughout 2025; markdowns normalized after store closure promos; damages improving .
  • SG&A/incentive comp: Q2 incentive comp headwind nearly double other quarters; full‑year headwind ~$180–$200M; expect Q2 EPS down YoY .
  • Price/wages stance: Comfortable with price gaps (3–4 pts to mass) and $1 SKUs (>2,000 items), no need for outsized wage moves at present .
  • Returns and capital: New stores ~17% IRR; remodel IRRs higher; majority of projects front‑loaded by Q3 to maximize operating weeks .

Estimates Context

  • Q1 2026 beat: EPS $1.78 vs $1.48*; revenue $10.44B vs $10.29B*; EBITDA also above consensus* — driven by shrink tailwind, category breadth, and execution .
  • Prior quarters: Q3 2025 EPS slight miss vs consensus*; Q4 2025 EPS miss vs consensus* given portfolio optimization charges; revenues exceeded consensus in both quarters .
  • Implication: Street likely raises FY EPS/GM assumptions modestly, but Q2 EPS cadence and tariff path constrain near-term estimate momentum; watch incentive comp and markdown trends .

Values with asterisk (*) retrieved from S&P Global.

Key Takeaways for Investors

  • Q1 quality beat with raised FY guide: shrink tailwind and operational execution driving margins and EPS — supports multiple expansion if cadence sustains .
  • Near-term caution: management pre-announced Q2 EPS down YoY on incentive comp normalization; use weakness to add if long‑term framework intact .
  • Tariff watch: mitigation actions are in place, but broader retail pass‑through could pressure demand; monitor category mix and promo intensity .
  • Structural levers: accelerated Elevate/Renovate remodels (higher IRRs), SKU rationalization, supply chain OTIF gains — durable drivers of mature-store comp and SG&A efficiency .
  • Digital/media scaling: DoorDash and DG same-day delivery expand reach, enable SNAP/EBT online, and amplify DG Media Network monetization — incremental margin lever .
  • Capital discipline: strengthened cash/inventory positions, dividend maintained, no buybacks in FY2025; leverage focused toward BBB/Baa2 ratings .
  • Trading lens: beat-and-raise plus visible tailwinds (shrink/delivery/media) are positive; tactically watch Q2 print and tariff headlines for entry timing.