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DG

DOLLAR GENERAL CORP (DG)·Q4 2025 Earnings Summary

Executive Summary

  • Net sales rose 4.5% to $10.30B, same-store sales increased 1.2%, while diluted EPS fell 52.5% to $0.87 due to $232M in charges tied to store portfolio optimization; gross margin was 29.4% and operating margin 2.86% .
  • Management issued FY2025 guidance: net sales growth 3.4–4.4%, same‑store sales 1.2–2.2%, EPS $5.10–$5.80, tax rate ~23.5%, capex $1.3–$1.4B, and ~4,885 real estate projects; no share repurchases planned in FY2025 .
  • Long‑term framework targets operating margin of ~6–7% by 2028–2029 and adjusted EPS growth of 10%+ starting in 2026, driven by shrink/damages improvement, DG Media Network, and non‑consumable mix initiatives .
  • Management highlighted a pressured core customer, tariff risk monitoring, and H1’25 deleverage from wage inflation (3.5–4%), normalized incentive comp (~$120M headwind), and D&A; shrink improvement is a tailwind throughout 2025 .

What Went Well and What Went Wrong

What Went Well

  • Underlying execution and top‑line were solid; market share gains in consumables and non‑consumables, with fiscal year sales surpassing $40B for the first time .
  • Shrink mitigation delivered a 68 bps year‑over‑year improvement in Q4 and is expected to remain a tailwind through 2025 .
  • Digital and delivery initiatives scaling: DoorDash in >16,000 stores, SNAP/EBT enabled, DG home delivery expanding from ~400 stores to a goal of up to 10,000 by year‑end 2025; supports scaling DG Media Network .

What Went Wrong

  • EPS and operating profit were sharply lower due to $232M in charges from store closures and pOpshelf impairments; EPS down 52.5% to $0.87 (−$0.81/share impact from charges) .
  • SG&A deleveraged 294 bps in Q4 (26.5% of sales) on impairments and higher retail labor, incentive comp, repairs & maintenance, D&A, and technology expenses .
  • Discretionary categories remained soft (seasonal, home, apparel declines vs consumables growth), with traffic down 1.1%; non‑consumable mix at 18% has pressured margins versus rising consumable mix to 82% .

Financial Results

MetricQ2 2025Q3 2025Q4 2025Q4 2024 (Prior Year)
Net Sales ($USD Billions)$10.21 $10.18 $10.30 $9.86
Diluted EPS ($)$1.70 $0.89 $0.87 $1.83
Gross Margin (%)29.96% 28.83% 29.40% 29.48%
SG&A (% of Sales)24.58% 25.65% 26.55% 23.60%
Operating Margin (%)5.39% 3.18% 2.86% 5.88%
Operating Profit ($USD Millions)$550.0 $323.8 $294.2 $579.7
Same-Store Sales (%)+0.5% +1.3% +1.2% —
Q4 2025 YoY vs Q4 2024Change
Net Sales YoY+4.5%
Diluted EPS YoY−52.5%
Operating Profit YoY−49.2%

Segment/category breakdown (Q4):

Category Sales ($USD Billions)Q4 2025Q4 2024
Consumables$8.317 $7.898
Seasonal$1.115 $1.104
Home Products$0.593 $0.582
Apparel$0.279 $0.275
Total Net Sales$10.304 $9.859

KPIs (Q4):

KPIQ4 2025
Same-Store Sales+1.2%
Traffic−1.1%
Avg Transaction Amount+2.3%
Consumables Mix of Sales82%
Shrink Improvement (YoY bps)+68 bps
Dividend Declared$0.59/share
Cash from Operations (FY)$3.0B

Note: Wall Street consensus estimates could not be retrieved due to S&P Global request limit; therefore, “vs. estimates” comparisons are unavailable.

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Net Sales Growth (%)FY2025N/A3.4%–4.4% New issuance
Same-Store Sales Growth (%)FY2025N/A1.2%–2.2% New issuance
Diluted EPS ($)FY2025N/A$5.10–$5.80 New issuance
Effective Tax Rate (%)FY2025N/A~23.5% New issuance
Capital Expenditures ($B)FY2025N/A$1.3–$1.4 New issuance
Real Estate Projects (#)FY2025N/A~4,885; 575 new U.S., up to 15 Mexico, 2,000 full remodels, 2,250 Project Elevate, 45 relocations New issuance
Share RepurchasesFY2025N/ANone assumed Maintained none
H1 cadenceFY2025N/AH1 more pressured; Q1 & Q2 EPS below prior year New color
Wage InflationFY2025N/A3.5–4% New color
Incentive Comp HeadwindFY2025N/A~$120M at target New color
D&A HeadwindFY2025N/AOngoing from prior capex and building material inflation New color

Long‑term framework:

MetricTargetTimeline
Operating Margin (Adjusted)~6%–7% 2028–2029
Net Sales Growth~3.5%–4% Begin 2025
Same-Store Sales Growth~2%–3% 2025–2026
Adjusted EPS Growth10%+ Begin 2026
Capex~3% of Net Sales 2025

Earnings Call Themes & Trends

TopicQ2 2025 (prior)Q3 2025 (prior)Q4 2025 (current)Trend
Core consumer healthSoftness; constrained customer and softer sales trends Financially constrained; comps +1.3% “Core customer” still pressured; trade-down accelerating; macro-neutral guidance Persistent pressure; trade-down helps DG
Shrink & damagesElevated shrink; margin pressure Lower shrink vs prior year Shrink +68 bps improvement in Q4; tailwind through 2025 Improving tailwind
Project Elevate / Remodel cadenceIntroduced Project Elevate Planned 2025 ramp 2,250 Project Elevate; H1 more project expense; comp lift 3–5% Elevate, 6–8% Renovate Accelerating remodels
Non‑consumables strategyCategory declines YoY Category declines; hurricanes impact Aim to lift non‑consumables +100 bps by 2027; ultimate ~20% mix; brand partnerships; layout changes Reinvest to rebalance mix
Digital, Delivery, DG Media NetworkFoundation in place Ongoing DoorDash partnership, SNAP/EBT; DG delivery scaling to up to 10,000 stores; media network growth Scaling; margin accretive potential
Tariffs/macroTariffs risk noted broadly Macro caution Monitoring 2025 tariffs; mitigation plans, price actions where needed Managed risk
Real estate portfolio—Elevated projects planned Close 96 DG and 45 pOpshelf; convert 6 to DG; IRR 17% on new stores; ~2‑yr payback Optimize footprint

Management Commentary

  • “Net sales increased 4.5% to $10.3 billion… we delivered fiscal year sales of more than $40 billion… an essential role in more than 20,000 communities” — Todd Vasos (CEO) .
  • “Q4 gross profit… 29.4%… shrink mitigation drove a 68 bps improvement… SG&A was 26.5%, including $214M impairment charges… operating profit decreased 49% to $294M… EPS decreased 52.5% to $0.87” — Kelly Dilts (CFO) .
  • “We expect… FY2025 net sales growth 3.4%–4.4%, same‑store sales 1.2%–2.2%, EPS $5.10–$5.80… capex $1.3–$1.4B… no repurchases this year” — Kelly Dilts .
  • “We plan to execute ~4,885 real estate projects in 2025, including 575 new stores in the U.S., up to 15 in Mexico, 2,000 full remodels, and 2,250 Project Elevate remodels” — Kelly Dilts .
  • “We conducted a real estate portfolio optimization… close 96 DG stores… convert 6 of 51 pOpshelf closure candidates to DG; close remaining 45” — Todd Vasos .

Q&A Highlights

  • Margin bridge to 6–7% operating margin: CFO detailed drivers—~150 bps initiatives (DG Media Network, merchandising), ~80 bps shrink, ~40 bps damages, plus SG&A simplification; not a straight path, multiple levers over time .
  • Consumer trade‑down and cadence: CEO noted accelerating trade‑down into Q4 and Q1; CFO flagged H1 expense pressure, with Q1/Q2 EPS below prior year; aim to complete most projects by end of Q3 to maximize operating weeks .
  • Capital returns and IRR: New stores still attractive (IRR ~17%, ~2‑year payback); balance capital between new and mature store investments; Elevate comps +3–5%, Renovate +6–8% .
  • Working capital and leverage: Inventory down 6.9% per store; cash from operations +25%; paid down $750M debt; plan early repayment of $500M maturing in fall; leverage ratio remains >3x adjusted debt to adjusted EBITDAR with focus on improvement .
  • Competitive landscape: Opportunities from competitor closures (e.g., party/drug channel share gains); delivery expansion a rural competitive edge; media network as a margin tailwind .

Estimates Context

  • S&P Global consensus for Q4 2025 (EPS, revenue, EBITDA, target price, recommendation) was unavailable due to request limit; we could not compare actuals to consensus in this report. Values would ordinarily be retrieved from S&P Global; since unavailable, no “vs estimates” table is provided.

Key Takeaways for Investors

  • Portfolio optimization and impairment charges masked underlying operating progress; watch for shrink tailwind and SG&A actions to begin showing through after H1’25 .
  • Near‑term cadence: Expect H1 deleverage (labor inflation, normalized incentive comp, D&A); management explicitly telegraphed Q1/Q2 EPS below prior year—position sizing and expectations should reflect this .
  • 2025 setup: Net sales growth 3.4–4.4% with heavy remodel activity; execution on Project Elevate/Renovate comp lifts is a critical KPI for multiple expansion .
  • Long‑term margin rebuild credible: Clear bps bridges (shrink/damages, initiatives/media, non‑consumables mix) toward 6–7% operating margin by 2028–2029; monitor quarterly progress on these levers .
  • Digital and delivery scaling may provide both top‑line and higher‑margin media monetization; rural same‑day delivery footprint is a differentiated competitive asset .
  • Non‑consumables rebalancing targets (+100 bps by 2027) can alleviate mix‑driven margin pressure if executed alongside brand partnerships and assortment upgrades .
  • Balance sheet and cash generation improving: $3.0B CFO, inventory down per store, debt paydown; dividend intact ($0.59/qtr), no repurchases in 2025 due to covenant relief and leverage priorities .

Appendix: Additional Data Points

  • Store portfolio actions: Close 96 DG and 45 pOpshelf; convert 6 pOpshelf to DG; EPS impact ~−$0.81 in Q4; leaves ~180 pOpshelf stores .
  • Category sales mix (FY2024): Consumables +6.5% YoY to $33.37B; seasonal/home/apparel declined YoY; total FY net sales $40.61B (+5.0%) .
  • Credit agreement amendment: Covenant relief through Jan 30, 2026; increased max leverage ratio (4.75x during relief), reduced fixed charge coverage (1.50x during relief), restricted buybacks during relief .