DG Q2 Earnings Beat Estimates on Sales Growth and Margin Gains

Dollar General Corporation DG reported second-quarter fiscal 2026 results, wherein the top and bottom lines beat the Zacks Consensus Estimate. Both net sales and earnings increased year over year.

Dollar General posted quarterly adjusted earnings of $2.23 per share, which topped the Zacks Consensus Estimate of $2.00. The bottom line increased 19.9% from $1.86 reported in the year-ago quarter. On a GAAP basis, earnings were $2.48, up 33.3% from $1.86 in the year-ago quarter.

Dollar General Corporation Price, Consensus and EPS Surprise

Dollar General Corporation price-consensus-eps-surprise-chart | Dollar General Corporation Quote

Net sales of $11,290.4 million rose 5.2% year over year and beat the consensus estimate of $11,178 million. The increase was driven by positive contributions from new stores and growth in same-store sales, partially offset by store closures.

Same-store sales improved 3.5%, reflecting a 2% rise in customer traffic and a 1.5% increase in average transaction amount. The quarter marked positive comparable-sales growth across all major categories, including consumables, seasonal, home products and apparel.

DG’s Key Metrics & Margin Insights

Consumables sales increased 5% year over year to $9,263 million. Seasonal sales rose 7.4% to $1,187.7 million. Home products sales advanced 4.8% to $536.6 million, while apparel sales increased 4.5% to $303.1 million.

Gross margin expanded 127 basis points to 32.6%. The improvement primarily reflected tariff refunds, a lower LIFO provision and reduced distribution costs, partly offset by higher markdowns and transportation costs. Tariff refunds, after related reinvestments, contributed about 81 basis points to the gross margin.

SG&A expenses were essentially flat at 25.8% of sales. Higher depreciation and amortization expense was offset by lower rent as a percentage of sales.

Operating profit jumped 29.2% to $769.2 million, with operating margin reaching 6.8% compared with 5.6% a year ago.

DG’s Financial Snapshot

Dollar General ended the quarter with cash and cash equivalents of $1.59 billion, up from $1.28 billion a year earlier. Long-term obligations declined to $4.56 billion from $5.73 billion, while shareholders' equity increased to $9.29 billion from $8.01 billion.

For the first 26 weeks of fiscal 2026, net cash provided by operating activities was $1.50 billion compared with $1.81 billion in the year-ago period. Merchandise inventories were $6.6 billion at quarter-end, with average inventory per store down 2.7% year over year.

DG’s Store Updates

During the second quarter of fiscal 2026, DG opened 125 new stores in the United States and one in Mexico. It remodeled 665 stores through Project Renovate and 711 through Project Elevate, while relocating five stores. The company ended the quarter with 21,148 stores, and total selling square footage increased 1.9%.

Dollar General continues to plan about 4,730 real estate projects in fiscal 2026.

What to Expect From DG in Fiscal 2026?

Dollar General raised its fiscal 2026 net sales growth forecast to 4-4.3% from 3.7-4.2%. The same-store sales growth outlook increased to 2.5-2.9% from 2.2-2.7%.

The company also lifted EPS guidance to $7.80-$8.00 from $7.20-$7.45. The updated range includes an estimated $0.25 second-quarter benefit from tariff refunds after related reinvestments, while management does not expect a material tariff-refund impact in the second half.

Shares of this Zacks Rank #2 (Buy) company have gained 13.8% in the past three months compared with the industry’s growth of 0.4%.

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