Dollar General Corp. (NYSE:DG) delivered a strong third-quarter earnings beat and lifted its full-year outlook, signaling improving profitability and steady demand as budget-conscious shoppers across income levels continue to seek value amid a choppy macroeconomic backdrop.
Following the earnings, Telsey Advisory Group analyst Joseph Feldman reiterated a Market Perform rating on Dollar General and raised his 12-month price target to $130 from $123.
Feldman said Dollar General is attracting value-seeking shoppers across income groups and executing well despite an uncertain macroeconomic backdrop. Adjusted EPS came in at $1.28, topping Feldman's 91-cent estimate and the 95-cent FactSet consensus.
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Third-Quarter Results
Feldman said margin performance drove the upside. Operating margin expanded 82 bps to 4.0% as gross margin increased 107 bps to 29.9%, aided by lower shrinkage (about ~90 bps) and higher markups, partly offset by a higher LIFO provision.
SG&A deleveraged 25 bps to 25.9% on incentive compensation, repairs and maintenance, and utilities, yet EBIT dollars still rose 31.5% to $426M.
Sales And Traffic Momentum
Sales grew 4.6% to $10.7 billion, and comps increased 2.5%, driven entirely by a 2.5% increase in traffic. The average ticket remained roughly flat, as higher unit retail prices offset the decrease in items per basket.
Feldman cited broad category strength, supported by "back-to-basics" initiatives and sharper value, more than 2,000 SKUs at or below $1, with Value Valley (about 500 $1 items) delivering a 7.6% comp. Seasonal and home also improved (+4.0%), and he noted continued trade-in from higher-income shoppers.
By the fourth quarter of 2025, Feldman said trends started well, despite delayed SNAP payments (~5% of tenders). He added that the shutdown period supported essential demand, with spending improving as benefits flowed later in November.
Guidance And Financial Levers
Dollar General raised 2025 EPS guidance to $6.30–$6.50 (from $5.80–$6.30) and increased sales growth (4.7%–4.9%) and comp (2.5%–2.7%) guidance.
Feldman expects the planned paydown of $550 million of 2027 debt to lower interest expense and add roughly ~9 cents to EPS. He also highlighted 4,885 planned 2025 real estate projects and expanding delivery (DoorDash (NASDAQ: DASH) across 18,000+ stores; same-day in 17,000+; Uber Eats (NYSE:UBER) in 17,000).
Feldman deemed the valuation fair at roughly 19.5x the midpoint of 2025 guidance. He based his $130 target on ~18x and 2026E EPS of $7.15, while flagging potential pressures from low income, competition, tariffs, and inflation.
Other Analyst Moves
On the Street, forecasts moved higher with ratings largely steady. Jefferies (Buy) raised its forecast to $142 from $130, while UBS (Buy) lifted its target to $143 from $135. Others also raised forecasts: Piper Sandler (Neutral) to $129 from $117, Truist (Hold) to $129 from $120, Morgan Stanley (Equal-Weight) to $135 from $125, Evercore ISI (In-Line) to $130 from $105, and BMO (Market Perform) to $130 from $115.
DG Price Action: Dollar General shares were down 0.21% at $132.09 during premarket trading on Monday. The stock is trading near its 52-week high of $135.08, according to Benzinga Pro data.
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