DG · Q2 2026 Earnings

Bullish

Dollar General

Reported August 28, 2025

30-second summary

Dollar General delivered a 2.8% same-store sales print and raised FY2025 EPS guidance to $5.80–$6.30 from $5.20–$5.80 — the old high end is now the new low end. Net sales grew 5.1% to $10.73B, gross margin expanded 137bps YoY to 31.34%, and operating profit rose 8.3%, validating the Q1 narrative that shrink recovery and the higher-income trade-in customer are durable rather than transient. The incentive compensation headwind flagged for Q2 in last quarter's call did materialize — SG&A deleveraged 121bps YoY — but gross margin strength more than absorbed it.

Headline numbers

EPS

Q2 FY2026

$1.86

Revenue

Q2 FY2026

$10.73B

+5.1% YoY

Gross margin

Q2 FY2026

31.3%

Operating margin

Q2 FY2026

5.5%

Key financials

Q2 FY2026

Metric	Q2 FY2026	YoY	Q1 FY2025	QoQ
Revenue	$10.73B	+5.1%	$10.44B	+2.8%
EPS	$1.86	—	$1.78	+4.5%
Gross margin	31.3%	—	31.0%	+34bps
Operating margin	5.5%	—	5.5%	+3bps

Guidance

Company raised full-year FY2026 guidance across net sales growth, same-store sales growth, and EPS, reflecting strong Q2 outperformance and improved second-half outlook.

Guidance is issued for both next quarter and the full year. Both may appear below.

Changes to prior guidance

Metric	Period	Prior guide	New guide	Δ	Result
Net Sales Growth	FY 2026	3.7% to 4.7%	4.3% to 4.8%	+0.6pts low end, +0.1pts high end	Raised
Same-Store Sales Growth	FY 2026	1.5% to 2.5%	2.1% to 2.6%	+0.6pts low end, +0.1pts high end	Raised
Diluted EPS	FY 2026	$5.20 to $5.80	$5.80 to $6.30	+$0.60 low end, +$0.50 high end	Raised
Effective Tax Rate	FY 2026	Approximately 23.5%	Withdrawn — no replacement	—	Withdrawn
Real Estate Projects	FY 2026	Approximately 4,885 projects (including 575 new US stores, up to 15 Mexico stores, 2,000 Project Renovate remodels, 2,250 Project Elevate remodels, 45 relocations)	Withdrawn — no replacement	—	Withdrawn
Share Repurchases	FY 2026	No share repurchases expected	Withdrawn — no replacement	—	Withdrawn
Incentive Compensation Headwind	FY 2026	$180 million to $200 million	Withdrawn — no replacement	—	Withdrawn

Reaffirmed unchanged this quarter: Capital Expenditures ($1.3 billion to $1.4 billion)

Segment performance

Q2 FY2026

Segment	Q2 FY2026	YoY
Consumables	$8.82B	+5.0%
Seasonal	$1.106B	+4.9%
Home products	$0.512B	+6.6%
Apparel	$0.29B	+4.2%

Platform metrics

Q2 FY2026

Segment	Q2 FY2026
Same-Store Sales Growth	2.8%
Customer Traffic Growth	1.5%
Average Transaction Amount Growth	1.2%
Store Count	20,746
Total Selling Square Footage Growth	2.6%
New Stores Opened (Q2)	204

Profitability

Q2 FY2026

Segment	Q2 FY2026
Operating Profit Growth	8.3%
SG&A as % of Sales	25.79%

Management tone

No transcript was available for this quarter; tone analysis below is drawn from press-release language and the qualitative shifts vs. Q1.

Q1 anchor: "Shrink tailwind + trade-in customer emerging" → Q2 anchor: "Outperformance narrative replaces tariff hedging."

Q1's prepared remarks were laced with tariff caveats ("dynamic and uncertain," "as a last resort," "could be more substantial if price increases take effect broadly") and the decision to withhold a quantitative Q2 guide was the most concrete expression of that hedging. The Q2 press release leads with confidence in a "resilient business model" and "ample opportunity to drive growth," with tariff risk now relegated to standard forward-looking-statement boilerplate rather than headline framing. The shift is from defending the year to compounding on it.

The Q1-flagged incentive comp headwind concentrated in Q2 did show up — SG&A deleveraged 121bps YoY, with the press release naming incentive compensation as a primary driver. The story is not that the headwind disappeared; it's that gross margin expansion of 137bps YoY more than offset it, allowing operating profit to still grow 8.3%. That's the answer to last quarter's biggest watch item.

The trade-in customer narrative graduated from "highest percent in four years" (Q1) to validation: traffic turning positive at +1.5%, with non-consumables (Home +6.6%, Apparel +4.2%) accelerating. Management is no longer arguing the thesis; the comp and mix data are making the argument.

Answers to last quarter's watch list

Q2 same-store sales holding above 2% — Same-store sales came in at +2.8%, comfortably above the 2% threshold and above the prior FY guide midpoint of 2.0%. The strength supported the FY SSS guide raise to 2.1–2.6%.

Resolved positively

Shrink delivering 50bps+ of YoY gross margin tailwind — Total gross margin expanded 137bps YoY (31.34% vs. 29.96% Q2 prior year), accelerating from Q1's 78bps print. The press release attributes the expansion primarily to lower shrink, higher inventory markups, and lower inventory damages, partially offset by an increased LIFO provision, increased markdowns, and increased distribution costs. The shrink tailwind is clearly intact and arguably strengthening.

Resolved positively

Trade-in customer retention — Traffic inflected to +1.5% from -0.3% in Q1, and non-consumables (Home, Apparel) accelerated. These are the cleanest available proxies and they all moved the right direction.

Resolved positively

Tariff-related price actions and tariff commentary — Tariff language was largely removed from this quarter's press release framing, replaced by confidence language. Whether DG actually raised shelf prices or held the line is not disclosed in the press release. Without transcript commentary, the action-versus-rhetoric question is unresolved.

Not resolved

Q2 incentive compensation SG&A impact in dollars — SG&A deleveraged 121bps YoY to 25.79% of sales, with the press release explicitly naming incentive compensation as a primary driver alongside repairs/maintenance and benefits. The Q1-flagged Q2 concentration of the headwind materialized as advertised; the company did not quantify the dollar magnitude in the press release. Status: Resolved (qualitatively confirmed, magnitude not disclosed)

Non-consumables mix progression — Seasonal +4.9%, Home +6.6%, Apparel +4.2%. Home accelerated meaningfully (vs. +5.9% Q1), Seasonal decelerated (vs. +6.2% Q1), Apparel improved (vs. +3.2% Q1). Collectively still tracking mid-single-digit growth against Consumables +5.0% — the mix shift toward higher-margin categories that underpins the margin expansion roadmap remains intact.

Resolved positively

What to watch into next quarter

Q3 same-store sales: the new FY SSS guide of 2.1–2.6% with Q1 +2.4% and Q2 +2.8% already in the bag implies H2 comps need to average ~1.7–2.5% — watch whether Q3 holds the >2% pace or whether management is baking deceleration into the back half

Gross margin trajectory: Q1 +78bps, Q2 +137bps. The shrink tailwind is accelerating, not exhausting — watch whether Q3 sustains triple-digit YoY expansion or whether the LIFO provision and markdown pressures called out in the press release start to bite

Traffic versus ticket composition: traffic turning positive in Q2 (+1.5%) is the cleanest validation of the trade-in customer thesis — any reversal in Q3 would suggest the higher-income shopper is a 2025 phenomenon, not a structural shift

SG&A trajectory: 121bps of Q2 deleverage is significant; watch whether the incentive comp pressure moderates in H2 as Q1 commentary implied, or whether repairs/maintenance and benefits keep SG&A elevated

The implied H2 EPS arithmetic: with $1.78 + $1.86 = $3.64 of H1 GAAP EPS reported, the FY $5.80–$6.30 range requires H2 EPS of $2.16–$2.66 — a wide implied spread that suggests management is preserving optionality on holiday-quarter outcomes

Any tariff-related price actions or input cost commentary on the Q3 call — the removal of tariff language from the Q2 press release is conspicuous and the question of whether DG raised shelf prices or absorbed input cost pressure remains unanswered

Sources

Dollar General Q2 FY2025 press release (SEC Form 8-K Exhibit 99), filed August 28, 2025 — https://www.sec.gov/Archives/edgar/data/29534/000110465925084297/tm2524307d1_ex99.htm
Dollar General Q1 FY2025 tapebrief, prior quarter context

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