Dollar General (NYSE:DG) reported second-quarter fiscal 2026 results that management said exceeded expectations, citing comparable-sales growth, operating-margin expansion and double-digit earnings-per-share growth. The company also raised its full-year outlook and said it plans to resume share repurchases in the third quarter.
Chief Executive Officer Todd Vasos said second-quarter net sales totaled $11.3 billion, compared with $10.7 billion in the prior-year period. Same-store sales increased 3.5%, driven by a 2% increase in customer traffic and 1.5% average basket growth. The quarter marked Dollar General’s fifth consecutive quarter of traffic growth, Vasos said.
Tariff Refunds Lift Results, Fund Customer Investments
Chief Financial Officer Donny Lau said gross profit as a percentage of sales increased 127 basis points to 32.6%. The improvement reflected tariff refunds, a lower LIFO provision and lower distribution costs, partly offset by increased markdowns and transportation costs.
Tariff refunds, net of gross-margin-related reinvestment, contributed approximately 81 basis points to gross margin during the quarter, Lau said. After related reinvestment, tariff refunds added about 66 basis points to operating margin and approximately $0.25 to quarterly diluted earnings per share.
Dollar General used a substantial portion of tariff-refund proceeds to support its customer value proposition, according to Vasos. Those investments included targeted promotions around summer holidays, lower everyday prices and customer-facing SG&A spending, including increased marketing expense.
Operating profit rose 29.2% to $769 million, while operating margin increased 126 basis points to 6.8%. SG&A expense was flat as a percentage of sales at 25.8%. Diluted EPS increased 33% to $2.48.
Lau said the company saw continued improvement in shrink and damages, despite lapping a 108-basis-point improvement in shrink during the second quarter of 2025. For the full year, Dollar General continues to expect shrink and damages to provide roughly 50 basis points of incremental gross-margin expansion from the 2025 base.
Raised Full-Year Outlook and Capital Returns
Based on first-half performance, business momentum and the impact of tariff refunds after reinvestments, Dollar General raised its fiscal 2026 guidance. The company now expects:
- Net sales growth of 4% to 4.3%.
- Same-store sales growth of 2.5% to 2.9%.
- Diluted EPS of $7.80 to $8.00, including the approximately $0.25 second-quarter benefit from tariff refunds after reinvestments.
The outlook assumes an effective tax rate of approximately 24.5% and includes up to $700 million of share repurchases in the second half. Lau said Dollar General plans to repurchase up to $700 million of common stock, funded with cash on hand, beginning in the third quarter. The company had previously expected to resume repurchases during 2027 under its long-term financial framework.
Year-to-date operating cash flow totaled $1.5 billion through the second quarter. Merchandise inventories ended the quarter at $6.6 billion, essentially flat from a year earlier and down 2.7% on an average per-store basis. The board also approved a quarterly cash dividend of $0.59 per share for the second quarter.
For the second half, Lau said the company expects gross-margin expansion despite elevated fuel costs and difficult comparisons. Expected drivers include additional shrink and damage improvement, non-consumable merchandising, supply-chain productivity, category management and the DG Media Network. The company does not expect tariff refunds, net of reinvestment, to have a material impact in the second half because it received the majority of the anticipated refund amount in the second quarter.
Consumer Pressure Supports Traffic, Value Focus
Vasos said Dollar General’s core customer remains financially constrained by persistent inflation and volatile fuel prices. He said customers are reducing trips, purchasing less per visit and shopping closer to home, while higher-income consumers continue to trade into Dollar General more frequently.
The company has more than 21,000 stores within five miles of approximately 75% of the U.S. population, according to Vasos. Its delivery operations contributed an estimated 40 basis points to comparable-sales growth during the quarter.
Dollar General continues to emphasize its $1 assortment, including more than 2,000 items at or below $1 and more than 600 rotating Value Valley items priced at $1. Value Valley comparable sales increased more than 16% in the second quarter. The company expanded $1 off-shelf displays to more than 9,000 stores and said those locations are generating incremental comparable sales above the rest of the chain.
Chief Operating Officer Emily Taylor said Dollar General’s collective delivery offerings, including myDG delivery, DoorDash and Uber Eats, have an estimated sales incrementality rate of about 80%. Digitally engaged and delivery customers are more than twice as productive as non-digitally engaged customers, she said. The company estimates that more than 1 million customers first engaged with Dollar General through delivery before becoming in-store shoppers.
Remodels, Store Growth and Digital Initiatives
Dollar General is pursuing four strategic growth pillars: enhancing the customer experience, elevating its brand, improving enterprise-wide efficiency and extending its reach. Combined non-consumable comparable sales increased 4.5% in the second quarter, led by toys.
The company completed 1,324 Project Renovate remodels and 1,422 Project Elevate projects through the end of the second quarter. It still expects to complete 2,000 Renovate remodels and 2,250 Elevate projects during 2026. Dollar General targets annualized comparable-sales lifts of roughly 6% for Renovate stores and 3% for Elevate stores.
During the quarter, the company opened 125 U.S. stores as part of its plan to open 450 stores in 2026. It also opened one Mi Súper Dollar General store in Mexico, bringing its Mexican store count to 22. Dollar General expects to open approximately 10 stores in Mexico this year.
Taylor said the company is also rolling out its DGTP ’26 format, which changes store layouts and product adjacencies to create clearer destinations for food and snacks, health and beauty, and home and seasonal merchandise. Vasos added that Dollar General is continuing SKU rationalization through more targeted tests in lower-volume and higher-shrink locations.
About Dollar General (NYSE:DG)
Dollar General Corporation is a U.S.-based variety and discount retailer operating a large network of small-format stores that serve primarily rural and suburban communities. The company is publicly traded on the New York Stock Exchange under the ticker DG and is headquartered in the Nashville/Goodlettsville, Tennessee area. Founded in 1939, Dollar General has grown from a regional operation into one of the nation’s prominent low-price retailers focused on convenience and value.
Dollar General’s stores offer a wide assortment of everyday consumables and household goods, including food and beverage items, cleaning supplies, health and beauty products, paper goods, apparel basics, seasonal merchandise and small household items.
