Back to Basics or Back to Growth? Inside Dollar General's 2025 Plan

Dollar General Corporation’s DG first-quarter fiscal 2025 performance suggests a strong emphasis on "Back to Basics," laying the groundwork for a renewed path to growth. Net sales rose 5.3%, and same-store sales climbed 2.4%, driven by improved store standards, stronger customer service, better inventory control and meaningful progress on shrink mitigation, which lifted the gross margin.

Merchandising initiatives, particularly SKU rationalization, are streamlining assortments to focus on high-velocity items, contributing to sales momentum. This effort aligns with improving execution in seasonal and non-consumable categories. Additionally, Dollar General continues to attract higher-income “trade-in” customers seeking value, supported by its commitment to maintaining more than 2,000 items priced at or below $1.

Furthermore, the significant investment in Project Elevate and Project Renovate remodels — targeting 20% of the store base annually — aims to bolster performance in mature stores. These remodels are expected to drive comp growth. Dollar General's goal for Project Elevate stores is to achieve first-year annualized comparable sales lifts ranging from 3% to 5%. 

On the digital front, Dollar General is ramping up delivery capabilities through its exclusive partnership with DoorDash and a growing in-house same-day service, now active in 3,000-plus locations. With SNAP and EBT now integrated into online orders, the retailer is broadening access and tapping into new customer segments.

Overall, Dollar General’s disciplined focus on operations, combined with its value proposition and strategic growth initiatives, positions it to convert “Back to Basics” into sustainable growth. DG expects 3.7%-4.7% net sales growth, with 1.5%-2.5% same-store sales growth for fiscal 2025.

Dollar General’s Price Performance, Valuation and Estimates

Dollar General stock has rallied 55.7% over the past six months against the industry’s decline of 0.1%. The company has also comfortably outperformed key peers such as Target Corporation TGT and Costco Wholesale Corporation COST. During the same period, Target shares have tumbled 23.8%, while Costco has posted a modest gain of 0.7%.
 

Dollar General’s forward 12-month price-to-earnings ratio of 18.21 reflects a lower valuation compared to the industry’s average of 31.61. DG carries a Value Score of B. DG is trading at a premium to Target (with a forward 12-month P/E ratio of 13.21) but at a discount to Costco (48.26). 
 

The Zacks Consensus Estimate for Dollar General’s current financial-year sales suggests year-over-year growth of 4.4%, while estimates for earnings per share imply a decline of 2.7%. 
 

Dollar General currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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