Dollar General Bets on Remodels as Its Next Growth Engine

Dollar General Corporation’s DG store remodel program is emerging as a compelling alternative to traditional new store growth. In the third quarter of fiscal 2025, the company completed 1,175 remodels under its Project Elevate (651 remodels) and Project Renovate (524 remodels) programs compared with 196 new store openings. 

Project Elevate, which targets stores not yet old enough for a full remodel, is tracking toward an average first-year annualized same-store sales lift of roughly 3%. While that figure may appear modest, management emphasized that the return profile is attractive, given the lower capital intensity. Project Renovate stores are expected to deliver about 6% same-store sales lift, reinforcing the value of reinvesting in mature locations.

By contrast, new store economics remain solid but more capital-intensive. Dollar General expects new stores to generate returns in the 16-17% range with a roughly two-year cash payback period. However, rising construction, occupancy and operating costs have increased the execution threshold for new builds. Remodels allow the company to refresh assortments, optimize merchandising adjacencies and improve customer satisfaction across existing footprints.

Management’s fiscal 2026 real estate plan underscores this shift. Remodels are expected to account for about 90% of planned projects, with roughly 2,000 Project Renovate remodels and 2,250 Project Elevate remodels planned alongside 450 new store openings in the United States. While the store base continues to expand, strategic emphasis is increasingly focused on driving productivity from stores in operation.

What the Latest Metrics Say About Dollar General

Dollar General, which competes with Costco Wholesale Corporation COST and Target Corporation TGT, has seen its shares up 99.9% in the past year compared with the industry’s growth of 3.2%. Shares of Costco and Target have dropped 5.3% and 19.2%, respectively, in the aforementioned period.
 

From a valuation standpoint, Dollar General's forward 12-month price-to-earnings ratio stands at 22.07, lower than the industry’s ratio of 33.53. DG carries a Value Score of B. Dollar General is trading at a premium to Target (with a forward 12-month P/E ratio of 15.01) but at a discount to Costco (46.25).
 

The Zacks Consensus Estimate for Dollar General's current financial-year sales and earnings per share implies year-over-year growth of 4.8% and 9.6%, respectively. For the next fiscal year, the consensus estimate indicates a 4.1% rise in sales and 9.2% growth in earnings.
 

Dollar General currently carries a Zacks Rank #2 (Buy). 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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