TGT vs. DG: Which Discount Retailer Stock Has Greater Upside?

Target Corporation TGT and Dollar General Corporation DG are the most recognized names in the Retail–Discount Stores industry. Commanding a market capitalization of approximately $42.9 billion, Target has established a strong presence through a combination of brick-and-mortar locations and an extensive digital footprint. Known for its wide product range, including apparel, groceries, electronics and home goods, Target operates 1,978 stores nationwide.

Meanwhile, Dollar General, with a market capitalization of around $21.3 billion, operates an expansive network of more than 20,000 stores across rural, suburban and urban communities. With a strategic focus on everyday low prices and household essentials, Dollar General has become a go-to destination for value-conscious consumers.

Given ongoing shifts in consumer spending and macroeconomic uncertainty, it is essential to evaluate which of these retailers is better positioned for upside.

The Case for Target

Target is leveraging its strong brand presence, diverse product portfolio and expanding e-commerce capabilities, alongside a growing store footprint, to solidify its market position and drive sustainable growth. By prioritizing innovation and integrating AI technology, the company is laying a solid foundation for long-term success. Target has outlined a comprehensive strategy to generate more than $15 billion in revenue growth by fiscal 2030.

To support this growth, the company plans to open more than 20 new stores and remodel several existing locations in fiscal 2025. Complementing its physical expansion, Target’s investments in same-day delivery, curbside pickup and personalized digital services continue to enhance customer convenience and loyalty. Same-day services powered by Target Circle 360 grew more than 25% during the final quarter of fiscal 2024. Target Circle membership increased by 13 million new members in 2024.

To boost efficiency, Target is modernizing inventory management with AI-driven solutions that optimize stock availability and delivery speed. The company is also introducing new package delivery solutions that leverage existing supply-chain assets and its Shipt service, ensuring faster and more reliable order fulfillment. Target remains committed to innovation and customer satisfaction, striving to deliver unique shopping experiences while maintaining value. The company plans to invest $4 billion to $5 billion in store remodels, supply-chain expansion and digital transformation in fiscal 2025.

Despite these strategic efforts, Target has issued a cautious outlook for the first quarter of fiscal 2025. The Minneapolis, MN-based retailer anticipates significant year-over-year profit pressure in the first quarter compared to the rest of the year owing to ongoing consumer uncertainty, a slight decline in February net sales, tariff concerns and the expected timing of certain expenses throughout the fiscal year. 

Target’s guidance for fiscal 2025 remains measured. The company expects net sales to grow by approximately 1%, with comparable sales remaining flat. While a modest improvement in the operating margin is anticipated, projected adjusted earnings of $8.80-$9.80 per share suggest only limited upside from the prior year’s $8.86, reinforcing the conservative tone of management's outlook.

The Case of Dollar General

Dollar General has been gaining market share, supported by its resilient product mix, strategic focus on value and real estate expansion. The company’s “back-to-basics” initiative has strengthened its operational foundation, while targeted efforts to reduce shrinkage are beginning to show results. These measures position Dollar General well for sustainable growth in fiscal 2025 and beyond.

Well, Dollar General is planning an extensive 4,885 real estate projects in fiscal 2025. This includes 575 new store openings in the United States and up to 15 outlets in Mexico, 2,000 remodels and 2,250 upgrades under the “Project Elevate” initiative. The Elevate program has demonstrated first-year comparable sales lifts of 3% to 5%, while the complementary “Project Renovate” is designed to deliver an even stronger 6% to 8% uplift.

To complement its physical footprint, Dollar General is expanding its digital capabilities. The retailer is in the early stages of scaling home delivery through a partnership with DoorDash, which is currently live in around 400 stores. Early results are promising, with higher average order values than in-store purchases. The company plans to expand this service to as many as 10,000 stores by the end of fiscal 2025. 

Despite these strategic moves, Dollar General anticipates a challenging first half of fiscal 2025 due to upfront costs associated with remodeling projects and increased labor-related expenses. Management expects earnings per share (EPS) to decline on a year-over-year basis during this period.

Looking further ahead, Dollar General has outlined a clear roadmap. Beginning in fiscal 2025, the company targets annual net sales growth of 3.5%-4%, supported by about 2% new unit growth. From fiscal 2026 onward, the retailer expects same-store sales growth of 2%-3%, with operating margin expansion resuming and potentially reaching 6%-7% by 2028. On an adjusted basis, EPS growth of at least 10% annually is projected starting in 2026.

Target vs. Dollar General: How Do Estimates Stack Up?

The Zacks Consensus Estimate for Target’s current fiscal year sales and EPS implies year-over-year growth of 0.9% and 1.5%, respectively. The consensus estimate for EPS for the current fiscal year has decreased by 33 cents to $8.99 over the past 60 days. (See the Zacks Earnings Calendar to stay ahead of market-making news.)
 

The Zacks Consensus Estimate for Dollar General’s current fiscal year sales suggests year-over-year growth of 3.7%, while for the EPS, the same indicates a decline of 6.3%. The consensus estimate for EPS for the current fiscal year has decreased by 40 cents to $5.55 over the past 60 days. 
 

TGT vs. DG: A Look at YTD Stock Performance

Despite operating in the same industry, the stock trajectories of Target and Dollar General have moved in starkly opposite directions. Target shares have plunged 30.3% year to date, underperforming both its peers and the industry. In contrast, Dollar General has surged 27.7% over the same period, significantly outpacing the industry’s modest decline of 0.1%
 

TGT vs. DG: A Dive Into Stock Valuation

Target is trading at a forward price-to-earnings (P/E) ratio of 10.3, below its one-year median of 14.77. Meanwhile, Dollar General’s forward P/E ratio stands at 17.02, higher than its median of 13.62.

TGT vs. DG: Which Has Greater Upside?

Both Target and Dollar General are solid names in the discount retail space, but the latter seems to have a slight edge for now. DG is actively expanding its store network and rolling out new initiatives that are already showing positive results, even though it faces some short-term cost pressures. Target, while focused on digital growth and innovation, holds a modest outlook for the current fiscal year. Given recent performance and strategic momentum, Dollar General appears to be the better option at this point. Both TGT and DG stocks carry 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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