Best Dollar Store Stock to Buy: Dollar Tree or Dollar General?

The dollar stores, such as Dollar General (NYSE: DG) and Dollar Tree (NASDAQ: DLTR), have stock prices trading at discount levels in 2025. The discounts were deserved, driven by sluggish retail business and much-needed rationalizations that are now underway. The takeaway for investors in June is that both turnaround stories are gaining traction, but only one is a buy today.

The difference is in the guidance issued for the year. Both will struggle with headwinds, including tariffs and a consumer pullback, but Dollar General is guiding for strength. At the same time, Dollar Tree only reaffirmed its previously stated outlook, raising risks in the process. 

The risk is earnings volatility. The company affirmed its revenue outlook and even lifted the midpoint of its full-year earnings outlook due to a reduced share count. The risk is that Q2 earnings may decline as much as 50%, and there is no guarantee of a full recovery.

Execs say they can mitigate the impact, and they likely will, producing a catalyst for this market at some later date. Until then, Dollar General raised its mid-point for revenue and earnings, simultaneously announcing the acceleration of its turnaround effort. The company plans to lean harder into store remodels and digital channels that are driving momentum. 

Dollar Tree Pulls Back; Buying Opportunity to Follow

Dollar Tree had a decent quarter, outgrowing its larger competitor with an 11.3% increase in the core business. Plans to sell Family Dollar continue to progress and are expected to close in the current quarter. Dollar General grew at a slower but still solid 5.3%, a significant rate given its larger size and scale.

Both companies reported positive comparable sales (comps), with transaction size leading the gains and strong margins. Both outperformed in Q1 and are guiding well for the year, although the strength was more pronounced in Dollar General's on both counts. 

Cash flow is another significant factor for these stocks. Both companies produce positive cash flow and can sustain capital returns. Dollar Tree doesn’t pay a dividend but reduces its share count each quarter, while Dollar General pays dividends and tends to buy back shares over time.

Its dividend is worth more than 2% in early June and is a reliable payment, accounting for 45% of the earnings forecast. 

The balance sheets for these companies provide no red flags for investors and incentives to buy. Dollar Tree's balance sheet reflects the impact of its divestitures and reposition with cash up, assets down, and equity halved, but it is still in a healthy condition. Long-term debt is less than 1x the equity, and the company is well-capitalized.

The analyst trends in Dollar Tree stock were bullish ahead of the release, but may end now. The results and guidance weren’t bad, but the Q2 caution is reason enough for them to stand pat if not temper the outlook.

Analysts Lead Dollar General Shares Higher: May Cap Gains in Dollar Tree

On the other hand, Dollar General analysts are lifting price targets following its release, putting it in the high-end range.

The consensus estimate forecasts a slight decline in early June, but the high-end range forecasts a double-digit upside and move above critical resistance targets. 

Following the release, Dollar General shares' price action was bullish, confirming support at the 30- and 150-day EMAs and a general price reversal that began earlier this year. The critical resistance target is near the $130 level and may be reached by early summer.

A move above $130 would signal a shift in market dynamics and open the door to a sustained rally that could take this stock back above $200 over time. Dollar Tree will likely follow, but its rebound may not start until later in the year, when its outlook is more certain. 

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The article "Best Dollar Store Stock to Buy: Dollar Tree or Dollar General? " first appeared on MarketBeat.