Dollar General (NYSE: DG) Posts Q2 EPS of $2.48, Up 33.3% YoY, Raises Full-Year Guidance

Dollar General Corporation (NYSE: DG) reported diluted EPS of $2.48 for its second quarter ended July 31, 2026, a 33.3% increase from $1.86 in the prior-year period. Net sales rose 5.2% to $11.3 billion, and the company raised its full-year financial guidance across all key metrics.

Q2 Fiscal 2026 Results

• Net sales: $11.3 billion, up 5.2% from $10.7 billion in Q2 fiscal 2025, driven by same-store sales growth and new store contributions, partially offset by store closures.
• Same-store sales: Increased 3.5% year over year, reflecting a 2.0% rise in customer traffic and a 1.5% gain in average transaction amount; growth was positive across all four merchandise categories: consumables, seasonal, home products, and apparel.
• Operating income: $769.2 million, up 29.2% from $595.4 million, with operating margin expanding 1.2 percentage points to 6.8%.
• Net income: $550.3 million, up 33.8% from $411.4 million in Q2 fiscal 2025.
• Gross margin: 32.6% in Q2 fiscal 2026 versus 31.3% in Q2 fiscal 2025, an increase of 127 basis points, driven primarily by tariff refunds (estimated at approximately 81 basis points of gross margin benefit after related reinvestments), a lower LIFO provision, and lower distribution costs.
• Year-to-date operating cash flow: $1.5 billion.

What Drove the Results

Gross margin expansion of 127 basis points was the primary driver of the outsized profit growth. Tariff refunds, net of related reinvestments, contributed an estimated 81 basis points to gross margin and approximately 66 basis points to operating margin for the quarter, with an estimated EPS benefit of approximately $0.25. SG&A as a percentage of net sales was essentially flat year over year at 25.8% in both periods, as lower rent costs offset higher depreciation and amortization.

Net interest expense declined 25.7% to $42.9 million from $57.7 million in the year-ago quarter. The effective income tax rate was 24.2% in Q2 fiscal 2026, up from 23.5%, primarily due to expired federal tax credits, partially offset by a lower state effective tax rate.

Q2 also marked the fifth consecutive quarter of customer traffic growth and the sixth consecutive quarter of positive comparable sales growth across all four merchandising categories. During the quarter, Dollar General opened 125 new U.S. stores and one new store in Mexico, remodeled 665 stores through Project Renovate and 711 stores through Project Elevate, and relocated 5 stores. Total merchandise inventories at cost were $6.6 billion as of July 31, 2026, a decrease of 2.7% on an average per-store basis compared to the prior year.

Raised Guidance and Capital Allocation

Dollar General raised its full-year fiscal 2026 outlook, citing first-half performance and an improved second-half view. The company now expects net sales growth in the range of approximately 4.0% to 4.3%, up from prior guidance of 3.7% to 4.2%. Same-store sales growth guidance was raised to approximately 2.5% to 2.9% from a prior range of 2.2% to 2.7%. Full-year diluted EPS guidance was increased to approximately $7.80 to $8.00, compared to prior guidance of $7.20 to $7.45.

The company does not anticipate a material impact from tariff refunds, after related reinvestments, in the second half of fiscal 2026. Capital expenditure guidance was maintained at $1.4 billion to $1.5 billion. The company intends to repurchase up to $700 million in shares in the second half of fiscal 2026, drawing from a remaining buyback authorization of $1.4 billion. The Board of Directors declared a quarterly cash dividend of $0.59 per share, payable on or before October 20, 2026, to shareholders of record on October 6, 2026.

Wall Street View

Analyst consensus as of August 1, 2026 reflects a broadly cautious but not bearish view on the stock, with the majority of coverage holding a Hold-equivalent rating. Shares traded up 2.53% on Thursday, August 27, 2026, while the S&P 500 gained 0.66%.

Investor Takeaway

The Q2 results show that Dollar General's profitability recovery is broadening beyond cost cuts, with gross margin now at its highest level in recent quarters and all four merchandise categories contributing to comparable sales growth. The raised full-year EPS guidance to $7.80 to $8.00 implies a meaningful step-up from the prior range and suggests management sees underlying demand holding even as tariff refund tailwinds are not expected to recur in the second half. Investors will likely focus on whether the traffic and transaction growth trends can sustain without the tariff-refund boost in H2.