Discount retailer Dollar General (NYSE: DG) met Wall Streets revenue expectations in Q3 CY2025, with sales up 4.6% year on year to $10.65 billion. Its GAAP profit of $1.28 per share was 37.6% above analysts’ consensus estimates.
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Dollar General (DG) Q3 CY2025 Highlights:
- Revenue: $10.65 billion vs analyst estimates of $10.62 billion (4.6% year-on-year growth, in line)
- EPS (GAAP): $1.28 vs analyst estimates of $0.93 (37.6% beat)
- Adjusted EBITDA: $765.5 million vs analyst estimates of $598 million (7.2% margin, 28% beat)
- EPS (GAAP) guidance for the full year is $6.40 at the midpoint, beating analyst estimates by 4.5%
- Operating Margin: 4%, in line with the same quarter last year
- Free Cash Flow Margin: 6.5%, up from 2% in the same quarter last year
- Locations: 20,901 at quarter end, up from 20,523 in the same quarter last year
- Same-Store Sales rose 2.5% year on year (1.3% in the same quarter last year)
- Market Capitalization: $24.19 billion
Company Overview
Appealing to the budget-conscious consumer, Dollar General (NYSE: DG) is a discount retailer that sells a wide range of household essentials, groceries, apparel/beauty products, and seasonal merchandise.
Revenue Growth
A company’s long-term sales performance is one signal of its overall quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years.
With $42.12 billion in revenue over the past 12 months, Dollar General is larger than most consumer retail companies and benefits from economies of scale, enabling it to gain more leverage on its fixed costs than smaller competitors. This also gives it the flexibility to offer lower prices. However, its scale is a double-edged sword because there is only so much real estate to build new stores, placing a ceiling on its growth. To accelerate sales, Dollar General likely needs to optimize its pricing or lean into international expansion.
As you can see below, Dollar General grew its sales at a tepid 5.1% compounded annual growth rate over the last three years (we compare to 2019 to normalize for COVID-19 impacts) as it barely increased sales at existing, established locations.
This quarter, Dollar General grew its revenue by 4.6% year on year, and its $10.65 billion of revenue was in line with Wall Street’s estimates.
Looking ahead, sell-side analysts expect revenue to grow 4% over the next 12 months, similar to its three-year rate. We still think its growth trajectory is satisfactory given its scale and implies the market is baking in success for its products.
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Store Performance
Number of Stores
A retailer’s store count influences how much it can sell and how quickly revenue can grow.
Dollar General sported 20,901 locations in the latest quarter. Over the last two years, it has opened new stores quickly, averaging 3.3% annual growth. This was faster than the broader consumer retail sector.
When a retailer opens new stores, it usually means it’s investing for growth because demand is greater than supply, especially in areas where consumers may not have a store within reasonable driving distance.
Same-Store Sales
The change in a company's store base only tells one side of the story. The other is the performance of its existing locations and e-commerce sales, which informs management teams whether they should expand or downsize their physical footprints. Same-store sales is an industry measure of whether revenue is growing at those existing stores and is driven by customer visits (often called traffic) and the average spending per customer (ticket).
Dollar General’s demand within its existing locations has been relatively stable over the last two years but was below most retailers. On average, the company’s same-store sales have grown by 1.7% per year. This performance suggests it should consider improving its foot traffic and efficiency before expanding its store base.
In the latest quarter, Dollar General’s same-store sales rose 2.5% year on year. This performance was more or less in line with its historical levels.
Key Takeaways from Dollar General’s Q3 Results
It was good to see Dollar General beat analysts’ EPS expectations this quarter. We were also excited its EBITDA outperformed Wall Street’s estimates by a wide margin. Zooming out, we think this quarter featured some important positives. The stock traded up 3.2% to $113.40 immediately after reporting.
Dollar General may have had a good quarter, but does that mean you should invest right now? We think that the latest quarter is only one piece of the longer-term business quality puzzle. Quality, when combined with valuation, can help determine if the stock is a buy. We cover that in our actionable full research report which you can read here, it’s free for active Edge members.
