- Strong Sales & Profit Growth: Net sales rose 4.6% to $10.6B, operating profit up 31.5% to $425.9M, EPS increased 43.8% to $1.28.
- Gross Margin Expansion: 107 bps margin expansion to 29.9% driven by lower shrink and inventory markups, despite 79 bps LIFO headwind.
- Inventory & Cash Flow Efficiency: Inventory reduced 6.5% YoY, $2.8B cash flow from operations YTD, supporting $516M in dividends.
- Expansion Plans: 4,885 real estate projects in 2025 (575 US new stores), 4,730 in 2026, with 80% stores in small towns forming a competitive moat.
- Digital Growth: 17,000+ stores with DoorDash/Uber Eats delivery, 75% of orders <1 hour, and DG Media Network driving double-digit retail media volume growth.
Operational Highlights
The company generated $2.8 billion in cash flow from operations year-to-date and reduced inventory by 6.5% compared to the prior year. Dollar General plans to execute approximately 4,885 real estate projects in 2025, including 575 new store openings in the US and 15 in Mexico. For 2026, the company plans to execute around 4,730 real estate projects, including 450 new store openings in the US and 10 in Mexico. The company's digital initiative, including its mobile app and website, has been popular with customers, and its delivery capabilities have expanded through partnerships with DoorDash and Uber Eats.
Gross Margin Expansion
The company delivered 107 basis points of gross margin expansion in Q3, despite a 79 basis point headwind from LIFO. The team expects another quarter of gross margin expansion in Q4, driven by continued improvement in shrink, growth in private label and non-consumables, and supply chain efficiencies. As the CFO mentioned, the company feels good about its long-term gross margin opportunities, with confidence in delivering on its long-term model.
Valuation Metrics
With a P/E Ratio of 22.81 and an EV/EBITDA of 15.2, the market is pricing in a certain level of growth. The company's ROE of 16.31% and ROIC of 5.62% indicate a strong ability to generate returns. The current valuation metrics suggest that the market is expecting continued growth and profitability from Dollar General.
Growth Prospects
The company is confident in its long-term financial framework and is focused on delivering profitable sales growth, high returns on invested capital, and long-term shareholder value. With 11,000 opportunities to put a Dollar General store in the Continental United States, the company feels bullish about getting a lot of these. Analysts estimate next year's revenue growth at 4.9%, indicating a continued upward trajectory.
Competitive Advantage
Dollar General's rural landscape and rent provide a competitive moat, making it difficult for competitors to replicate. The company believes it can compete effectively against Amazon and Walmart Plus, with a strong value proposition in rural America. With a unique offering in rural areas, the company's digital capabilities enable delivery to customers within an hour.