Dollar General (NYSE:DG) reported what executives described as results “well ahead” of expectations for both the fourth quarter and fiscal year 2025, driven by continued same-store sales growth, market share gains, and profit improvement tied to shrink reduction and expense leverage.
Fourth-quarter sales growth led by traffic, value offerings, and non-consumables
Net sales increased 5.9% to $10.9 billion in the fourth quarter, up from $10.3 billion a year earlier. Same-store sales rose 4.3%, supported by growth in both customer traffic and average basket size. Management said average basket growth reflected higher average unit retail prices, partially offset by a lower average number of items per basket.
For the fourth consecutive quarter, Dollar General posted positive comparable sales across consumables, seasonal, home, and apparel. Executives highlighted that combined non-consumable categories again outpaced consumables, extending a trend the company has referenced throughout 2025.
Vasos emphasized that value remains central for shoppers across income brackets. The company reiterated its pricing goal of staying within 3 to 4 percentage points of mass retailers and pointed to its assortment of more than 2,000 items at or below $1. The company’s “Value Valley” assortment—more than 500 rotating items priced at $1—delivered a 17.6% comparable sales increase in the quarter, outperforming the chain average. Vasos also said $1 seasonal items posted the highest sell-through rates in seasonal for the quarter.
Margin expansion driven by shrink improvement and lower charges
CFO Donny Lau said fourth-quarter gross margin was 30.4%, up 105 basis points year over year. The increase was attributed primarily to shrink reduction, higher inventory markups, and lower inventory damages, partially offset by a higher LIFO provision.
Management said shrink improvement remained a major contributor. In the fourth quarter, the company delivered a 62 basis point improvement in shrink versus the prior year, even while lapping a 68 basis point improvement in the prior-year quarter. For fiscal 2025, the company said gross margin expanded 107 basis points, driven by an 80 basis point reduction in shrink.
SG&A as a percentage of sales was 24.9% in the quarter, down 165 basis points. Lau said the decrease was primarily driven by impairment charges that were lower versus the prior-year period due to a store portfolio optimization review completed in 2024, as well as retail salary leverage, partially offset by higher incentive compensation.
Operating profit rose 106% to $606 million, and operating margin increased 270 basis points to 5.6%. Lau noted that fourth-quarter 2024 operating profit included an approximately $232 million negative impact tied to impairment charges.
Diluted EPS increased 122% to $0.93. Lau said the prior-year quarter included an approximately $0.81 per share negative impact from the same impairment charges.
Inventory reduction, debt redemption, and dividend highlighted in cash flow discussion
Dollar General ended the quarter with merchandise inventories of $6.3 billion, down $379 million, or 5.7%, versus the prior year. Lau said inventory declined 7% on an average per-store basis, while the company continued to improve in-stock levels.
Operating cash flow for 2025 increased 21.3% to $3.6 billion. The company redeemed $550 million of senior notes during the fourth quarter, bringing total senior note redemptions in 2025 to $1.7 billion. Dollar General also paid a quarterly dividend of $0.59 per share (about $130 million in total).
Lau said the company’s capital allocation priorities were unchanged, emphasizing reinvestment in the business (including new store expansion and remodels), dividends, and share repurchases “when appropriate,” while targeting adjusted debt to adjusted EBITDAR below three times to support middle BBB credit ratings.
Fiscal 2026 guidance includes tax headwind and modest SG&A deleverage
For fiscal 2026, management guided to:
- Net sales growth: 3.7% to 4.2%
- Same-store sales growth: 2.2% to 2.7%
- EPS: $7.10 to $7.35
- Capital spending: $1.4 billion to $1.5 billion
The EPS outlook assumes an effective tax rate of about 25% and includes a headwind tied to the expiration of the Work Opportunity Tax Credit on Dec. 31, 2025. Lau said the expiration represents an estimated 150 basis point impact and about a $0.13 reduction to EPS. He added that Congress has extended the program three times in the past decade and that prior extensions included a “full catch-up provision,” though he cautioned there are no guarantees.
Lau said early 2026 sales were negatively affected by severe winter storms in the first two weeks of February, including temporary store closures, but management was “pleased with the solid rebound” that followed. The company expects first-quarter comparable sales in the low-2% range.
On profitability, the company expects further gross margin expansion in 2026, but “to a much lesser extent” than in 2025 as it laps prior-year gains. Management said modest improvements are expected from shrink and damages, along with contributions from initiatives including DG Media Network, non-consumables, supply chain productivity, and category management. The company also expects modest SG&A deleverage as investments continue in areas such as remodels and IT modernization.
Strategy update: new store format, remodels, delivery expansion, and media network growth
Vasos outlined four strategic growth pillars: enhancing the customer experience, elevating the brand, driving enterprise-wide efficiencies, and extending the company’s reach.
To enhance the customer experience, Dollar General is introducing a new store format designed to be “more open and inviting,” which the company tested in a portion of 2025 remodels. Vasos said the format generated incremental sales lift and outperformed traditional remodels. The company also plans to expand discretionary and non-consumable offerings, including the launch of at least 15 new brands in 2026. Management reiterated a goal to raise non-consumables penetration to as high as 20% by 2029.
On digital and omnichannel, Vasos said the DG app has more than 7 million monthly active users and the company has more than 100 million marketable customer profiles. The company is delivering through approximately 18,000 stores via its myDG delivery offering and third-party partners DoorDash and Uber Eats, with more than 80% of delivery orders arriving in one hour or less. Management estimated delivery contributed about 80 basis points to fourth-quarter comparable sales.
The DG Media Network generated approximately $170 million in retail media volume in 2025, which management said is highly accretive to gross margin. Executives discussed initiatives to expand on-site and in-store advertising capabilities, including improved search, sponsored products, and an in-store audio program, as well as expanded off-site placements across social, connected TV, and video.
As part of “elevating the brand,” management reaffirmed remodel targets of 2,000 Project Renovate remodels and 2,250 Project Elevate remodels. The company targets an annualized comp lift of approximately 6% in Project Renovate stores and about 3% in Project Elevate stores. Executives also said these efforts supported a reduction of more than 375 basis points in store manager turnover in 2025.
On efficiencies, leadership highlighted supply chain productivity efforts, including leveraging its private truck fleet for about half of outbound transportation needs, which Vasos said represents about 20% savings versus third-party providers. The company also discussed inventory optimization, SKU rationalization, and the development of an enterprise AI operating system aimed at improving productivity and lowering SG&A per unit of work over time.
For extending reach, Dollar General opened 581 new U.S. stores in 2025 and plans to open 450 in 2026. The company also expects to open about 10 additional Mi Súper Dollar General stores in Mexico in 2026, after ending 2025 with 16 locations.
During Q&A, Lau said the company’s long-term framework contemplates resuming share repurchases in 2027, while adding that the company expects continued optimization opportunities in inventory and continued accounts payable leverage, though “not to the extent” seen in 2025.
About Dollar General (NYSE:DG)
Dollar General Corporation is a U.S.-based variety and discount retailer operating a large network of small-format stores that serve primarily rural and suburban communities. The company is publicly traded on the New York Stock Exchange under the ticker DG and is headquartered in the Nashville/Goodlettsville, Tennessee area. Founded in 1939, Dollar General has grown from a regional operation into one of the nation’s prominent low-price retailers focused on convenience and value.
Dollar General’s stores offer a wide assortment of everyday consumables and household goods, including food and beverage items, cleaning supplies, health and beauty products, paper goods, apparel basics, seasonal merchandise and small household items.
