By Panos Mourdoukoutas
Shaking off concerns raised by several retailers over a potential shortfall in sales and earnings, Dollar General reported higher revenue and profits for the first quarter of fiscal year 2025. The company attributed the gains in part to higher-income consumers bargain-hunting for essentials at its stores. Meanwhile, the company has continued to implement its “Back to Basics” strategy, which includes measures to mitigate the impact of tariffs. Its shares rallied by double digits on Wall Street.
On June 3, the Goodlettsville, Tennessee-based discount retailer reported net sales of $10.4 billion for the quarter ended May 2, up 5.3 percent from the first quarter of fiscal year 2024. The result beat market estimates by 1.45 percent and exceeded the increase of 4.5 percent recorded a year earlier.
Same-store sales increased by 2.4 percent year over year, up from a 1.2 percent rise a year earlier, reflecting a 2.7 percent increase in average transaction amount and a 0.3 percent decline in customer traffic. Sales grew across all major categories, including consumables, seasonal items, home products, and apparel.
That contrasts with the fourth quarter of the previous fiscal year, when same-store sales were driven primarily by consumables due to trade-in customers.
Earnings per share (EPS) was $1.78, up by 7.9 percent from a year earlier, also beating market estimates by a wide margin.
Meanwhile, the company raised its guidance for the rest of the fiscal year.
Management expressed satisfaction with the strong first-quarter performance, attributing it to the company’s improved execution and enhancements to both associate and customer experience.
“We are pleased with our start to the year, including strong same-store sales and EPS results,” said Todd Vasos, Dollar General’s CEO, in a statement following the release of the first-quarter results.
“Our efforts to improve execution and enhance the associate and customer experience are yielding positive outcomes in both our operational performance and our financial results.”
Management’s efforts to improve execution date back to 2023, when it launched the “Back to Basics” strategy aimed at enhancing operational efficiency, delivering superior customer service, and creating long-term value for its shareholders.
These efforts recently received a tailwind as higher-income consumers began seeking bargains in discount stores. According to Vasos, the company has seen increased purchases from both middle- and higher-income customers.
“We believe these behaviors suggest we are continuing to attract higher-income customers who are looking to maximize value while still shopping for items they want and need,” he said during the company’s earnings call.
“To that end, we saw the highest percentage of trade-in customers we’ve had in the last four years.”
Wall Street joined the Dollar General management in applauding its first-quarter report, sending its shares 14 percent higher as of 12:50 p.m. ET on June 3.
Still, the stock lags the broader market—down 20.26 percent over the past year and 41.36 percent over the past five years—while the S&P 500 Index has gained 13.11 percent and 91.36 percent, respectively, over the same periods.
One explanation for the company’s weak performance on Wall Street is a decline in long-term profitability. Dollar General’s earnings before interest and taxes (EBIT) has dropped from around 8.5 percent in 2021 to around 4.5 percent in 2025.
EBIT is a broadly used measure by the investor analyst community to determine the profitability of a company’s core operations. A declining EBIT indicates that the company’s core operations have become less profitable, making it a less appealing investment.
Meanwhile, the company’s “Back to Basic” strategy has yet to deliver superior returns to capital holders.
According to Gurufocus.com estimates, Dollar General’s return on invested capital, a measure of how well a company generates cash flow relative to the capital it has invested in its business, is currently 5.74 percent. In comparison, its weighted average cost of capital is 6.8 percent.
However, the stock’s year-to-date performance—an increase of more than 47 percent—positions it for a potential tariff-driven shift in the economy.
The company has taken several steps to mitigate the impact of tariffs on its bottom line, such as negotiating cost concessions, shifting manufacturing to other countries where possible, reengineering products, or finding substitute products.
“While the tariff landscape remains dynamic and uncertain, we expect tariffs to result in some price increases as a last resort, though we intend to work to minimize them as much as possible,” Vasos said during the earnings call.
“Looking ahead, we are uniquely well-positioned to serve our customers in a variety of economic environments,” he said.
“We are proud of our progress and are excited about the future of this business as we look to further create sustainable long-term value for our shareholders.”
