What impacted DG's gross profit in Q3 2025?

Dollar General's (DG) gross profit in Q3 2025 was impacted by several key factors:

1. **Increased Expenses**: Gross margin decreased due to higher expenses, which squeezed profit margins and, consequently, gross profit. The company's gross margin fell from 31.1% to 30% in Q3 2024, primarily due to increased markdowns and inventory damages, and selling, general, and administrative expenses rose from 24% to 24.6%.
2. **Hurricane-Related Costs**: DG incurred $32.7 million in hurricane-related expenses from Hurricanes Helene and Milton, which had a significant negative impact on earnings. Additionally, Q4 is expected to incur $10 million in hurricane-related costs, affecting DG's FY25 EPS guidance.
3. **Competitive Pricing Pressure**: DG faced intense competition from larger retailers like Walmart, which intensified the promotional retail environment, putting pressure on DG's gross margin. Gross margin declined by 120 basis points to 28.8%.
4. **Strategic Initiatives**: DG's strategy to remodel stores and expand its real estate footprint is a double-edged sword. While it drives long-term growth, it comes at a cost, which can temporarily strain gross profit. DG plans to remodel about 2,000 stores in FY26 and 2,250 stores through Project Elevate, a significant investment in enhancing its store portfolio.

In summary, DG's gross profit in Q3 2025 was impacted by increased expenses, hurricane-related costs, competitive pricing pressure, and strategic initiatives. These factors combined to squeeze profit margins and, consequently, gross profit.