Dollar General’s Hidden Forte: Why Its Valuation and Tariff Resilience Make It a Buy Ahead of Earnings

The retail sector faces headwinds like never before—soaring tariffs, inflation, and shifting consumer preferences. Yet one discount retailer is standing firm: Dollar General (DG). With only 10% of its inventory exposed to tariffs, a PEG ratio favorably positioned against peers, and a June earnings report on the horizon, DG presents a compelling buy opportunity for investors seeking stability in volatile markets.

10% Tariff Exposure: DG’s Secret Weapon

While many retailers grapple with tariff-induced price hikes, Dollar General’s minimal tariff exposure acts as a shield. According to Citigroup research cited in its Q1 2025 10-Q filing, just 10% of DG’s inventory faces tariff risks, primarily in discretionary goods. The remainder—over 80%—consists of tariff-resistant staples like groceries, paper products, and cleaning supplies. This structural advantage allows DG to avoid the painful pricing strategies plaguing competitors, retaining customer loyalty in a cost-conscious era.

PEG Ratio: Undervalued Amid Retail’s Turbulence

DG’s PEG ratio of 1.81 (as of May 2025) underscores its valuation appeal. This metric, which balances price-to-earnings (P/E) with earnings growth, paints DG as a GARP (Growth at a Reasonable Price) play. While the broader retail sector’s PEG averages 3.45, DG’s ratio is 69% below the Discount Stores industry average and 25% above the Consumer Defensive sector’s average, reflecting its growth potential without overvaluation.

Earnings Momentum: Outperforming a Sluggish Sector

Despite Zacks’ neutral rank for the Discount Stores industry (ranked 150–155, bottom 38–40% of all sectors), DG’s fundamentals shine. Analysts project a 10.9% EPS growth in Q2, driven by resilient same-store sales and operational efficiency. Notably, DG’s Q1 performance beat expectations, with earnings growth outpacing peers like Kohl’s and Macy’s, which saw same-store sales declines.

Why Zacks’ Neutral Rank Is Misleading

Zacks’ industry-neutral stance overlooks DG’s unique competitive moats:
- Geographic Dominance: Over 18,000 stores in rural and underserved areas, where inflation hits hardest.
- Cost Discipline: A streamlined supply chain and focus on high-margin staples.
- Earnings Resilience: Even in a high-tariff environment, DG’s core business remains insulated.

Investors should prioritize DG’s fundamentals over rankings. The stock’s Forward P/E of 15.63—well below the industry’s 22.03—supports this thesis.

Buy Now, Ahead of June’s Earnings Surge

With DG’s June 3 earnings report looming, now is the time to position for upside. Analysts anticipate a 3.8% same-store sales increase, a figure that could surprise to the upside given DG’s track record. Historically, DG’s stock has surged post-earnings when guidance aligns with its defensive strengths.

Conclusion: DG’s Discounted Valuation + Tariff Shield = Strategic Buy

Dollar General is a rare gem in today’s retail landscape: a company with minimal tariff exposure, a PEG ratio favorably positioned against peers, and a proven earnings engine. Even with Zacks’ neutral outlook, DG’s valuation and structural advantages make it a must-buy for investors seeking stability and growth.

Act now—before the June earnings report sends this undervalued stock soaring.