Guggenheim Raises Dollar General Buy Rating to $125, Reiterates Buy.

Guggenheim Raises Dollar General Buy Rating to $125, Reiterates Buy.

Guggenheim Securities has upgraded its rating on Dollar General (DG) to a "Buy" with a target price of $125, reiterating its bullish stance on the company. The upgrade comes following the release of the retailer's second-quarter earnings report, which showed strong performance across various metrics.

Dollar General reported net sales of $10.7 billion for the second quarter of fiscal 2025, representing a 5.1% year-over-year increase. Same-store sales increased by 2.8%, driven by a 1.5% increase in customer traffic and a 1.2% increase in average basket size. Gross profit margin improved to 31.3%, up 137 basis points year over year, primarily due to a reduction in shrink [1].

The company's operating profit increased to $595 million, an 8.3% year-over-year increase, with a margin of 5.6%. Net interest expense decreased to $57.7 million, down from $68.1 million in the prior year. Diluted EPS (GAAP) was $1.86 per share, up 9.4% year over year [1].

Guggenheim analysts praised Dollar General's ability to maintain its competitive pricing while delivering strong financial results. The company's commitment to keeping more than 2,000 SKUs at a $1 or less price point has been a key driver of its success, particularly among its core customer base. The $1 Value Valley assortment achieved same-store sales growth at more than double the total company rate in the second quarter of fiscal 2025 [1].

Additionally, the company's initiatives in store remodels, such as Project Elevate and Project Renovate, have contributed to first-year annualized comp sales lifts in the range of 3%-8% for completed locations. The delivery partnership expansion with DoorDash and Uber Eats has also been a significant growth driver, with expectations to offer DG delivery for more than 16,000 stores by year's end [1].

Guggenheim expects Dollar General to continue its strong performance, driven by its focus on everyday low prices, broad-based market share gains, and successful shrink and inventory management. The company's fiscal 2025 guidance was raised, with net sales growth of 4.3%-4.8% expected for the year, same-store sales growth of 2.1%-2.6%, and diluted EPS (GAAP) of $5.08-$6.30 [1].

References:
[1] https://www.fool.com/earnings/call-transcripts/2025/08/29/dollar-general-dg-q2-2025-earnings-call-transcript/