Dollar General Set For Q1: Analyst Sees Trade-In Momentum, Margin Recovery, Strong Price Gaps Over Rivals

BofA Securities analyst Robert F. Ohmes reiterated the Buy rating on Dollar General Corp DG, raising the price forecast from $100 to $115.

On June 3, the company plans to release its financial results for the fiscal 2025 first quarter, which ended May 2.

Ohmes projects Dollar General will report first-quarter adjusted EPS of $1.40, with comparable sales rising 1%.

The analyst points out that real-time sales data showed an acceleration in the quarter, contrasting with the flat trends implied by current estimates and suggesting potential upside for Q1.

Also Read: Dollar General’s Strategy To Tackle Debt And Shrink Could Drive Margin Expansion, Analyst Says

That said, Ohmes anticipates profit gains from reduced shrink will likely be offset in the near term by pressures tied to store remodel activity and labor costs, particularly as many stores still relied on self-checkouts last year and approximately $20 million in expenses related to store closures.

However, Ohmes sees margin performance improving progressively over the year.

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In addition, the analyst sees growing benefits from trade-in programs that will help support comparable sales and cushion fluctuations in spending among core customers.

While Dollar General management acknowledged that trade-in adoption was limited through the end of the third quarter and only began to scale more meaningfully in the fourth, Ohmes sees the trend gaining traction.

Although some may point to stronger comp performance from Walmart as a concern, Dollar General's significant price gaps over competitors, momentum in digital expansion, including first-party offerings and partnerships such as DoorDash, Inc. DASH, as well as ongoing store closures at rivals such as Family Dollar, CVS Health and Walgreens Boots Alliance could serve as supportive tailwinds, the analyst writes.

DG Price Action: Dollar General shares are trading higher by 1.25% to $101.90 at publication on Friday.

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