Dollar General (DG) Q2: Margin Compression to 2.9% Reinforces Bearish Profitability Narrative

Dollar General (DG) just posted Q2 2026 results with revenue of about $10.7 billion, basic EPS of $1.87, and net income of roughly $411 million, setting a clear snapshot of its latest quarter. The company has seen quarterly revenue move from about $10.2 billion in Q2 2025 to $10.7 billion in Q2 2026, while basic EPS stepped up from $1.70 to $1.87 over the same period. This gives investors a cleaner view of how the top and bottom lines are tracking heading into the back half of the year as margins remain a key watchpoint.

See our full analysis for Dollar General.

With the headline numbers on the table, the next step is to see how this earnings print lines up against the dominant narratives around Dollar General, and where the data might be starting to challenge them.

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Same-store sales creep up to 2.8 percent

• Comparable sales growth improved from 0.5 percent in Q2 2025 to 2.8 percent in Q2 2026, alongside quarterly revenue rising from about 10.2 billion dollars to roughly 10.7 billion dollars over the same period.
• Analysts' consensus view expects steady store productivity gains, and the recent lift in same store sales aligns with that by:
  • Pointing to value focused shopping behavior that has supported same store sales growth between 2.4 percent and 2.8 percent in the last two quarters.
  • Fitting with the narrative that remodels and expanded private label offerings can help sustain revenue growth even when overall revenue is only forecast to grow about 4 percent per year.

Margins under pressure at 2.9 percent

• Trailing net profit margin sits at 2.9 percent versus 3.6 percent a year earlier, while trailing twelve month net income is about 1.2 billion dollars on 41.7 billion dollars of revenue.
• Bears argue rising costs and heavy rural exposure threaten profitability, and the margin trend gives that view some support because:
  • The five year earnings trend shows reported earnings declining about 15.6 percent per year, which lines up with concerns about cost pressures and competitive intensity from other discount retailers.
  • Management is still dealing with increasing labor and other operating costs, which matches the narrative that higher wages and expenses can weigh on margins if productivity gains do not keep pace.

Skeptics warn that a 2.9 percent margin leaves little room for error if costs stay high or sales soften further. 🐻 Dollar General Bear Case

Premium 23.2x P/E with DCF upside

• The stock trades on a price to earnings multiple of 23.2 times, above the US consumer retailing industry at 20.7 times and peers at 19.7 times, yet sits below a DCF fair value of about 161.11 dollars per share with the current price at 125.29 dollars.
• Supportive investors highlight a rewards mix of growth and income, and the numbers partly back that bullish stance through:
  • Forecast earnings growth of about 10.6 percent per year, which is faster than the roughly 4 percent forecast for revenue and offers scope for earnings to grow ahead of sales if margins stabilize.
  • A 1.88 percent dividend yield combined with the DCF fair value pointing to potential upside from 125.29 dollars, even though the higher than peer P E shows the market already prices in some optimism.

Bulls argue that double digit earnings growth plus a dividend can justify the premium P E if margins move back toward past levels. 🐂 Dollar General Bull Case

Next Steps

To see how these results tie into long-term growth, risks, and valuation, check out the full range of community narratives for Dollar General on Simply Wall St. Add the company to your watchlist or portfolio so you'll be alerted when the story evolves.

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A great starting point for your Dollar General research is our analysis highlighting 3 key rewards and 1 important warning sign that could impact your investment decision.

See What Else Is Out There

Dollar General's compressed margins, slower revenue growth, and premium valuation suggest limited room for error if costs rise further or sales momentum fades.

If those pressures make you uneasy, use our stable growth stocks screener (2081 results) to quickly focus on businesses delivering steadier revenue and earnings trends that could offer more predictable compounding.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.