Freedom analysts have raised the target price for Dollar General Corp. (DG) to $140 from $95 and maintained a Hold rating following the release of the Q1 FY2026 Performance Report.
Dollar General is one of the largest discount retail chains in the U.S., focusing on selling everyday essentials, seasonal products, home goods, and other necessities at affordable prices through small-format stores.
According to experts, the report confirmed the first signs of a recovery in business profitability, despite moderate sales growth. For the quarter, the company's net revenue increased by 3.4% YoY to $10.8 billion. This figure was slightly below market expectations. At the same time, earnings per share (EPS) increased by 12.4% to $2.00, exceeding the consensus forecast of $1.90. Operating profit increased by 10.8% to $638.5 million, and the operating margin widened by 40 basis points to 5.9%.
Freedom Broker noted that improved margins, reduced shrinkage, and more efficient inventory management contributed to the increase in profitability. Gross margin increased to 31.6% from 30.95% a year earlier.
All key product categories of the company demonstrated positive comparable sales dynamics. Comparable sales grew by 2%, and customer traffic increased by 1.4%. Analysts consider it important that discretionary goods (non-essential items) grew faster than staples, as this supports further margin recovery.
Digital channels provided additional support to the results. The delivery service added about 70 basis points to the growth of comparable sales. Delivery is now available at approximately 18,000 stores in the chain.
The company's management raised its diluted EPS forecast for fiscal year 2026 to a range of $7.20–$7.45, up from the previous $7.10–$7.35. Net sales growth forecast was maintained at 3.7–4.2%, and comparable sales growth at 2.2–2.7%.
Freedom Broker believes that the report exceeded expectations primarily due to margin improvement, not accelerated demand. According to analysts, Dollar General’s investment case increasingly depends on the company’s ability to maintain customer traffic, improve product mix, and convert operational improvements into sustainable profit growth.
Not an individual investment recommendation.