Highlights

  • Dollar General shows 42.58% basic EPS growth, a P/E of 17.23 and PEG of -3.91.
  • Second quarter net income was $550.3 million, against $411.4 million.
  • Net sales were $11.29 billion, up 5.2%, with same-store sales up 3.5%.
  • Management raised 2026 EPS guidance to $7.80 to $8 on its second quarter call.

Growth, P/E and PEG sit side by side at Dollar General (NYSE:DG), an undervalued growth stock: basic earnings per share grew 42.58% over one year, the trailing twelve-month P/E ratio is 17.23 and the PEG ratio, on an expected basis, is -3.91, with shares trading at USD 126.34 on October 28, 2026, down 0.41%. Alongside those figures, the discount retailer opened 126 new stores in the second quarter, reported second quarter 2026 net income of $550.3 million and declared a quarterly dividend of $0.59 per share in August.

Dollar General is based in Goodlettsville, Tennessee, and incorporated in Tennessee. It describes itself as the largest discount retailer in the United States by number of stores, with 21,148 stores in 48 states and Mexico at July 31, 2026. The company sells consumables such as food, paper and cleaning products, health and beauty products and pet supplies, along with seasonal merchandise, home decor and basic apparel, and operates 179 standalone pOpshelf stores. It reports one operating segment.

Growth: Second Quarter Net Income, Sales and Gross Profit

Net income was $550.3 million in the second quarter of 2026 against $411.4 million a year earlier, up 33.8%, and $994.4 million for the 26 weeks against $803.4 million, up 23.8%. Basic earnings per share were $2.49 against $1.87, and diluted earnings per share were $2.48 against $1.86.

Net sales increased 5.2% to $11.29 billion, which the company attributed primarily to a same-store sales increase of 3.5% and sales from new stores. Same-store sales reflected a 2.0% increase in customer traffic and a 1.5% increase in average transaction amount. Gross profit increased 9.5%, and the gross profit rate was 32.6%, up 127 basis points. The company said the rate increase was primarily due to tariff refunds, a lower LIFO provision and lower distribution costs, partly offset by increased markdowns and transportation costs. SG&A was 25.8% of net sales in both periods.

Valuation: P/E of 17.23, PEG of -3.91 and Cash Generation

The P/E ratio of 17.23 is measured on trailing twelve-month earnings, and the PEG ratio of -3.91 on expected growth. Total shareholders' equity was $9,288,648 thousand at July 31, 2026, against $8,511,962 thousand at January 30, 2026. Cash flows from operating activities were $1.5 billion for the 26 weeks.

On the second quarter call, management said the planned second half share repurchases reflect its cash and liquidity position, its progress toward long-term financial framework targets and its confidence in the future of the business.

Capital and Balance Sheet: Liquidity, Dividends and Repurchases

Cash and cash equivalents were $1,589,590 thousand at July 31, 2026. The company had no outstanding borrowings under its $2.375 billion Revolving Facility and no commercial paper notes outstanding. Long-term obligations were $4,558,145 thousand. Capital expenditures for 2026 are projected at approximately $1.4 billion to $1.5 billion.

About $1.38 billion remained under the repurchase authorization, which has no expiration date. The company has not repurchased under the program since 2022 and expects to resume repurchases in the second half of 2026. Management said on the call that it plans to repurchase up to $700 million in the second half, funded with cash on hand. The August dividend of $0.59 per share is payable on or before October 20, 2026.

Disclosed Risks and Outlook

Shareholder securities class actions in the Middle District of Tennessee allege misrepresentations about store labor, inventory and pricing practices, with a putative class period of May 28, 2020 to August 28, 2024. The company stated it cannot estimate the value of the claims or a range of loss, and that an unsuccessful defense could have a material adverse effect, while expecting pending legal matters overall to be resolved without one.

The company disclosed that tariff rates did not materially affect second quarter results but that uncertainty remains, that it incurred significantly higher fuel costs and expects this to continue for an uncertain duration, and that inventory damages remain elevated. It also said its customers continue to feel constrained by elevated household expenses.

For fiscal 2026, management raised its outlook on the call to net sales growth of 4% to 4.3%, from 3.7% to 4.2%, same-store sales growth of 2.5% to 2.9%, from 2.2% to 2.7%, and EPS of $7.80 to $8, from $7.20 to $7.45. The EPS range includes an approximate $0.25 second quarter benefit from tariff refunds after related reinvestments and assumes an effective tax rate of approximately 24.5%. Management expects modest SG&A deleverage and gross margin expansion in the second half.