Dollar General Stock Wavers After Earnings Beat, Guidance Raise. Here’s Why.

Dollar General raised its fiscal-year outlook, citing ‘outperformance’ in the second quarter. (Spencer Platt/Getty Images)

Dollar General stock wavered Thursday after the discount retailer scored an earnings beat and boosted its outlook—but sounded a warning on tariffs.

Dollar General stock rose 0.5% to $111.76 in afternoon trading, reversing earlier losses but still down from its premarket gains. Peers Dollar Tree and Walmart fell 0.2% and rose 0.1%, respectively.

The company’s second-quarter numbers were impressive. Earnings of $1.86 a share handily topped the $1.58 that analysts had expected. Net sales rose 5.1% to $10.7 billion in the quarter, in line with the FactSet consensus estimate.

Management noted that same-store sales were up 2.8% from a year ago, reflecting a 1.5% increase in customer traffic and a 1.2% increase in average transaction amount.

Dollar General raised its fiscal-year outlook “primarily to reflect its outperformance in the second quarter” as well as management’s higher expectations for the year’s second half.

The outlook takes into consideration “the potential for uncertainty related to consumer behavior,” the company said.

Earnings are expected in the range of $5.80 to $6.30 a share, compared with earlier calls for $5.20 to $5.80. Analysts polled by FactSet were looking for $5.78 a share.

The company now projects net sales growth of 4.3% to 4.8%, up from 3.7% to 4.7%. Same-store sales are expected to grow 2.1% to 2.6%, up from 1.5% to 2.5%.

Dollar General said it expects to open 575 stores in the U.S. and up to 15 in Mexico during the fiscal year. The company also plans to remodel about 4,250 stores and move roughly 45 locations.

Commentary on the earnings call touched on something top of mind for investors—tariffs.

CEO Todd Vasos said Dollar General would be able to ease the “vast majority” of tariff impacts, but acknowledged that prices would increase. In June, Vasos told investors he saw price increases as “a last resort.”

On Thursday, Vasos said the company would try to raise prices as little as possible.

“While the landscape remains dynamic, tariffs have begun to result in some price increases, and we will continue to work to minimize them,” Vasos said. “We remain committed to serving our customers with the everyday low prices they have come to know and appreciate from Dollar General.”

The stock reacted far differently Thursday than it did after the company’s earnings report in June, when it surged by double digits. Shares are up 47% this year.

Barron’s named Dollar General a stock pick in January, arguing that the company’s plan to “coexist” alongside bigger rival Walmart would help it find success.

Write to Mackenzie Tatananni at mackenzie.tatananni@barrons.com