Dollar General reported adjusted earnings per share of $2.48 for the second quarter of fiscal 2026, exceeding Wall Street estimates by 24% and rising 33% year-over-year. Revenue totaled $11.3 billion, up 0.2% from the prior-year period and surpassing the $11.19 billion consensus by $110 million. Same-store sales increased 3.5%, marking the fifth consecutive quarter of positive comps across all four merchandising categories.
Gross margin expanded 127 basis points to 32.6%, driven by lower shrink, reduced distribution costs, and a lower LIFO provision, partially offset by higher markdowns and transportation expenses. Operating profit rose 29.2% to $769 million, with operating margin up 126 basis points to 6.8%. Net interest expense declined to $42.9 million from $57.7 million a year earlier, while the effective tax rate increased to 24.2%.
Customer traffic grew 2.0% for the fifth straight quarter, and average basket size rose 1.5%. Merchandise inventory stood at $6.6 billion at quarter-end, essentially flat year-over-year on a total basis but down 2.7% per store. Cash flow from operations reached $1.5 billion year-to-date through Q2, and return on equity over the last twelve months was 19%.
The board approved a quarterly dividend of $0.59 per share, yielding 3.84%. Dollar General also announced plans to resume share repurchases in Q3, targeting up to $700 million in buybacks during the second half of the fiscal year, funded with existing cash.
Full-year guidance calls for net sales growth of 4.0% to 4.3%, same-store sales growth of 2.5% to 2.9%, and diluted EPS of $7.80 to $8.00. The outlook includes an estimated $0.25 benefit from Q2 tariff refunds after reinvestments and assumes an effective tax rate of approximately 24.5%.
CEO Todd Vasos highlighted balanced top-line growth, margin expansion, and double-digit EPS growth, noting continued customer traffic gains despite a challenging retail environment. CFO Donny Lau emphasized the strength in gross margin performance even before tariff refund benefits and confirmed the buyback restart in Q3.
Shares rose 6.51% in premarket trading to $130.77, extending gains from the prior close of $122.78. The stock remains 17% below its 52-week high of $158.23 and 37% above its low of $95.11.
