Dollar General Beats Estimates by 36% as Dollar Tree Stumbles

Core Insights - Dollar General and Dollar Tree reported contrasting Q3 results, with Dollar General outperforming expectations while Dollar Tree fell short despite higher revenue growth [3][4][6]. Financial Performance - Dollar General reported Q3 earnings of $1.28 per share, exceeding estimates by 36%, with revenue of $10.65 billion slightly above the consensus of $10.60 billion, reflecting a 4.6% year-over-year growth [4][10]. - Dollar Tree's revenue of $4.75 billion missed the $4.79 billion estimate, despite a stronger year-over-year growth of 9.4%, and adjusted earnings of $1.21 per share beat estimates but showed a decline in operating margin [6][10]. Margin Analysis - Dollar General's gross margin increased by 110 basis points to 29.9%, while its operating income rose by 31.5% to $425.9 million [4][10]. - Dollar Tree's gross margin expanded by only 40 basis points to 35.8%, and its operating margin decreased by 40 basis points to 7.2%, indicating challenges in maintaining profitability despite revenue growth [6][8]. Strategic Initiatives - Dollar General plans to undertake 4,885 real estate projects for fiscal 2026 and is focusing on dividend payments over share buybacks, indicating a commitment to growth and shareholder returns [5][11]. - Dollar Tree has invested $1.5 billion in share buybacks year-to-date under its $2.5 billion program, reflecting management confidence but also suggesting limited organic growth opportunities [11]. Sales Performance - Same-store sales for Dollar General rose by 2.5%, while Dollar Tree outperformed with a 4.2% increase, highlighting differing customer engagement strategies [5][6][8].