DOLLAR GENERAL CORP (DG): what the price assumes

boothcheck covers DOLLAR GENERAL CORP (DG) but does not put one priced-in number on it: here the defensible answer is the evidence rather than a point estimate. boothcheck publishes no house fair value, target price, or buy/sell rating. Narrative composed 2026-07-25.

Generated: 2026-08-30 · Source: https://boothcheck.com/report/DG

Headline

What The Price Assumes (Inversion)

The assumption today's price embeds, recovered by inverting the valuation.

The price sits below what even a 5%/yr operating-profit decline would warrant; the inversion reports a bound, not a solved growth path.

Solve inputs: computed at a 6% cost of capital with 4% terminal growth over a 5-year stage (computed at the 6% minimum rate; the CAPM rate 5.7% sits below it).

How unusual the bet is: within-range (limited comparison data)

Valuation X-Ray

The price is justified by relative-multiple and growth-DCF; earnings-power land below the price.

How the valuation models price the stock relative to the market price. Price/FV above 1.0 means the market pays more than that lens defends (expensive); at or below 1.0 the lens can defend the price.

Families that justify the price: Relative, Growth Families that call it expensive: Earnings

The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 7.2%); the inversion above states its own rate.

Per-Model Detail (n=18)

Economic-Unit Decomposition (Sum Of The Parts)

Only one reportable economic unit is present in the current topology source. Consolidated operating lenses remain available, but there is no multi-unit decomposition.

No total common-equity value is stated. One or more material units lack a supported unit value. The displayed values are an indicative subtotal; consolidated debt and cash cannot be applied to a fraction of the company.

Solvency

Interest expense is not separately reported in the latest filings, so interest coverage cannot be computed.

Bullet Takeaways

• Four fifths of everything rung up is consumables, the lowest-margin category on the shelf, and the filing is blunt that such sales "tend to have lower gross margins" while driving the traffic the rest of the store depends on.
• Gross margin rose 107 basis points to 30.7% of net sales in the year to January 2026, mostly on lower shrink, which is the clearest single piece of evidence that the operational repair is working.
• Second-quarter results are due August 27, 2026, and same-store sales is the line that decides things: it ran 3.0% last year, and the company has posted positive comparable growth in every year since 1990 bar one.

Bull Case

For a retailer that leases nearly everything it trades out of, the balance sheet is mostly a lease schedule, and that is the right place to start. Funded borrowings come to about $4.58 billion gross, or roughly $3.22 billion after the cash on hand. Bring the stores themselves into the count and the shape changes: on a lease-inclusive basis total obligations run nearer $16.56 billion. The 10-K puts a term on them, a weighted-average 9.1 years remaining at a weighted-average discount rate of 4.6%, and notes that "Many of our stores typically carry a primary lease term of up to 15 years with multiple renewal options." The renewal options are the point. A lease that reaches term is a cost that can be shrunk; owned real estate is a decision you live with.

That flexibility bought time, and the time has been used. In the year to January 2026 gross profit rose 9.0% and gross margin gained 107 basis points to 30.7% of net sales, driven mainly by lower shrink. Shrink is the trade's word for inventory that leaves the store without being paid for, and pushing it down is unglamorous work that lands straight in profit. Net sales grew 5.2% over the same year on same-store sales of 3.0%.

The store estate is being worked over rather than simply extended. During 2025 the company opened 589 stores, remodelled 2,000 through one programme and 2,254 through another, relocated 47 and closed 290. Across three years the base grew by 1,789 stores, roughly 9%, while 8,143 locations, about 43% of the estate, were remodelled or relocated. The 2026 plan calls for around 450 new United States stores against roughly 4,270 remodels or relocations, funded from capital spending the company puts at $1.4 billion to $1.5 billion. Far more refurbishment than expansion is a company choosing to make the boxes it already has more productive.

The durability underneath all of it is genuinely unusual. The filing records that "We have achieved positive same-store sales growth each year since 1990, with the exception of 2021", a run that spans several recessions and two generations of competitors. The mix is why. Four fifths of sales are consumables, and management is explicit that these "tend to have lower gross margins" while serving as "key drivers of net sales and customer traffic". Selling cheap staples to a customer who has to buy them regardless is not a high-margin business. It is a stubbornly repeatable one, and a trailing return on equity near 17.7% says the model still converts.

Bear Case

The competitors that should worry a holder here are the small ones. FIVE grew revenue 25.9% and earns an 11.0% operating margin. OLLI grew 16.7% at 11.4%, on a gross margin of 40.7%. DLTR grew 9.4% at 8.8%. Dollar General grew at a mid single-digit pace and converts roughly 5.2% at the operating line. Every one of those rivals takes more profit out of each dollar of sales, and every one is adding square footage faster. This is not an incumbent being disrupted by technology. It is one being outgrown by people selling a slightly different basket at a better margin.

The mix explains the gap, and the company names it without being asked. Consumables "tend to have lower gross margins" while non-consumables "tend to have higher gross margins" and are "key drivers of more profitable sales growth and average transaction amount." Four fifths of this basket sits in the low-margin half of that sentence. In the first quarter of the current year consumables also grew more slowly than the rest, about 3% against seasonal up 6.0% and apparel up 6.7% off far smaller bases. Shifting the mix takes years of merchandising, and it works against the very traffic that consumables generate.

The obligation the equity actually carries is the store base itself. On a lease-inclusive basis total obligations sit near $16.56 billion, against funded borrowings of about $4.58 billion, and the annual cost is right there in the accounts: operating lease cost of $1.99 billion in 2025 against $1.89 billion in 2024. That is very nearly as much going out in rent each year as the company earns from operating after paying it, with a 9.1-year weighted-average term still to run. Rent does not fall when sales do.

Reinvestment absorbs most of what is left. Capital spending of $1.4 billion to $1.5 billion is planned for 2026 against trailing operating profit near $2.24 billion, so the bulk of the profit is going back into the same estate rather than to owners. The share count has fallen only about 0.9% a year over the past four years, which is the honest measure of how much is genuinely spare after rent, remodels and openings. A retailer operating on a margin this thin has very little distance between a soft quarter and a warning.

The bull deserves the concession that the repair is real, and gross margin up 107 basis points on lower shrink is not a presentational trick. The answer is that this is a recovery inside a business whose ceiling is set by what a consumables basket can earn, and the peer group is already demonstrating what a better mix converts. That is the problem the price has to solve, and no amount of remodelling changes what is in the trolley.

Valuation

Two things are true about this price at once, and they point in opposite directions. Measured against peer multiples, the shares sit well below where those approaches land, and the forward cash-flow routes reach past the price as well. Measured against what the company earns right now with no growth credited at all, the price sits at roughly twice the level the earnings-power methods reach. The asset lens falls in between, with the price about 47% above where the book-value methods come out. That configuration is the ordinary signature of a business the market expects to recover: inexpensive against multiples, expensive against a frozen snapshot of today's profit.

Placement inside the group makes the tension concrete. DLTR earns an 8.8% operating margin on $19.75 billion of revenue growing 9.4%. FIVE earns 11.0% on revenue growing 25.9%, and OLLI 11.4% on revenue growing 16.7%. At the other end, TGT converts 4.5% on $106.4 billion and BJ 3.7% on $22.0 billion. Dollar General's roughly 5.2% operating margin on about $43.1 billion of revenue puts it alongside the second pair on profitability and with neither pair on growth. The multiple the market pays sits in the upper half of that range, which is compensation for the store count and the staple demand rather than for the returns earned on capital.

There is a reading of the price that says decline is already assumed: on a whole-company basis the quote sits below the level that even a 5% annual fall in operating profit would warrant, computed at a 6% cost of capital. That reading rests on a low discount rate and moves a long way when the rate moves, so it belongs in the file as one input rather than as the argument.

What is measurable is the return on capital employed by the owners. Book value stands near $39.91 a share against the $117.20 quote, and trailing return on equity runs about 17.7%. A business earning that on its book, in a category whose demand barely notices a recession, is not cheap at nearly three times book and is not obviously dear either. The real question the multiple asks is whether 17.7% is the through-cycle number or the high point of a recovery from a bad two years.

The obligations set the ceiling on all of it. Funded borrowings stand near $4.58 billion gross and about $3.22 billion after cash. Counted with the store leases, the figure runs closer to $16.56 billion, and the rent behind it, $1.99 billion during 2025, is close to what the company earns from operating once it has been paid. The equity is a claim on that difference, and the difference is narrower than the store count makes it look.

Catalysts

First-quarter results landed on June 2, 2026. Net sales came to $10,787.0 million, up 3.4%, with gross profit of $3,410.5 million; consumables, four fifths of the basket, grew about 3%, while seasonal rose 6.0% and apparel 6.7% off much smaller bases. Second-quarter results are scheduled for August 27, 2026.

The spending plan for the year is already on the record: roughly 450 new stores in the United States, about 10 more in Mexico, and approximately 4,270 remodels or relocations, funded out of capital expenditure the company projects at $1.4 billion to $1.5 billion. Two named remodel programmes carry most of that work. This is where the gross margin recovery either extends or stalls, and the annual result will turn on it more than on the store-opening count.

For holders the dividend runs $2.36 a share, a yield near 2%, with the most recent ex-dividend date on July 7, 2026. Sell-side positioning has been drifting gently the other way, with Evercore ISI trimming its target in early July while keeping the stock in coverage. Repurchases have been light, taking the share count down about 0.9% a year across four years, so the income and the store-productivity programme, rather than buybacks, are what this equity currently pays for.

Peer Cohorts (Per Segment, With Filing Citations)

Discount retail (single reportable segment) (reported)

• DLTR (DOLLAR TREE, INC.)
• FY2025 10-K: …operations and financial condition of our continuing operations. Overview We are a leading operator of more than 8,800 retail discount stores, as of February 1, 2025, offering merchandise predominantly at the opening price point of $1.25, with additional offerings at higher price points. Our net sales are derived…
• FY2025 10-K: Consolidated Financial Statements 45 Table of Contents DOLLAR TREE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 1 - Description of Business and Basis of Presentation Description of Business Dollar Tree, Inc. ("we," "our," "us," or "the Company") is a leading operator of discount retail stores in the United…
• FIVE (Five Below, Inc.)
• FY2025 10-K: …2024, fiscal 2023 and fiscal 2022, the Company made matching contributions of $ 6.1 million, $ 5.1 million and $ 5.0 million, respectively. (11) Segment Reporting The Company has one reportable and operating segment, which derives revenue from sales of the Company's merchandise to customers at our 1,771 brick &…
• FY2025 10-K: …and administrative expenses (including depreciation and amortization) and operating income. Net Sales Net sales constitute gross sales net of merchandise returns for damaged or defective goods. Net sales consist of sales from comparable stores, non-comparable stores, and e-commerce, which includes shipping and…
• OLLI (Ollie’s Bargain Outlet Holdings, Inc.)
• FY2025 10-K: …it relates. 55 Index Estimation of store shrink As discussed in Note 1(h) to the consolidated financial statements, inventories are valued at the lower of cost or market determined using the retail inventory method on a first-in, first-out basis. The retail inventory method is based on a number of factors such as…
• FY2025 10-K: …discounts on future purchases. The Company has determined it has an additional performance obligation to Ollie's Army members at the time of the initial transaction. The Company allocates the transaction price to the initial transaction and the discount awards based upon its relative standalone selling price, which…
• TGT (TARGET CORPORATION)
• FY2025 10-K: …and Analysis of Financial Condition for 2023, as compared to 2022, is included in Part II, Item 7, MD&A to our Annual Report on Form 10-K for the year ended February 3, 2024 . Net Sales Net Sales includes Merchandise Sales and revenues from other sources, most notably advertising revenue and credit card…
• FY2025 10-K: …1, 2025, and February 3, 2024, we included book overdrafts of $ 157 million and $ 173 million, respectively, in Accounts Payable and $ 8 million and $ 10 million, respectively, in Accrued and Other Current Liabilities. 8. Inventory The vast majority of our inventory is accounted for under the retail inventory…
• BJ (BJ’S WHOLESALE CLUB HOLDINGS, INC.)
• FY2025 10-K: 1 South Carolina 1 Segments Our retail operations, which include retail club and other sales procured from our clubs and distribution centers, represent substantially all of our consolidated total revenues, and are our only reportable segment. Substantially all of our identifiable assets are located in the United…
• FY2025 10-K: …estimated impact of returns, was $ 5.4 million in each of fiscal years 2024 and 2023, respectively, and $ 6.1 million in fiscal year 2022. Actual sales returns were $ 221.7 million, $ 220.7 million, and $ 228.9 million in fiscal years 2024, 2023 and 2022, respectively. Customer Discounts Discounts given to customers…

Methodology Note

• Priced-in inversion: the valuation is inverted on the current price to recover the operating-income growth, duration, and steady-state margin the price embeds (ROE for financials, FFO growth for REITs).
• Valuation x-ray: the valuation models, grouped into four families (asset, earnings, relative, growth). Each model is expressed as a price/FV ratio (distance from price), not a point fair-value estimate. The spread across families is the disagreement.
• Economic-unit decomposition (SOTP): each disclosed business unit is assigned its native valuation basis before any multiple is applied. Operating units are valued on enterprise value; funded financial units are valued on their own common equity, because their borrowings fund earning assets rather than levering the parent. A company total is stated only once every material unit carries a supported value and the parent capital bridge reconciles.
• Solvency: net cash/debt, net-debt-to-NOPAT, interest coverage, and share-count CAGR from EDGAR financials (net debt / FFO and fixed-charge coverage for REITs; regulatory-capital framing for financials).
• Peer cohorts: per-segment comparables with deep-linkable SEC filing citations.

Fundamentals sourced from SEC EDGAR filings. Current price from Databento. The priced-in inversion and valuation x-ray are computed by the boothcheck engine; narrative composed by AI from the structured data.