Dollar General saw its Q1 net income climb nearly 8% to $392 million, driven by improved inventory control and the removal of most self-checkout kiosks across its stores.
The discount retailer reported a 78 basis-point increase in gross margin to 31%, as lower shrink and better inventory markups proved major tailwinds.
Net sales rose 5.3% year-over-year to $10.4 billion. Same-store sales increased 2.4%, aided by a 2.7% rise in average transaction value, despite a 0.3% decline in traffic.
The company’s ongoing store enhancement strategy also played a key role in its performance.
During the quarter, Dollar General opened 156 stores and remodeled 1,227 under its Project Elevate and Project Renovate initiatives. CEO Todd Vasos said the company aims to overhaul 20% of its store fleet each year.
For 2025, it plans to open 575 US stores and up to 15 in Mexico, alongside 4,250 remodels.
Shrink, once called the “most significant headwind” by Vasos, has now turned into a strength. CFO Kelly Dilts said shrink improvements will be a “gift that keeps on giving” in the months ahead.
The company attributed the improvement to better store layouts, enhanced merchandising, and stronger staffing models following the pullback from self-checkout.
Looking ahead, tariffs and economic uncertainty remain key challenges.
Dollar General has diversified its supply chain, cutting direct imports from China to below 70% and indirect imports to below 40%.
Vasos said while the company is working with vendors and exploring alternative products to avoid passing on costs, some price increases may be necessary.
“Tariffs may result in some price increases as a last resort,” Vasos told analysts. “But we remain committed to delivering the everyday low prices our customers expect.”
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