DG

Target Corporation TGT is witnessing strong momentum in its non-merchandise businesses, which are emerging as important contributors to revenue growth and profitability. The company's advertising platform, Roundel, Target+ marketplace and Target Circle 360 membership program are expanding rapidly, creating opportunities to generate higher-margin revenues beyond traditional merchandise sales. The second-quarter fiscal 2026 results highlighted the growing importance of these businesses to Target's financial performance. Non-merchandise sales increased 20.1% year over year during the quarter, significantly outpacing the 5% growth in merchandise sales. Roundel's gross billings advanced nearly 20%, while gross merchandise volume (GMV) on the Target+ marketplace surged more than 40%. Target Circle 360 membership revenues also increased more than 40%, reflecting continued momentum across the company's digital advertising, marketplace and membership offerings. These businesses are contributing to Target's profitability as well. Management highlighted their outsized contribution to top- and bottom-line growth, with higher-margin revenue streams supporting gross margin expansion. Excluding tariff refund benefits, the company's gross margin rate improved approximately 100 basis points year over year, partly reflecting continued growth in advertising and non-merchandise sales. While these businesses represent a smaller portion of Target's overall sales, their faster expansion highlights an evolving revenue mix. The sustained expansion of these businesses suggests that Target is developing additional earnings opportunities beyond product sales. Target, which competes with Dollar General Corporation DG and Costco Wholesale Corporation COST, has seen its shares rally 14% over the past three months compared with the industry's 0.3% rise. Shares of Dollar General and Costco have jumped 3.1% and 2.2%, respectively, in the aforementioned period. Image Source: Zacks Investment Research From a valuation standpoint, Target's forward 12-month price-to-earnings ratio stands at 15.77, lower than the industry's 27.76. However, the stock is trading above its 12-month median level of 14.93. Target is trading at a discount to Costco (forward 12-month P/E of 41.03) but at a premium to Dollar General (15.41). Image Source: Zacks Investment Research The Zacks Consensus Estimate for Target's current fiscal-year sales and earnings per share implies year-over-year growth of 5.1% and 37.8%, respectively. For the next fiscal year, the consensus estimate indicates a 3.1% rise in sales but a decline of 9.5% in earnings per share. Image Source: Zacks Investment Research Target's improving traffic, stronger digital momentum, broad-based category growth and better inventory reliability indicate that its refreshed strategy is gaining traction. Same-day delivery growth, continued price investments and higher-margin revenue streams further strengthen the operating backdrop. Management also raised fiscal 2026 sales and EPS guidance, reflecting greater confidence in underlying momentum. These factors support a constructive investment view on this Zacks Rank #2 (Buy) stock. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Target Corporation (TGT) : Free Stock Analysis Report Dollar General Corporation (DG) : Free Stock Analysis Report Costco Wholesale Corporation (COST) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research

Costco Wholesale Corporation COST continues to demonstrate the strength of its membership-driven model as it closes fiscal 2026 with solid operational momentum. The warehouse club operator's latest quarterly performance reflected broad-based resilience, supported by strong member engagement, healthy demand trends and continued expansion across physical and digital channels. Costco's focus on delivering value through curated product offerings, competitive pricing and a differentiated shopping experience has helped it maintain customer loyalty in a dynamic retail environment. However, after the latest earnings beat, investors are now evaluating whether Costco can sustain its growth trajectory amid changing consumer trends and an evolving retail landscape. Examining the company's recent performance, key growth drivers and potential challenges will help determine whether Costco stock is a Buy, Hold or Sell following its quarterly results. Costco shares have risen 3.1% since the company released its fourth-quarter results on Sept. 24. Costco reported adjusted earnings of $6.60 per share, beating the Zacks Consensus Estimate of $6.48 and increasing 12.4% year over year. Reported earnings came in at $6.75 per share, including a 15-cent nonrecurring benefit related to tariff refunds. Total revenues rose 11.1% year over year to $95,723 million, surpassing the consensus estimate of $94,820 million. (Read: COST Q4 Earnings Beat Estimates on Sales and Digital Strength) The quarterly performance reflected healthy demand trends across Costco's business channels. Adjusted comparable sales, excluding gasoline price and foreign exchange impacts, increased 6.7%. Membership remained a key contributor, with membership fee income rising 7.3% to $1,850 million, supported by continued member engagement. Costco benefited from higher shopping frequency and increased spending per visit during the quarter. Worldwide traffic grew 3.3%, while the average transaction value increased 5.9%. The company continued leveraging its value-focused merchandising strategy, with growth across warehouses, ancillary businesses and digital platforms. Over the past seven days, the Zacks Consensus Estimate for the current fiscal year has moved up by 30 cents to $22.80, while the estimate for the next fiscal year has increased 44 cents to $24.90. These estimates indicate expected year-over-year growth rates of 11.5% and 9.2%, respectively. Image Source: Zacks Investment Research Costco's membership ecosystem represents a competitive advantage, supporting recurring revenue growth, customer loyalty and higher spending intensity. Members pay for access to consistent savings and quality merchandise. Membership fee income increased 7.3% year over year to $1,850 million during the final quarter of fiscal 2026. Costco's ability to maintain member trust by offering high-quality products at attractive prices has allowed it to strengthen customer relationships. The worldwide renewal rate improved to 89.8%, while the United States and Canada renewal rate reached 92.3%, reflecting continued member satisfaction and engagement. The company continues to deepen relationships with existing members while attracting younger customers. Rising executive membership penetration, stronger digital engagement and improving retention trends indicate that Costco's customer base is becoming increasingly valuable. Costco ended the quarter with 84.1 million paid members, up 3.8%, and 150.4 million cardholders, up 3.6%. Executive memberships reached 42.3 million, growing 9.4%, with executive members accounting for 75.6% of sales. Executive members typically spend more and show stronger loyalty, supporting higher lifetime customer value over time. Costco's warehouse expansion strategy provides a significant runway for future growth. The company continues to identify opportunities across domestic and international markets, including new markets, mature-market infill locations and expansion opportunities overseas. During fiscal 2026, Costco opened 28 warehouses, including three relocations, resulting in 25 net new buildings and bringing the global warehouse count to 939. Management plans to open another 33 warehouses in fiscal 2027, including five relocations, while targeting a long-term pace of approximately 30 net new warehouse openings annually. Costco's digital transformation is becoming an increasingly important growth contributor. In the quarter, digitally enabled comparable sales increased 19.5%. E-commerce site and app traffic increased 30%, supported by stronger digital capabilities and expanded delivery partnerships. Costco's partnerships with Instacart, DoorDash and Uber Eats provide members with greater convenience. The company is also leveraging artificial intelligence and personalization to improve product discovery and customer engagement. Costco reported triple-digit growth in sales from personalized initiatives during the quarter. Traffic originating from AI search grew in triple digits for the second consecutive quarter. The company's Kirkland Signature private-label brand, ancillary businesses and disciplined merchandising approach provide additional competitive advantages. Kirkland Signature allows Costco to offer differentiated products with strong value, while businesses such as gas, pharmacy and travel increase member engagement and encourage customers to spend more. With a strong balance sheet, including $20,207 million in cash and cash equivalents and $15,825 million in operating cash flow, Costco has substantial financial flexibility to fund warehouse expansion, supply-chain investments and digital initiatives while continuing shareholder returns. Costco's impressive sales figures are part of a larger retail picture where competition is intensifying. Rivals like Dollar General Corporation DG and Target Corporation TGT are investing in expanding their product assortments, enhancing supply-chain efficiency and upgrading in-store and digital experiences to capture greater market share. These retailers are also sharpening their value propositions through competitive pricing, private-label expansion and targeted promotional strategies. Margins remain an area to monitor, as Costco continues to navigate rising costs related to healthcare, general liability, commodities, freight and tariffs. While the company has leveraged productivity initiatives and supply-chain efficiencies to mitigate some pressures, uncertainty around oil prices, tariffs and other input costs could weigh on margin performance. Costco stock has climbed 7.1% year to date compared with the industry's rise of 6.4%. A sneak peek into key retail peers' performance reveals that shares of Dollar General have tumbled 7.6% during the same time frame, while Target has surged 60%. Image Source: Zacks Investment Research Despite Costco's strong fundamentals, its premium valuation remains a key consideration for investors. The stock has historically commanded a premium multiple due to its consistency, brand strength and membership economics. Costco's forward 12-month price-to-earnings ratio stands at 40.65, higher than the industry's ratio of 27.35. However, it is trading below its 12-month median level of 45.10, indicating some moderation in valuation. Costco is trading at a premium to Target (with a forward 12-month P/E ratio of 16.05) and Dollar General (14.92). Image Source: Zacks Investment Research Costco's strong membership ecosystem, consistent execution and expanding digital capabilities continue to support its long-term growth story. However, the stock's premium valuation and potential margin pressures from rising costs warrant a balanced approach. Existing investors may consider holding the stock while monitoring valuation and profitability trends, whereas potential investors may look for more favorable entry opportunities before initiating positions. Costco remains a fundamentally strong company. Costco currently has a Zacks Rank #3 (Hold). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Costco Wholesale Corporation (COST) : Free Stock Analysis Report Target Corporation (TGT) : Free Stock Analysis Report Dollar General Corporation (DG) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research

Dollar General Corporation DG received a meaningful boost from tariff refunds during the second quarter of fiscal 2026, supporting margin expansion and profitability. The company reported that gross profit as a percentage of sales increased 127 basis points year over year to 32.6%. The improvement stemmed from tariff refunds, lower LIFO provisions and reduced distribution costs. Dollar General estimated that tariff refunds, after related reinvestments, contributed approximately 81 basis points to gross margin expansion during the quarter. The benefit from tariff refunds also flowed through to operating profitability. Operating profit increased 29.2% year over year to $769.2 million, while operating margin expanded 126 basis points to 6.8%. The company estimated that tariff refunds, after reinvestments, contributed approximately 66 basis points to operating margin growth. Earnings per share increased 33% to $2.48, including an estimated 25 cents benefit from tariff refunds after related reinvestments. Dollar General directed a substantial portion of the tariff refunds to enhance its customer value proposition. Management noted that the company invested in targeted promotional activities, lower everyday prices and customer-facing initiatives, including increased marketing expenses. The company received the majority of its expected tariff refunds in the second quarter and does not anticipate a material impact from tariff refunds after related reinvestments in the second half of fiscal 2026. While tariff refunds supported margin expansion during the quarter, Dollar General noted that other operational improvements also contributed to profitability, including supply-chain efficiencies, and progress in shrink and damages. Walmart Inc. WMT is also using tariff refunds as a temporary earnings and margin benefit while directing much of the proceeds back into pricing. In the second quarter of fiscal 2027, Walmart said tariff refunds helped lift gross profit and operating income, with operating income receiving an approximately 750-basis-point net benefit after price investments. Walmart expects to continue prioritizing the remaining tariff refunds toward customer experience and price investments in the second half. Target Corporation TGT saw an even more pronounced second-quarter fiscal 2026 earnings benefit from tariff refunds. Target recognized $994 million of pretax tariff refunds, which added $752 million to net earnings and $1.65 to earnings per share. Target said the refunds contributed 3.7 percentage points to both gross margin and operating margin in the quarter. Its full-year guidance includes about 90 basis points of operating-margin benefit from second-quarter refunds while excluding any potential future tariff refunds. Dollar General has seen its shares advance 8% over the past three months against the industry's 1.7% decline. Image Source: Zacks Investment Research From a valuation standpoint, Dollar General's forward 12-month price-to-earnings ratio stands at 15.13, lower than the industry's 27.38. The stock is also trading below its 12-month median level of 16.03. Image Source: Zacks Investment Research The Zacks Consensus Estimate for Dollar General's earnings per share for the current and next fiscal year has increased by 50 cents and 32 cents to $7.89 and $8.39, respectively, over the past 30 days. Image Source: Zacks Investment Research Dollar General currently carries a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Dollar General Corporation (DG) : Free Stock Analysis Report Target Corporation (TGT) : Free Stock Analysis Report Walmart Inc. (WMT) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research

Costco Wholesale Corporation COST reported fourth-quarter fiscal 2026 adjusted earnings of $6.60 per share, which beat the Zacks Consensus Estimate of $6.48 and increased 12.4% year over year. Reported earnings came in at $6.75 per share, including a 15-cent nonrecurring benefit related to tariff refunds. Total revenues rose 11.1% year over year to $95,723 million, surpassing the consensus estimate of $94,820 million. Comparable sales increased 9.4%, while digitally enabled comparable sales advanced 19.5%. Costco Wholesale Corporation price-consensus-eps-surprise-chart | Costco Wholesale Corporation Quote Net sales improved 11.2% year over year to $93,873 million. Comparable sales growth was supported by a 3.3% increase in worldwide traffic and a 5.9% rise in average ticket. Excluding gasoline price and foreign exchange impacts, comparable sales increased 6.7%, with both adjusted ticket and traffic growth of 3.3%. Gas price inflation contributed about three percentage points to reported sales growth, while foreign exchange had a roughly 0.3% negative impact. Comparable sales in the United States increased 10.7%, while Canada and Other International markets registered gains of 5% and 7%, respectively. On an adjusted basis, comparable sales grew 7.2% in the United States, 4.6% in Canada and 6.2% in Other International markets. Nonfoods delivered mid-to-high-single-digit comparable sales growth, led by gold and jewelry, home furnishings, housewares, small electrics, and health and beauty. Fresh foods recorded mid-single-digit comparable sales growth, driven by bakery and meat, while food and sundries posted low-to-mid-single-digit gains. Membership fee income increased 7.3% year over year to $1,849 million and rose 7.7%, excluding foreign exchange effects. Excluding foreign exchange and the September 2024 membership fee increase, membership income advanced 6.8%, driven by higher executive membership penetration and membership growth. Costco ended the quarter with 84.1 million paid members, up 3.8%, and 150.4 million cardholders, up 3.6%. Paid executive memberships increased 9.4% to 42.3 million. U.S. and Canada renewal rates improved 10 basis points sequentially to 92.3%, while the worldwide rate reached 89.8%. Digitally enabled comparable sales increased 19.5%, or 19.8% excluding foreign exchange impacts. Site and app traffic climbed 30%, with pharmacy, home furnishings, small electrics, hardware, housewares, domestics, and health and beauty among the strongest digital categories. Costco expanded third-party same-day delivery through Uber Eats and DoorDash in the United States alongside its Instacart partnership. Management said digitally enabled sales exceeded $33 billion in fiscal 2026 and grew more than 20%. Gross margin contracted 11 basis points year over year to 11%. Excluding gasoline inflation, however, gross margin improved 20 basis points. Core-on-core margins on their own sales increased 18 basis points after excluding tariff refund effects, helped by supply-chain efficiencies and improved fresh-food labor productivity. The SG&A rate improved 27 basis points to 8.9%, though the improvement narrowed to two basis points, excluding gasoline inflation. Operating income increased 13.8% year over year to $3,801 million. Costco ended fiscal 2026 with 939 warehouses after opening 25 net new locations during the year. Management plans 33 openings in fiscal 2027, including five relocations, for a net 28 new warehouses. Cash and cash equivalents stood at $20,207 million at fiscal year-end, up from $14,161 million a year earlier. Fiscal 2026 operating cash flow increased to $15,825 million from $13,335 million, while additions to property and equipment totaled $6,435 million. Costco plans approximately $7.5 billion in capital expenditures for fiscal 2027, primarily supporting warehouse growth and supply-chain investments. Shares of this Zacks Rank #3 (Hold) company have fallen 5.9% over the past three months compared with the industry's decline of 4.8%. Target Corporation TGT, a general merchandise retailer, carries a Zacks Rank #2 (Buy) at present. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here. The Zacks Consensus Estimate for Target's current financial-year sales and earnings indicates growth of 5.1% and 37.8%, respectively, from the prior-year reported levels. TGT delivered a trailing four-quarter earnings surprise of 10.5%, on average. Ross Stores, Inc. ROST is one of the largest off-price apparel and home fashion chains in the United States. ROST carries a Zacks Rank #2. The consensus estimate for Ross Stores' current fiscal-year sales and earnings per share implies growth of 12.4% and 32.7%, respectively, from the year-ago reported figures. ROST delivered a trailing four-quarter earnings surprise of 11.2%, on average. Dollar General Corporation DG, a discount retailer, currently carries a Zacks Rank #2. DG delivered a trailing four-quarter earnings surprise of 19.1%, on average. The Zacks Consensus Estimate for Dollar General's current fiscal-year sales and earnings calls for growth of 4.2% and 15.2%, respectively, from the year-ago reported figures. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Costco Wholesale Corporation (COST) : Free Stock Analysis Report Target Corporation (TGT) : Free Stock Analysis Report Dollar General Corporation (DG) : Free Stock Analysis Report Ross Stores, Inc. (ROST) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research

As Costco Wholesale Corporation COST prepares to unveil its fourth-quarter fiscal 2026 earnings results on Sept. 24, after the market closes, investors face an important decision: Should they buy, hold or sell the stock? With expectations and market conditions in focus, it is crucial to evaluate the key factors influencing Costco’s performance and whether the stock offers an attractive entry point.Costco's strategic investments, customer-centric approach, merchandise initiatives and focus on membership growth have supported steady sales and earnings growth, positioning COST as a consumer defensive stock.The Zacks Consensus Estimate for fourth-quarter revenues stands at $94.82 billion, calling for a 10.1% increase from the prior-year reported figure. On the earnings front, the consensus estimate has fallen by 3 cents to $6.48 per share over the past 30 days but still implies a 10.4% year-over-year jump.Costco has a trailing four-quarter earnings surprise of 1%, on average. In the last reported quarter, this Issaquah, WA-based company beat the Zacks Consensus Estimate by a margin of 0.4%. Image Source: Zacks Investment Research As investors prepare for Costco's fourth-quarter announcement, the question looms regarding an earnings beat or miss. Our proven model does not conclusively predict an earnings beat for Costco this time. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. However, that’s not the case here. You can see the complete list of today’s Zacks #1 Rank stocks here.Costco has a Zacks Rank #3 but an Earnings ESP of -0.19%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter. Costco Wholesale Corporation price-consensus-eps-surprise-chart | Costco Wholesale Corporation Quote Costco’s fourth-quarter performance is likely to have benefited from the continued strength of its value-focused merchandising model, which supports shopping frequency and basket expansion even in a cautious consumer environment. Members continued to respond well to the combination of quality, value and newness, with healthy demand likely across fresh foods, nonfoods and everyday essentials. Kirkland Signature also remained an important engagement driver through new product launches and attractive pricing, reinforcing traffic and member loyalty.In its August sales report, Costco highlighted that net sales rose 11.3% year over year to $93.9 billion for the 16-week fourth quarter. Comparable sales increased 9.4% companywide. The United States posted a 10.7% comparable-sales gain, while Canada and Other International rose 5% and 7%, respectively.The company’s expanding paid membership base and healthy growth in Executive memberships are also likely to have contributed to fourth-quarter performance. Executive members generally shop more frequently and spend more with Costco, supporting sales. Meanwhile, targeted digital communications and retention efforts are helping stabilize renewal trends, while management remained encouraged by new-member sign-ups. The continued shift toward Executive memberships, along with the benefit from the earlier fee increase, is likely to have supported membership-fee income.Costco’s expanding digital capabilities and warehouse network may have provided further support to the top line. The company has been improving checkout speed, mobile-wallet functionality and digital membership access while expanding same-day delivery and personalized online recommendations. We note that digitally enabled comparable sales climbed 19.5% during the final quarter. At the same time, Costco remained focused on opening and relocating warehouses, remodeling high-volume locations and improving parking and gas-station capacity to enhance convenience and support higher volumes.However, Costco may have faced pressure from an uncertain cost environment. Inflationary pressures stemming from higher input and component costs, along with tariff-related uncertainty, remained concerns. Combined with the company’s continued focus on maintaining attractive prices for members, these factors are likely to have weighed on margins in the fourth quarter. Costco, which competes with Dollar General Corporation DG and Target Corporation TGT, has seen its shares jump 4.3% in the year-to-date period compared with the industry’s rise of 4.4%. While shares of Target have surged 62.6%, those of Dollar General have fallen 7.7% in the aforementioned period. Image Source: Zacks Investment Research From a valuation standpoint, Costco currently trades at a premium relative to its industry peers. The company’s forward 12-month price-to-earnings (P/E) ratio is 39.75, higher than the industry average of 27.04 and the S&P 500’s 20.06. However, the stock is trading below its median P/E level of 45.28, observed over the past year. Costco is trading at a premium to Target (with a forward 12-month P/E ratio of 16.30) and Dollar General (15.16). Image Source: Zacks Investment Research Costco’s resilient sales trends, strong membership base, digital momentum and value proposition support the long-term story, but margin pressures, a premium valuation and the lack of a clear earnings-beat signal warrant some caution ahead of the release. Existing investors may consider holding their positions, while prospective investors may be better served waiting for greater clarity from the fourth-quarter results before initiating a position. Overall, the risk-reward setup suggests a measured approach rather than aggressive buying ahead of earnings. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Costco Wholesale Corporation (COST) : Free Stock Analysis Report Target Corporation (TGT) : Free Stock Analysis Report Dollar General Corporation (DG) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research

Dollar Tree, Inc. DLTR raised its fiscal 2026 adjusted earnings outlook after stronger second-quarter execution and a sizable tariff-refund benefit. The retailer now expects adjusted earnings of $7.70-$8.05 per share, with about 60 cents of net benefit from tariff refunds.The company is not treating the full refund as a near-term earnings windfall. It plans to reinvest roughly $210 million of the $383 million received in the second quarter into pricing, marketing, store operations and store conditions.Dollar Tree maintained its fiscal 2026 net sales outlook of $20.5-$20.7 billion, based on comparable-store sales growth of 3-4%. The higher earnings range also reflects second-quarter performance above the prior outlook, lower expected tariff rates than assumed in May, lower net interest expense and a reduced share count. Image Source: Zacks Investment Research Second-quarter results provided evidence that the underlying business improved alongside the refund benefit. Net sales increased 7% to $4.89 billion and comparable-store sales rose 3.7%, with average ticket up 3.3% and traffic increasing 0.4%. Adjusted earnings excluding the $1.31 per-share net tariff-refund benefit were $1.39 per share, topping the Zacks Consensus Estimate of $1.13.The refund, however, had a large effect on reported profitability. Gross margin expanded 850 basis points to 42.9%, including about 680 basis points from the net impact of tariff refunds. Dollar Tree assumes no additional refunds for the year. Its third-quarter adjusted earnings outlook of 80-95 cents per share includes an estimated 50-cent negative impact from tariff-refund reinvestments, while inflation, elevated fuel costs and a sales mix tilted toward lower-margin consumables remain margin risks. Dollar Tree, Inc. price-consensus-eps-surprise-chart | Dollar Tree, Inc. Quote The reinvestment plan is aimed at areas already central to Dollar Tree's operating strategy. Multi-price merchandise represented 17% of second-quarter sales, up about 400 basis points year over year, and the company ended the period with roughly 6,600 multi-price stores. Better store execution, wider assortment and positive traffic give management a base from which to deploy the incremental spending, though it has not assumed a near-term return from those investments.Other value retailers are also navigating tariff refunds while protecting customer value. Dollar General Corporation DG raised its fiscal 2026 guidance after its second quarter and said its earnings outlook includes an estimated 25-cent benefit from tariff refunds after related reinvestments. Five Below, Inc. FIVE also increased its full-year 2026 sales and earnings outlook after comparable sales rose 14.1% in the second quarter, while its guidance excludes the impact of future tariff refunds.Dollar Tree's cash generation provides flexibility to fund its operating agenda and capital returns. Continuing operations generated $922 million of operating cash flow and $675 million of free cash flow in the second quarter. The company repurchased 5.6 million shares for $605 million during the period and had $2.5 billion remaining under its repurchase authorization as of Aug. 1, 2026.The higher fiscal 2026 earnings view combines healthier operating trends with a temporary tariff-refund lift. The second half will show how much support the reinvestment provides to traffic, store productivity and customer engagement as the one-time refund benefit moderates and external cost pressures remain.DLTR currently carries a Zacks Rank #2 (Buy) and has a Value Score of A, Growth Score of A, Momentum Score of A and VGM Score of A. The Zacks Rank reflects favorable near-term earnings estimate revision trends, while the Style Scores indicate attractive characteristics across value, growth and momentum. These measures complement the operating picture but do not eliminate the risks tied to tariffs, reinvestment spending and consumer budget pressure. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Dollar Tree, Inc. (DLTR) : Free Stock Analysis Report Dollar General Corporation (DG) : Free Stock Analysis Report Five Below, Inc. (FIVE) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research

Dollar Tree, Inc. DLTR is showing clearer operating improvement after a second quarter in which sales, traffic and underlying earnings advanced. The retailer also raised its fiscal 2026 earnings outlook, while broader multi-price adoption and better store execution are supporting customer engagement.The question is whether that progress is enough to offset tariff-related volatility and planned reinvestment that could restrain near-term margins. DLTR shares have fallen 17.9% in the past four weeks, bringing valuation and earnings revisions into sharper focus.Second-quarter net sales rose 7% year over year to $4.89 billion, while comparable-store sales increased 3.7%. Average ticket climbed 3.3% and traffic improved 0.4%, a useful sign because recent growth is no longer coming only from higher ticket. Consumables posted a 5.8% comp and discretionary sales increased 1.6%. Dollar Tree, Inc. price-consensus-eps-surprise-chart | Dollar Tree, Inc. Quote Underlying earnings also improved. Adjusted earnings of $1.39 per share, excluding the $1.31 per-share net tariff-refund benefit, rose 80.5% from 77 cents and topped the Zacks Consensus Estimate of $1.13. Multi-price merchandise reached 17% of sales, up about 400 basis points year over year, and the company ended the quarter with about 6,600 multi-price stores.Management raised fiscal 2026 adjusted earnings guidance to $7.70-$8.05 per share, including an estimated 60-cent benefit from tariff refunds. Net sales are still expected at $20.5-$20.7 billion with comparable-store sales growth of 3-4%. The Zacks Consensus Estimate for current-year earnings has risen 13.1% in the past four weeks.Margin quality is the main counterweight. Gross margin expanded 850 basis points to 42.9% in the second quarter, but about 680 basis points came from the net impact of tariff refunds. The company received $383 million in refunds and plans to reinvest about $210 million in pricing, marketing, store operations and store conditions. Third-quarter adjusted earnings guidance of 80-95 cents includes an estimated 50-cent negative impact from those reinvestments.Selling, general and administrative expenses also need monitoring. The second-quarter expense rate declined 40 basis points to 29.2%, but the first-half rate edged up to 28.5% from 28.4% a year earlier as marketing, general liability costs and depreciation increased. Inflation, elevated fuel costs and a heavier mix of lower-margin consumables could further limit margin expansion.Dollar General Corporation DG, another value retailer, reported 3.5% same-store sales growth in its second quarter, with traffic up 2%. The TJX Companies, Inc. TJX, an off-price apparel and home fashions retailer, posted 4% comparable sales growth in its second quarter. These peers provide context for discount-oriented demand, though merchandise mix and margin structure differ.DLTR trades at 14.1X forward 12-month earnings, below the Zacks sub-industry at 27.04X and the Zacks sector at 21.5X. At the same time, the earnings benefit from tariff refunds is partly temporary, while reinvestment and external cost pressures can limit margin upside. Image Source: Zacks Investment Research For investors assessing whether the earnings recovery warrants a fresh position, the operating trend and estimate revisions are constructive, while tariff, fuel, mix and spending pressures keep the margin outlook less straightforward. The durability of the earnings improvement will depend on how margins perform as the refund benefit is partly offset by reinvestment and other costs.DLTR currently carries a Zacks Rank #2 (Buy) and has a Value Score of A, Growth Score of A, Momentum Score of A and VGM Score of A. The Zacks Rank reflects favorable earnings-estimate trends over the shorter term, while the Style Scores add positive signals across valuation, growth and momentum. The combination supports interest in the shares, but it does not eliminate the execution and margin risks surrounding the earnings path. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Dollar Tree, Inc. (DLTR) : Free Stock Analysis Report The TJX Companies, Inc. (TJX) : Free Stock Analysis Report Dollar General Corporation (DG) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research

Five Below, Inc. FIVE raised its fiscal 2026 outlook after second-quarter results exceeded expectations, making the guidance revision the key near-term event for investors. Higher traffic, stronger margins and product newness have lifted the earnings trajectory.The revised forecast also raises the execution bar. Delivering the new targets will depend on sustained transaction growth, merchandise-margin gains and disciplined inventory management as Five Below moves into the holiday period. Five Below, Inc. price-consensus-eps-surprise-chart | Five Below, Inc. Quote Adjusted earnings were $1.68 per share in the fiscal second quarter, topping the Zacks Consensus Estimate of $1.34. Net sales rose 22.9% year over year to $1.26 billion, above the consensus estimate of $1.192 billion.Comparable sales increased 14.1%, marking a fifth consecutive quarter of double-digit growth. Broad gains across customer groups, geographies and product categories gave management a stronger operating base for raising full-year expectations. Fiscal 2026 net sales guidance increased to $5.63-$5.71 billion from $5.40-$5.48 billion. Expected comparable-sales growth moved to 10%-12% from 6%-8%.Adjusted earnings per share guidance rose to $9.83-$10.31 from $8.65-$9.05. Adjusted operating margin is expected to increase about 250 basis points year over year to roughly 12.5% at the midpoint, signaling stronger full-year profitability. Transactions increased 13.6% in the second quarter, while average transaction value rose 0.4%. Traffic remained the primary comparable-sales driver, consistent with management's expectation that transaction growth will continue to carry much of the demand improvement.The raised outlook also reflects merchandise-margin gains, fixed-cost leverage and lower tariff costs. Five Below still plans to fund higher marketing investment, so the improved profit outlook is not based solely on expense restraint. Five Below expects a fuller Halloween and holiday assortment, including merchandise it elected not to carry last year because of tariff-related constraints. That gives the company more seasonal product to support traffic during its important fourth quarter.Early tests of the Five Beyond reconfiguration generated positive customer, crew and productivity responses, prompting a broader rollout. The company is also emphasizing trend-driven product stories and faster speed to market to support repeat visits and customer engagement. The guidance assumes tariff rates currently in place. Higher outbound transportation fuel costs and a tougher shrink comparison are expected to offset part of the third-quarter gross-margin benefit from lower tariffs. Inventory ended the second quarter at $941.2 million, up 17.7% year over year.Dollar General Corporation DG reported 3.5% same-store sales growth in its fiscal second quarter, including a 2% increase in customer traffic. Dollar Tree, Inc. DLTR reported 3.7% comparable-store net sales growth in its fiscal second quarter. Those results show other value retailers are also generating traffic and sales growth. The raised outlook strengthens Five Below's near-term earnings profile, but the company still needs sustained traffic, margin execution and effective holiday merchandising to deliver against the higher forecast. Cost volatility or slower inventory turns could complicate delivery.FIVE currently carries a Zacks Rank #1 (Strong Buy), with a Growth Score of B and VGM Score of B. Those readings support its earnings-revision and growth profile. The Value Score of D and Momentum Score of C are less favorable, providing context for investors assessing how much of the improved operating outlook may already be reflected in expectations. You can see the complete list of today’s Zacks #1 Rank stocks here. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Five Below, Inc. (FIVE) : Free Stock Analysis Report Dollar General Corporation (DG) : Free Stock Analysis Report Dollar Tree, Inc. (DLTR) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research

As continuous inflation squeezes household budgets, the discount retail sector should potentially benefit across the board, with middle- and lower-income consumers looking for value driving foot traffic into value chains. That's roughly what happened in the second-quarter reports from Dollar General Corporation (NYSE:DG) and Dollar Tree, Inc. (NASDAQ:DLTR), both of which were released in late August. Both retailers outperformed expectations, though only one company's stock was rewarded for this. Dollar General Corporation (NYSE:DG) reported second-quarter results on August 27 that exceeded expectations, and shares rose more than 6.5% in premarket trading. Net sales increased 5.2% to $11.29 billion, surpassing the $11.2 billion market forecast, while diluted EPS came in at $2.48, up 33.3% year-over-year and well above the $2.01 analysts projected. Same-store sales increased 3.5%, driven by a 2.0% increase in customer traffic and a 1.5% increase in average transaction amount, marking the fifth consecutive quarter of traffic growth and the sixth consecutive quarter of positive comps across all four merchandise categories. Management improved their full-year estimate across the board: same-store sales growth is now expected to be 2.5% to 2.9%, up from 2.2% to 2.7% before, while full-year EPS guidance increased to $7.80-$8.00 from $7.20-$7.45. Tariff refunds, a lower LIFO provision, and improved shrink and damages helped increase the gross margin by 127 basis points to 32.6%. CEO Todd Vasos also pointed to continued market share gains from higher-income households switching away from traditional grocers, a trend the company has cited for several quarters, with management announcing plans to resume up to $700 million in share buybacks in the latter half of the year, backed by remodels under its Project Renovate and Project Elevate initiatives. Dollar Tree's results, released on August 27, indicate a more complicated situation. Diluted EPS came in at $2.70, including a $1.31-per-share net benefit related to tariff refunds, while revenue increased 7% year-over-year to $4.89 billion. Comparable store sales up 3.7%, driven by a 3.3% gain in average ticket and a 0.4% increase in traffic, a return to positive traffic that occurred a full quarter ahead of management's internal plan. However, the headline figure includes an important caveat: $1.31 of the $2.70 in EPS came from the net impact of $383 million in IEEPA tariff refunds after related reinvestment spending, duties, and taxes. Strip that out, and underlying EPS was $1.39, above the $1.00-$1.15 range management had guided to in May and about 23% above the $1.13 consensus estimate. Despite the strong underlying beat, shares plummeted about 3% to 4% in the hours following the release. The reason: third-quarter EPS projection of $0.80-$0.95, with a midpoint of $0.88, was significantly lower than the $1.39 analyst average. Management attributed the discrepancy to two factors: approximately $0.50 per share from reinvesting tariff refunds in pricing competitiveness, and margin pressure from a 40th anniversary $1 price-point campaign on select items. The difference boils down to what each report indicated concerning durability. Dollar General's beat was broad-based and included a straightforward increase in nearly every full-year metric, sending investors a clear, unambiguous indication of growing momentum. Dollar Tree's beat, on the other hand, required investors to dig deeper to identify the real story, isolating a substantial, one-time tariff refund from underlying performance and then comparing a solid current quarter against a forecasted margin decline in the next one. Institutional interest in both companies saw an increase. Dollar General Corporation (NYSE:DG) had hedge fund ownership increase from 47 in the first quarter to 53 in the second, with short interest at a low 2.97% of float. Dollar Tree, Inc. (NASDAQ:DLTR) experienced an even larger gain, from 43 to 54 funds, though short interest stood higher at 4.15%, indicating slightly more contentious opinion among investors on the stock, even as institutional ownership increased ahead of this quarter's mixed reaction. The case for both retailers is supported by a favorable macroeconomic backdrop: inflation is driving both lower- and higher-income customers to value retail, and both reported positive comparable sales growth alongside higher customer traffic. Dollar General's clean beat-and-raise, with guidance rising on nearly every indicator and a planned $700 million repurchase, provides investors with a straightforward case for continued growth. Dollar Tree's underlying EPS beat of around 23-25%, even after deducting the tariff refund, shows operational improvement, and a return to positive traffic a quarter ahead of schedule indicates that its turnaround is moving faster than predicted. However, the difference between DLTR's headline and underlying EPS shows how readily one-time factors can mask a company's true trajectory, and investors might treat future beats with caution as a result. For DG, the company's persistent reliance on trade-down customers poses questions about its long-term viability, since some of that traffic could reverse if inflation falls or grocers respond competitively. Both companies benefit from the same consumer trade-down dynamic, but Dollar General's report provided a clear signal of long-term growth, whereas Dollar Tree's required parsing a one-time item and ended with a disappointing forward guidance. Dollar General Corporation (NYSE:DG) investors should keep an eye on whether traffic growth continues for a sixth consecutive quarter, while Dollar Tree, Inc. (NASDAQ:DLTR) investors should focus on the third-quarter results, which will be the true test of whether the underlying, tariff-adjusted improvement holds once the flagged headwinds hit the P&L. While we acknowledge the potential of DG as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you're looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock. READ NEXT: 33 Stocks That Should Double in 3 Years and 15 Stocks That Will Make You Rich in 10 Years Disclosure: None. Follow Insider Monkey on Google News.

Costco trades at 47x earnings with four straight quarters of declining comps, while Five Below grew net sales 23% and comparable sales 14%. Dollar General posted its fifth straight quarter of traffic growth while Dollar Tree expanded gross margin 850 basis points, each trading near 17x earnings. Cramer warned Costco may be losing younger shoppers as digital sign-ups renew at lower rates than warehouse members, suggesting weakening cultural grip. Just released. Our analysts combed the entire stock market and named the ten best stocks to buy right now, and Costco didn't make the cut. Enter your email to see the names that beat COST. The report is free. Enter your email and see if any of your stocks made the cut. On CNBC's opening bell on September 3, 2026, Jim Cramer laid out a split that inverts most people's assumptions about American retail. The membership warehouse with the best reputation in the business is stumbling, and the chains people quietly hit for essentials are running away with the story. Costco (NASDAQ:COST) trades near 47 times trailing earnings while its comparable sales have gone the wrong way for four straight reporting periods. Meanwhile, Five Below (NASDAQ:FIVE), Dollar Tree (NASDAQ:DLTR), and Dollar General (NYSE:DG) have each reported quarters that would look strong in any market. Cramer's read is that the trade-down is real, and it is not treating Costco the way loyal shoppers assume it should. Jim Cramer said, "If you want to know what trading down looks like in a positive way, you just look at what Winnie Park has done at Five Below. Still one more amazing quarter." The endorsement lines up with the numbers. Five Below's second quarter delivered net sales of $1.3 billion, up 23%, with comparable sales growth of 14% and adjusted diluted EPS of $1.68. Park raised full-year adjusted EPS guidance to a midpoint of $10.07. Free Report, Just Released Why Didn't COST Make The Top 10 List? 24/7 Wall St has helped investors make money for over two decades, and our top analysts just finished ranking the definitive Top 10 Stocks To Buy Now. Not the ten biggest companies. Not the ten everyone is arguing about. The ten best stocks to buy right now. And COST didn't make the cut! The report is free, and you can see why we think each stock is a top investment today. Enter Your Email and See the Ten → Trading down describes household dollars migrating toward retailers positioned where the marginal purchase now happens. Park emphasized broad-based growth across all income cohorts, geographies, and categories, which reads as trade-in behavior from higher-income shoppers rather than pure distress buying. At roughly 31 times earnings, Five Below is priced for growth investors, and estimate revisions have moved higher across every forward quarter. That is a materially different proposition than paying 47 times for a warehouse chain whose top line is decelerating. Cramer invoked Charlie Munger's principle that at extreme multiples the price has already paid for the future, and then applied it to Costco. He is right, and the multiple is best read as a symptom of the underlying problem. CNBC noted that Costco's comparable store sales declined across May, June, July, and August, and also flagged weak renewal rates for membership card purchases. Management on the last call reported the worldwide renewal rate at 89.7%, attributing the pressure to a growing mix of online sign-ups that renew at lower rates than warehouse sign-ups. A membership retailer that struggles to keep its members has a structural issue that a rebound in gasoline traffic cannot fix. Costco's operating leverage lives in the fees line, and although membership fees ran $1.37 billion, up 10.7% in the most recent quarter, a slower renewal cadence eventually reaches that growth rate. The stock has noticed. Costco is down 2% over the past year and sits below both its 50-day and 200-day moving averages. Jim Cramer said, "I don't want it to be a generational thing where my generation is Costco and the newer generations don't look at it like that." That is the most interesting thing he said, and the evidence is genuinely mixed. Bullish evidence: paid executive memberships grew 9.6% to 41.2 million, digitally enabled comparable sales rose 21.5%, and site and app traffic increased 37%. A brand losing the internet does not produce those numbers. Bearish evidence: digital sign-ups renew at a lower rate than warehouse sign-ups. The new member is easier to acquire and harder to keep, which is the pattern you would expect if the brand's cultural gravity were weakening at the margins. Cramer's fear is reasonable. The data does not yet confirm it. Jim Cramer said, "I'm just wondering whether the great value isn't in these dollar stores." CNBC reported strong results from both Dollar Tree and Dollar General. Dollar Tree posted comparable sales up 3.7% with gross margin expanding 850 basis points to 42.9%. Dollar General reported 3.5% same-store sales growth in its fifth consecutive quarter of traffic growth, and CEO Todd Vasos cited strong trade-in across middle- and high-income cohorts. The economics are simple. When budgets tighten, the fixed-cost base of a small-box discount format levers hard against small increases in traffic, and a $1 price point does disproportionate merchandising work for a shopper counting pennies. Dollar Tree at 16 times earnings and Dollar General at 17 times are priced as if the trade-down ends tomorrow, which it likely will not, unless real wages accelerate meaningfully at the low end. The trade-down winners look like a cyclical opportunity that investors would size to their own risk tolerance. What ends the trade is a genuine improvement in purchasing power at the bottom two income quintiles. Until that shows up in the data, Five Below and the dollar stores are where the incremental household dollar is going. If you have cash sitting in your account right now, give this two minutes. After more than two decades of helping investors beat the market, our top analysts at 24/7 Wall St. put together a definitive report on the Top 10 Stocks To Buy Today. And COST wasn't one of them. They combed the entire market. It's not 10 ideas, not 10 stocks everyone is talking about, it's what their research points to as the 10 best stocks to buy right now, and it's free. Read more here and >;elm:context_link;itc:0;sec:content-canvas" data-yga="{"yLinkElement":"context_link","yModuleName":"content-canvas","yLinkText":"see which stocks made the list -->"}" class="link ">see which stocks made the list -->> Contact [email protected] for any questions or corrections.

Image source: The Motley Fool. Thursday, Aug. 27, 2026 at 9:00 a.m. ET Vice President of Investor Relations - Kevin Walker Chief Executive Officer - Todd Vasos Chief Financial Officer - Donny Lau Chief Operating Officer - Emily Taylor Operator: Good morning. My name is Rob, and I'll be your conference operator today. At this time, I'd like to welcome everyone to the Dollar General Second Quarter 2026 Earnings Call. Today is Thursday, August 27, 2026. [Operator Instructions] This call is being recorded. Instructions for listening to the replay of the call are available in the company's earnings press release issued this morning. Now I would like to turn the conference over to Mr. Kevin Walker, Vice President of Investor Relations. Kevin, you may begin your conference. Kevin Walker: Thank you, and good morning, everyone. On the call with me today are Todd Vasos, our CEO; and Donny Lau, our CFO. After our prepared remarks, we'll open the call up for your questions. And Emily Taylor, our Chief Operating Officer, will join us for the Q&A session. To allow us to address as many questions as possible in the queue please limit yourself to one question. Our earnings release issued today can be found on our website at investor.dollargeneral.com under News and Events. Let me caution you that today's comments include forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995, such as statements about our financial guidance, long-term financial framework, strategy, initiatives, plans, goals, priorities, opportunities, expectations or beliefs about future matters and other statements that are not limited to historical facts. These statements are subject to risks and uncertainties that could cause actual results to differ materially from our expectations and projections. These factors include, but are not limited to, those identified in our earnings release issued this morning under Risk Factors in our 2025 Form 10-K filed on March 20, 2026, and any later filed periodic report and in the comments that are made on this call. You should not unduly rely on forward-looking statements, which speak only as of today's date. Dollar General disclaims any obligation to update or revise any information discussed in this call unless required by law. Now it is my pleasure to turn the call over to Todd. Todd Vasos: Thank you, Kevin, and welcome to everyone joining our call. I want to begin by thanking our team for their continued dedication to fulfilling our mission of serving others every day in our stores, distribution centers, private fleet and store support center. We are pleased with our second quarter results, including balanced top line growth, healthy operating margin expansion and strong double-digit EPS growth, each of which exceeded our expectations even before considering any impact from tariff refunds. For today's call, I'll start by recapping highlights from our second quarter performance. Donny will then walk through our financial results and outlook, and I'll close with an update on our strategic growth pillars. Turning to our second quarter performance. Net sales for the quarter increased 5.2% to $11.3 billion compared to net sales of $10.7 billion in last year's second quarter. Once again, during the quarter, we grew market share in both dollars and units in highly consumable product sales while also growing market share in nonconsumable product sales. We were especially pleased to see our share gains accelerate in the quarter, which we believe demonstrates the strength and broad appeal of our unique combination of value and convenience, particularly in rural communities across America. Same-store sales increased 3.5% during the quarter, driven by customer traffic growth at 2% and average basket growth of 1.5%. Notably, this marks the fifth consecutive quarter of growth in customer traffic as we continue to build on the momentum in our business with both new and existing customers. In addition, all 4 merchandising categories delivered positive comp sales for the sixth consecutive quarter with the growth rate in nonconsumables once again outpacing consumable. This broad-based category growth is a testament to the relevance of our offering and our position as America's neighborhood general store. From a monthly cadence perspective, all 3 periods of the quarter were strong, led by both June and July. And while still early, we're pleased with the strong sales performance to begin Q3 and confident in our plans to drive continued growth in sales, market share, and customer traffic. Moving to an update on our customer. Our core customers continue to be financially constrained with a variety of factors impacting their budget. Most notably, higher and more volatile fuel prices have forced customers to further prioritize purchases with a focus on value and affordability. As customers have continued to reduce trips and shop closer to home, Dollar General is uniquely positioned to meet their needs with more than 21,000 stores located within 5 miles of approximately 75% of the U.S. population. Our expansive store footprint continues to be a unique competitive strength and is complemented by our growing delivery presence, which contributed an estimated 40 basis points to our comp sales growth in Q2. In addition to our strong convenience offering, we remain committed to delivering exceptional value through our strong everyday low price position, which is within 3 to 4 percentage points of mass retailers. Disciplined and strategic approach to promotional activity and extensive offering of more than 2,000 items across the store at or below the $1 price point. Within our $1 price point, we continue to emphasize and strengthen our Value Valley offering, which is now comprised of more than 600 rotating items each priced at $1. During Q2, we expanded our $1 off-shelf display presence in more than 9,000 stores. We are encouraged by the early results, and these stores are already driving incremental comp sales greater than the rest of the chain. Notably, our Value Valley offering once again significantly outperformed the chain average in Q2 with comp sales increases of more than 16%. Looking ahead, we're excited about our plans for an expanded $1 presence in our fall and holiday set in the back half of the year. We know this price point is important to our customers, and we are excited about the opportunity to continue providing tremendous value through these offerings. We also received tariff refund payments during the quarter and reinvested a substantial portion primarily to further enhance the overall value proposition for our customers while helping them save money on everyday necessities. More specifically, we delivered additional savings through both targeted promotional activities, particularly around the important summer holidays and lower everyday prices. Consistent with our overall approach to pricing, we took these actions strategically to serve customers while targeting sustainable share gains and sales growth over time. In addition, tariff refund reinvestments during the quarter included incremental SG&A spend on customer-facing initiatives, including increased marketing expense as we look to further enhance the customer experience and elevate our brand. For the quarter, we once again experienced strong trade-in across middle and high-income cohort while also driving productivity gains with our low income customers. Overall, we're proud of the consistency and balance of our top line performance, which was enabled by strong execution and further demonstrates the essential role that Dollar General serves as a trusted partner in the communities we call home. Finally, as we continue to invest in the growth and development of our teams, we are pleased to see lower year-over-year turnover collectively in our stores, distribution centers, private fleet and store support center, all of which is contributing to our improved execution and strong financial results. In summary, we are pleased with our Q2 performance and proud of our team's strong execution. We are confident in our long-term financial framework and excited about our plans to continue delivering value for our customers, associates and shareholders. With that, I'll now turn the call over to Donny. Donny Lau: Thank you, Todd, and good morning, everyone. Now that Todd has taken you through the top line results for the quarter, let me take you through some of the other important financial details. Unless we specifically note otherwise, all comparisons are year-over-year. All references to EPS refer to diluted earnings per share, and all years noted refer to the corresponding fiscal year. For Q2, gross profit as a percentage of sales was 32.6%, an increase of 127 basis points. This increase was primarily attributable to the benefit from tariff refunds, a lower LIFO provision and lower distribution costs, partially offset by increased markdowns and increased transportation costs. We are especially pleased with our gross margin performance during the quarter even before considering the approximate 81 basis point benefit from tariff refunds after gross margin-related reinvestment. We were also pleased with the continued improvement in damages and shrink in Q2, which reflects strong in-store execution by the team. Turning to SG&A, which as a percentage of sales was 25.8% and flat year-over-year. The primary expense that was a higher percentage of sales in the quarter was depreciation and amortization offset by rent, which was lower as a percentage of sales. Moving down the income statement. Operating profit for the second quarter increased 29.2% to $769 million. As a percentage of sales, operating profit increased 126 basis points to 6.8%, and includes an approximate 66 basis point benefit from tariff refunds after related reinvestments. Net interest expense for the quarter decreased to $42.9 million compared to $57.7 million in last year's second quarter. Our effective tax rate for the quarter was 24.2% and compares to 23.5% in the prior year. Finally, EPS for the quarter increased 33% to $2.48, including an approximate $0.25 benefit from tariff refunds after related reinvestments. Turning now to our balance sheet and cash flow where we continue to make significant progress in strengthening our financial position. Merchandise inventories were $6.6 billion at the end of Q2, essentially flat compared to the prior year and represented a decline of 2.7% on an average per store basis. Importantly, the team has done a terrific job reducing inventory to a level we believe is appropriate to support strong sales growth going forward. Overall, we're pleased with our inventory position and for fiscal 2026, continue to expect inventory to grow at a rate below our sales growth. Year-to-date through Q2, we generated significant cash flow from operations of $1.5 billion, providing flexibility to reinvest in the business and return meaningful cash to shareholders, all while further strengthening our balance sheet and liquidity position. Our capital allocation priorities continue to serve us well and remain unchanged. Our first priority is investing in the business, including our existing store base as well as other high-return growth opportunities, such as new store expansion and our strategic initiatives. Next, we seek to return cash to shareholders through our quarterly dividend payment and when appropriate, share repurchases. Finally, we remain committed to maintaining our goal of less than 3x adjusted debt to adjusted EBITDAR in support of our commitment to middle BBB ratings by S&P and Moody's. Now with regards to shareholder returns and consistent with our capital allocation framework, I'm very pleased to note that we plan to resume our share repurchase program in the third quarter. More specifically, we plan to repurchase up to $700 million of our common stock in the second half, funded with cash on hand. This step reflects our strong cash and liquidity position, the progress we are making towards our long-term financial framework targets and our confidence in the future of the business. Moving to our outlook. Given our strong first half performance and expectations for the balance of the year, we are raising our full year outlook. We now expect the following for fiscal 2026. Net sales growth in the range of 4% to 4.3%. Same-store sales growth in the range of 2.5% to 2.9%. And EPS in the range of $7.80 to $8, including the approximate $0.25 Q2 benefit from tariff refunds after related reinvestments. Our EPS guidance continues to assume an effective tax rate of approximately 24.5% and now contemplates up to $700 million of share repurchases in the back half of the year. Our expectations for capital spending and real estate projects remain unchanged from our previously stated amounts. In addition, our Board of Directors recently approved a quarterly cash dividend payment of $0.59 per share for Q2 2026. Let me provide some additional context as it relates to our outlook. First, our revised outlook reflects the strength of our first half performance, underlying momentum in the business, the anticipated impact of tariff refunds after related reinvestments, and our improved expectations for the remainder of the year. We believe the updated range appropriately balances our confidence in the business while also considering the evolving consumer environment. In addition, despite much higher-than-anticipated fuel costs, we expect gross margin expansion in the second half, supported by continued progress against our key gross margin initiatives, many of which remain early in their maturity curve. As a reminder, our initiatives include continued improvements in shrink and damages, growth in our DG Media Network, nonconsumables merchandising, supply chain productivity and category management. On the expense side, we continue to expect modest SG&A deleverage in 2026 as we continue to invest in key initiatives to support the long-term growth and productivity of the business. Finally, with regards to tariff refunds, we received the majority of our anticipated total refund amount in Q2 and do not expect a material impact from tariff refunds after related reinvestments in the second half. In closing, we're pleased with our second quarter results and the momentum we carried through the first half of the year. Looking ahead, we remain confident in our strategy, our business model and our ability to continue advancing toward the targets outlined in our long-term financial framework. As we move through the back half, our focus remains on disciplined execution and continued progress across the key drivers of profitable sales growth, strong operating cash flow, healthy returns on invested capital and long-term shareholder value. With that, I'll turn the call back to Todd. Todd Vasos: Thank you, Donny. I'll take the next few minutes to provide an update on our 4 strategic growth pillars, which are supported by targeted initiatives to drive long-term sustainable growth and value creation. As a reminder, these pillars include enhancing the customer experience, elevating our brand, driving greater enterprise-wide efficiencies, and extending our reach. First, we remain focused on enhancing the customer experience. We are working to do this in a number of ways, both in our physical stores as well as through our digital initiatives. Within our merchandising initiatives, our efforts to improve the nonconsumable product offering continues to resonate with the customer as evidenced by the 4.5% increase in combined non-consumable comp sales during Q2. This performance has continued to drive a positive mix shift impact within our gross margin as well. Our nonconsumable growth was once again led by toys this quarter as our team continues to do a nice job offering an on-trend items and licensed products that are resonating with customers. Our brands and licenses are continuing to enhance the customer experience through a surprise and delight approach that offers exciting products at a compelling value. Looking ahead, we're excited about our extensive plans to drive newness and build on this momentum in the back half of the year. Beyond our in-store initiatives, we are also advancing our digital initiatives as we seek to further enhance the omnichannel customer experience at Dollar General. Our digital ecosystem is an important complement to our expansive physical store network and continues to be a key driver of incremental value and convenience for our customers. As we look to drive future growth in this area, we are focused on scaling our delivery options personalizing the customer experience and growing our DG Media Network. We continue to rapidly grow our delivery business through multiple avenues, including our myDG Delivery offering as well as through third-party partnerships of DoorDash and Uber Eats. These offerings are enhancing the convenience proposition for our existing customers as well as introducing new customers to Dollar General. In fact, we estimate that our collective delivery offerings are generating a strong sales incrementality rate of approximately 80%, along with high customer repeat rate. Our delivery platforms are also becoming a more meaningful sales driver as digitally engaged and delivery customers are more than twice as productive as our nondigitally engaged customer. Importantly, we believe we have significant opportunity to continue growing incremental delivery sales, while also attracting new customers through digital engagement and ultimately, in our stores. In fact, we estimate we have already seen more than 1 million new customers first engaged through our delivery and then become an in-store shopper at Dollar General. Looking ahead, we are focused on building the growth within our digital ecosystem while driving sales and customer growth and also support greater contributions from our DG Media Network. Our DG Media Network strategy is focused on accelerating on-site performance through improved search, sponsored products and stronger e-commerce experience while expanding our ability to capture off-site spend across social, connected TV and video. We are combining this approach with the opportunity for advertisers to participate inside our expansive footprint of physical stores, including our recently expanded in-store radio network, ultimately providing better connections between our digital and physical experiences. Over time, we believe our media network will serve as a strategic lever to drive profitable growth, enhance the customer experience and strengthen loyalty across our digital ecosystem. Overall, our digital strategy is an important complement to our in-store customer experience and a key driver within our long-term financial framework. Our second strategic growth pillar is elevating our brand. Our mature store base is a unique competitive advantage that enables us to serve customers in smaller, rural communities across the country. We continue to make strategic investments in our store base, particularly through Project Renovate and Elevate remodel programs, which are positively impacting the customer and associate experience. As a reminder, Project Renovate is our traditional remodel program, which impacts the entire store and includes adding or replacing coolers as well as upgrading to the latest store format. These projects are focused primarily on stores that are 7 or more years removed from opening or their last full remodel. While Project Elevate is designed to further grow sales and market share in portions of our mature store base that are not yet old enough to be part of a full remodel pipeline. These projects include physical asset enhancements, merchandising updates, product adjacency adjustments and category refreshes, all of which generally impact up to 80% of the total store. We continue to expect to execute a total of 2,000 Project Renovate remodels and 2,250 Project Elevate remodels this year. We made significant progress on these goals in the second quarter and have now completed 1,324 Project Renovate remodels and 1,422 Project Elevate remodels through the end of Q2. We continue to target annualized comp sales lift of approximately 6% in Project Renovate stores and approximately 3% in Project Elevate stores as we believe these projects can drive significant sales and profit growth. Our third strategic growth pillar is driving greater enterprise-wide efficiency. We continue to pursue opportunities to drive greater efficiencies while lowering costs across the organization, including increased supply chain productivity, further simplification of our stores, inventory optimization and increased use of artificial intelligence. By focusing on controlling the things we can control and driving efficiencies, we have been able to mitigate other cost pressures, including higher fuel costs. Additionally, while we are still early in our AI journey, we are building agentic operating systems for the enterprise focused on reshaping and optimizing our workflows to improve productivity throughout the organization. Our final strategic growth pillar is extending our reach. We continue to extend our unique combination of value and convenience in new communities across the country. In turn, this extension is helping attract new customers and support further market share gains. In Q2, we opened 125 new stores in the U.S. as part of our continued plan to open a total of 450 stores in 2026. Importantly, these projects continue to be one of the best uses of capital, delivering healthy returns, while also expanding access for new customers and communities. In addition to our new store growth in the U.S., we continue to test, learn and refine our strategy for incremental growth in Mexico. As part of our plans to open a total of approximately 10 stores in Mexico in 2026, we opened 1 Mi Súper Dollar General in Q2, bringing us to a total of 22 stores in Mexico. While our core business proposition of value and convenience continues to resonate with customers in Mexico, we are leveraging our customer, real estate and merchandising insights to further extend our reach and capture more of these exciting growth opportunities. Overall, we are pleased with the strong and steady progress we are making toward the goals laid out in our long-term financial framework. We are advancing each of our strategic pillars and are confident in our strategy to build on our progress and momentum. In closing, we are proud of our strong Q2 performance and financial results. The business is performing well, and we are operating from a position of strength as we head into the back half of the year. We recently had approximately 1,800 leaders of the organization in Nashville for our annual Field Leadership Meeting, and I was once again reminded of the talent, passion and commitment of our team. I want to thank our more than 198,000 employees for the work they do to serve our customers and communities every day, and I'm looking forward to all they will accomplish together in the second half of the year. With that, operator, we would now like to open the line for questions. Operator: [Operator Instructions] And the first question is from the line of Rupesh Parikh with Oppenheimer. Rupesh Parikh: Congrats on a nice quarter. So I want to start with gross margins. So I was hoping for more color on back half gross margins, including some of the key puts and takes you guys see out there and how you're managing through some of the transportation cost headwinds. And then related to that, how is your team thinking about the competitive promotional backdrop as others invest tariff refunds and there's more chatter out there on industry price investments? Donny Lau: Yes. Thanks, Rupesh. This is Donny. Maybe I'll start with your first question and then maybe hand it off to Todd to address your second one. But in terms of gross margin, I'd start with maybe just providing some color as it relates to Q2 because I think that does provide a little bit of context as we think about the second half. So in terms of Q2 gross margin, what I'd say here is, very pleased with the gross margin performance that we delivered in Q2. As you saw in the release, a 127 basis point improvement, that does include 81 basis point benefit from tariff refunds net of the reinvestment. But even when you set that aside, gross margin performance exceeded our expectations, and that's despite higher-than-anticipated fuel costs. And so when you think about the primary drivers of our expansion during the quarter, obviously, the tariff benefit net of reinvestment played a role. But when you set that aside, really pleased to see nice contributions across many of our gross margin drivers. And so while there's supply chain efficiencies, which we called out, but also continued improvements in shrink and damages. And what I'm very pleased with on the shrink side is we're lapping 108 basis points of improvement in Q2 2025. We touched on the transportation. The one thing I'll note here is it was higher than anticipated cost in the quarter because it was more pronounced in Q2 just given the full quarter impact versus Q1. But overall, building and seeing nice momentum across our gross margin drivers. And so when you think about the second half, we do expect gross margin expansion in the back half. Just a couple of things to note, we are lapping over 100 basis points improvement versus the prior year and fuel costs continue to be a little bit of a pressure point for us in the back half. But from a tailwinds perspective, again, continued expectations to drive improvement across a lot of our gross margin drivers. We expect continued improvement in shrink and damages. We expect continued improvement in growth in our other gross margin drivers, including our DG Media Network, nonconsumables, merchandising, more supply chain efficiencies and category management, more specifically there on the Value Valley dollar price point private label side of the house. And again, from a headwinds perspective, just higher fuel costs. We anticipate fuel costs will remain elevated for the balance of the year. The great news here is the team has done a great job so far offsetting these pressures within the base business. And the other thing I'd probably point out is just that the tariff landscape continues to evolve. Now our full year guidance today reflects current tariff levels that are in place today. But like any quarter, lots of puts and takes in any given quarter, and we saw that in Q2 as well. But overall, continue to believe there are more tailwinds than headwinds and feel really good about our ability to drive continued gross margin expansion as we move ahead. Todd Vasos: Yes. Thank you, Donny. And with that, Rupesh, I would tell you that as we exited Q2 from a pricing perspective, we feel very good about where we are on many levels. So we're in a great position on our everyday pricing position against all classes of trade. We executed, I believe, a very strategic promotional cadence in Q2 and expect that strong offensive execution of promotional cadences to be with us in the back half of the year as well. And of course, a strong and growing $1 price point that you heard in my prepared remarks, both from Value Valley as well as over 2,000 items at or below $1 dollar. So when you think about where we are, I would say that from a promotional activity and such, pretty close to what Q1 looked like overall, not only at Dollar General, but across all classes of trade. And as we look to the back half of the year, we're positioned really well and have a lot of dry powder to continue to be there for the consumer, what she needs, when she needs it. And I think I would also point to you, Rupesh, and I know you know us well, we've got a real strong track record of investing in price over time, including everyday price, our promotional activity. But more importantly, we've got a real good track record, once we do that of keeping that customer engaged at Dollar General even outside of those promotional time frames. We saw that in Q2. Actually, even when we didn't run additional promotional activity in Q2, we saw a very engaged consumer and a very sticky consumer. Operator: Next question is from the line of Matthew Boss with JPMorgan. Matthew Boss: Congrats on a nice quarter. So Todd, 3.5% comps in the second quarter, your best 2-year stack in 3 years. Can you speak to the cadence of comps that you saw in the quarter? And on the underlying momentum that you cited, where are you seeing the acceleration if you looked at the sequential trends from your core low-income customer versus trade down from middle and higher income customers? And then Donny, can you speak to the reinstatement of share repurchases now for the back half of the year? It's earlier than your initial '27 plan. Or at 2 to 3 comps in the model now, how you see annual earnings growth as a go-forward baseline with the return of capital allocation? Todd Vasos: Matt, I'll start. And then Donny, I'll pass it over to you. I would tell you, Matt, we're very pleased with our comp sales of 3.5%. It's a real testament of the back to basics plan we had put into place a couple of years ago. And now fast-forwarding all that work plus the work that we're doing around Renovate and Elevate, and all the work that the team has done on the merchandising side and ops side of the business, really all coming together as we continue to add wins on the consumer side of the equation. The customer is definitely seeing the differences not only in our stores, our in-stock levels as well as our pricing activity. And when I -- again, as I've mentioned, we are in as good a position as we've been in on everyday price against all classes of trade and feel very good about that momentum leading to the back half of the year. A lot of the momentum you're seeing is very well balanced as well. We're on that sixth consecutive quarter of great momentum in our nonconsumable businesses. And again, a real testament to all the work that the teams have done there. And when you think about nonconsumables for a moment, you can also think about in the second part of your question is where we're seeing some of these gains, additional gains and trade in of the consumer, really coming from that $100,000 and above crowd, if you will, income levels. And as I've always said, that cohort of customer brings with them, additional discretionary income that she's able to spend on nonconsumables as well as consumable goods. I think the important thing here to look at, Matt, as well, is the sustainability, we believe, of those comps as we move through the back half of the year. We're in a real good position both from pricing as well as promotional cadence, but also from the consumer standpoint. Inflation is still stubbornly high as well as fuel prices being volatile. And with that, the consumer needs us more every day, and we continue to be there for them. So we feel very good about our positioning and being able to deliver a good strong back half. Donny Lau: Yes. And Matt, to your question on -- Matt, to your question on share repurchases. I think what I'd say here is just very pleased with our announcement this morning that we now intend to resume our share repurchase program in the third quarter. Our plans are to repurchase up to $700 million of stock in the second half. Just as a reminder, share repurchases have always been an important component and driver of our long-term financial framework. And as you alluded to, the framework did assume we would resume share repurchases at some point during 2027. But as we've noted for several quarters now, we're ahead of schedule versus some of the initial goals embedded in our long-term financial framework, and that includes progress towards strengthening our balance sheet and enhancing our liquidity position. So really great to be in a position to restart the program, which is also now ahead of our initial long-term financial framework goals, which is great to see. And importantly, not only is this consistent with our capital allocation framework, but this step really does underscore, I think, the progress we're making towards our long-term financial framework targets as well as our confidence in the future of the business. And so as we look ahead, I'll tell you, no changes in terms of how we're thinking about the long-term financial framework. Operator: The next question is from the line of Michael Lasser with UBS. Michael Lasser: Has Dollar General entered a new era where it needs to use promotional activity such as $5 off a $25 purchase or $10 off a $40 purchase more frequently in order to drive the traffic? And this year, there's obviously going to be a variety of different offsets like the improvement in shrink and damages as well as some of the tariff-related ins and outs. But as next year approaches, those factors may not be here. And to the extent that this lever may need to continue to be utilized, how do you make sure that your gross margin maintains in an upward trajectory? Todd Vasos: Michael, thanks for the question. I would tell you that we feel very good about the positioning of where we are on pricing, as I indicated. Coming out of Q2, obviously, the customer is strained. We see that, and the customer obviously is feeling it every day. And we've always said, we reserve the right to go in and do what we believe is necessary for our core consumer as well as any trade down consumer that we see coming in. We believe it was very prudent in the activity that we've taken. I would tell you that we don't see meaningful step-up in those promotional activities. We did anniversary some. We invested appropriately and very much on the offensive around key holiday times during Q2. Think about Memorial Day, think about 4th of July, where the customer has a little bit more money in their pocket or has the optionality to spend a little bit more. We were there for the consumer during those strong times. But the great thing is, even outside of those promotional times, the consumer hung with us and stuck with us. And we do a really good job on the backside of retaining those customers, and we've seen that. The other thing that we don't spend a lot of time on, and I know that promotional activity gets a lot of airtime, but it's our strong everyday price that really brings the consumer in and keeps her sticky. And I would tell you that we are as good a price today as we've been against all classes of trade and feel very good about our everyday pricing as well. So when you think about that, we actually invested in Q2 and everyday price as well. And keep in mind, that takes a little longer for the customer to realize you've lowered an everyday price. And so that should be the gift that keeps on giving into the back half of the year. So we feel we're doing the exact right thing for the customer at the right time from a position of strength and on the offense. And we have the ability to flex up and flex down and have enough dry powder in the back half to be there for the customer every day. Operator: The next question is from the line of Seth Sigman with Barclays. Seth Sigman: So when we look at the refunds this quarter, it looked like it was 81 basis points to the gross margin equates to about $91 million. I think the math on the operating profit suggests that the net impact was less than that, so perhaps there's offsets in SG&A. Can you speak to that where are you spending within SG&A? And then just related to that, to your credit, SG&A seems quite low even with those investments, up only 3% per store. So just any other color on maybe how you're changing? How you think about cost management? And how to think about that in the back half of the year? Donny Lau: Yes. No, I appreciate the question. So I think to your point about the tariff refunds, I think you're thinking about it the right way. We did receive and record the vast majority of the anticipated refund amount in Q2. It did provide us with the opportunity to reinvest heavily as Todd mentioned in enhancing the customer value proposition. And some of that, to your point, was an incremental SG&A spend on customer-facing initiatives. And the one thing I'd point out is increased marketing spend, which we think is going to pay a lot of dividends as we move ahead. And so I think from an SG&A perspective, you're right. In terms of -- as you think about the quarter, we did -- there was a little bit of reinvestment, so about 15 basis points is the way I would think about that math. And so it's flat versus year, but when you take that into account, it essentially delivers leverage in the quarter, which is great to see. Operator: The next question is from the line of Simeon Gutman with Morgan Stanley. Simeon Gutman: Nice quarter. Todd, when the going gets tough, I always want to ask you about the consumer as you understand she and trade down. Can you talk about what's happening there? And then I'll put the follow-up within it. The incrementality from here for some of the last mile services that you're using, is the incremental benefit building stable or beginning to lap or moderate against tougher compares? Todd Vasos: Great. Thank you for the question. And I'll take the first half. And then Emily, I'll pass it over to you. Yes, the consumer obviously is strained. I mentioned earlier that stubborn inflation that is currently with that consumer hasn't subsided. And also the volatile fuel prices. We've always said here, if you go back years and years, any time it gets close to that $4 mark or crest $4, it puts an extra strain on the consumer. And we obviously have been there for the better part of Q2 and now as we move into Q3. So that consumer is under a lot of pressure. Our core consumer, especially as it relates to feeding her family and being there for her family needs us more than ever. And we're seeing that inside of our numbers as well. And then that trade-in because of all the pressure that, that middle and upper middle income consumer is under, and that is usually that $100,000-plus crowd, if you will, that has been trading in the better part of a year now and has continued to trade in through Q2 and now into Q3, I would tell you, is looking for more and more value as time goes on. She was trading in earlier on more sporadically. Now on a more everyday basis. Not only everyday goods, but as I mentioned earlier, she has been trading in for those nonconsumable goods as well. The great thing about that all put together is we believe that core consumer will continue to be strained as we move through the back half of the year. And we're in a great position on pricing, promotional cadences and our $1 offerings as well as in my prepared remarks, our seasonal offering for the back half of the year is very strong with a very strong offering increased over last year in the dollar price point as well. So we feel very good about where we're headed in the back half and what's ahead of us to be able to deliver for the consumer each and every day. Emily Taylor: Yes. And I'll take the delivery question. So from an incrementality perspective, it really is stable. I'll give just a little more color on the business overall. We were really happy with the business in the quarter. It was ahead of our internal plan. And delivery for us really is making sure that we are there to meet the convenience needs of the customer, which is, of course, incredibly important. At the same time, we're using delivery, of course, to reach new customers. And that's exactly what we're seeing. You heard earlier on the call that over 1 million customers found and shopped inside our stores for the first time after they first use delivery to find Dollar General. So that's really exciting results for us. But when you combine that with the fact that we continue to see a higher average basket from our delivery orders versus what we see inside our stores, it means that we're also seeing delivery broaden the way our customers are able to shop with Dollar General. So of course, delivery supports both traffic and basket growth here at Dollar General and with the high repeat rates that we continue to see, it tells us the customers really value what we're doing in the space and it really encourages us in terms of potential for additional growth as we move ahead. Operator: The next question comes from the line of Chuck Grom with Gordon Haskett. Charles Grom: Todd, Donny, great quarter. Can we spend some time on Value Valley and the dollar price point, strong comps here, high teens again, back to back quarters, I guess how can you capitalize on this going forward? You have a couple of thousand items in stores. Would it make sense to grow this to take advantage of the Tree's multi-price move? And then my follow-up is on SG&A. You guys are lapping, I believe, $200 million of higher incentive comp and the leverage is essentially neutral here in 2Q despite that 3.5%. So how do we think about the hurdle rate going forward? Is it still 3% or costs in the business need to move higher? Emily Taylor: Chuck, this is Emily. I'll take your Value Valley question. We were really happy with the 16% growth. And you heard us talk about the fact that now we're running over 600 items in this particular set inside our stores. That compares to about 500. So the team is doing an outstanding job of continuing to expand our assortment and the breadth of items that customers can get inside our store within that Value Valley space. I think it's really important to call out that Value Valley for us doesn't represent all of the Dollar items. You heard Todd referenced the 2,000 -- more than 2,000 items at $1 and below that we have throughout the store. And we're also growing in those areas. We have off-shelf space in 9,000 stores that we referenced, but working on getting those and see the potential to get those into all stores this year, which will be one source of growth. We talked last quarter about our Dollar door in frozen food. The customer response there has been very strong. And as you'd expect, the team is already looking at rapidly expanding that set as well. And then from a seasonal perspective, Todd referenced, but just to give you a number, our dollar SKU count in the back half sets is going to be up 40%. So we continue to deliver that really important value for our customer and feel like we've got plenty of room to continue growing. Donny Lau: Yes. And in terms of your question about SG&A, I guess a couple of things. I think the first thing I'd say is I think the number you quoted in terms of the incentive comp, that's not a number I think we've necessarily disclosed. But to your point, we are lapping higher incentive comp from prior year. But what I would tell you is the business is performing, right? And so incentive comp for this year, the tailwind is going to be lower than we were anticipating, which is actually a really good thing from our perspective. In terms of the leverage point going forward, as a reminder, the long-term framework always contemplated we would minimize deleverage at a comp of 2% to 3%. That's still our expectation as we move forward. And so the great news here is even with incremental reinvestment that was tariff-related during the quarter, right, SG&A leverage was essentially flat as we talked about leverage when you set that aside. And so we feel really well positioned to really deliver against our target, outlining the long-term framework. I think the couple of things I'd point you to that actually gives us a lot of confidence is the accelerated remodel program should -- is expected to really mitigate future earnings in expense which should help. And in the meantime, we expect to drive additional efficiencies through our work simplification efforts. And so overall, I feel really good about our efforts on this front. And as we've alluded to in the past, the long-term framework doesn't contemplate any potential benefit from AI. And we're still early days here, but feel really good about what that could mean for us as we move forward. Operator: The next question is from the line of Zhihan Ma with Bernstein. Zhihan Ma: Circling back on the comp side of things, your full year guidance does imply some sort of a moderation compared to the really strong trends that we saw in Q2. Is there anything you can point to in terms of the Q2 drivers that's not sustainable going into the second half? And we think that on the delivery comp contribution side, we have seen some deceleration there from 80 basis points to 70 to, I think, 40 this quarter. So as you start to lap tougher comps there, are you expecting a smaller contribution from here? Todd Vasos: Thank you for the question. Yes, I would tell you that there really isn't anything in Q2 that we don't -- from a top line perspective that we don't believe will continue into the back half of the year. One thing to keep in mind, in Q4 last year, we are lapping this year a pretty big benefit as we called out at the beginning of this year from the winter storms last year. So Q4 has that embedded in it from last year. So the lap is pretty big. So keep that in mind as you think about it. But I would tell you, from our perspective, all of the fundamentals are very much intact on the top line. And actually, we believe that we have a real opportunity to continue to capitalize and make new friends, if you will. From a customer perspective, that will help propel the back half, but also into 2027. Emily? Emily Taylor: Yes. And just from a delivery perspective, you heard my earlier comments, but just as a reminder, last year, we were scaling delivery to 18,000 stores, which we finished by year-end. I would just say that even with that in Q2, we did see outsized growth out of the delivery business, and it was great to see it add to really strong brick-and-mortar performance. Operator: The next question is from the line of Spencer Hanus with Wolfe Research. Spencer Hanus: I just wanted to ask on tariff refunds and how you're thinking about the sales lift that you're going to get from those reinvestments that you're going to be making in the second half? And then given what your peers are doing from a pricing standpoint, do you think it's going to be harder to see that volume lift from the promos? And then just on Value Valley as the assortment expands there, have you seen any change in your value scores as people realize you have more of these $1 SKUs in the store? Todd Vasos: Yes, I'll take that. Real quick, I would say, that when you think about where we are on pricing, as I mentioned earlier, we're in a real good spot. And I believe we're in a real good spot as we move into the back half of the year. What we did in Q2 and where we invested, I believe, was from a position of strength and on the offense. And that was the idea. It was around these holidays that I mentioned. But also, it was to continue to help this core consumer and the trade-in consumer bridge the end of the month and, well, quite frankly, all pieces of the month, but definitely bridge where she may fall short throughout the month at times. And with that, and I think about competitors, and I mentioned earlier, Q2 looked a lot like Q1. And we feel that we've got plenty of dry powder in the back half of the year to be able to continue to do whatever we need to do for that consumer from a position of strength. We watch very closely all competitors no matter what classes of trade looking at price. Price is paramount for our customer. So as you would imagine, it's paramount for us as we put together our plans. And everything that Donny laid out from a guidance perspective in the back half of the year contemplates all of those pieces to be able to deliver from a customer perspective, no matter what we believe that the competition does. Again, from a position of strength is where we're jumping into Q3 and 4. And then lastly, on the $1 price points and such, we feel, again, very, very good there and where we're headed, but also where we can leverage that with our consumers. And they are giving us credit. We're seeing it in our own data that comes back where the consumer is relying more and more on that $1 price point. And also, it's that whole halo effect on price, and she's given us credit for that as well. The great thing is, though, as we see the trade-in come in, even in that middle and upper middle, they're actually moving to a lot of these $1 price points, too. We don't like to use the word magical, but it is a magical price point and we know that. We are leveraging that to our benefit, but also and foremost, the benefit of the consumer. And I would tell you that. And you heard from Emily as we move into the back half, but even more so into '27, we've got real plans to expand that $1 price point to offer even more value for the consumer. Operator: The next question is from the line of Kate McShane with Goldman Sachs. Katharine McShane: Just a quick question from us just about how we should be thinking about ticket versus traffic in the second half versus what you've seen so far this year? Todd Vasos: Yes. I would tell you, when you look at the traffic numbers and the ticket number, we feel very good about the balance in Q2. We've taken all that into account in the back half of the year. We see the momentum in the business, feel good about the traffic number that we're already seeing here in early Q3, as I mentioned in my prepared remarks, we're off to a good start. And so we believe that a real good balance of traffic and ticket will continue into the back half of the year. Now we don't take any of that for granted. Obviously, we are, from a position of strength, doing a lot of things to ensure that we solidify those traffic and overall sales numbers in the back half of the year. But the most important thing, I think, to think about here and the way we always look at it is really from the consumer lens and where the consumer is today and being there for her, if we're there on all of the elements that I talked about earlier, from everyday price to promotional cadence and that $1 price point, we believe that delivering on all 3 of those promises every day will continue the momentum that we've seen. And then lastly, I don't want to minimize also the execution level that this team is performing at, not only in our operating group, in our supply chain and in our merchandising group back here at our store support centers. We're hitting on all cylinders, and we're there for the consumer each and every day. Operator: The next question is from the line of Scot Ciccarelli with Truist. Scot Ciccarelli: So I guess my question is you mentioned that the low-income consumer is increasingly strained and that you're seeing that in your numbers. Can you give us any data points or examples around that? And then secondly, you had expected shrink and damage benefits to ease a bit this year. But I think they continue to outpace previous expectations. So like how much lower can shrink and damages go from where we are today? Todd Vasos: Yes. I'll start that and pass it over to Donny. From our perspective, what we see from our numbers in that core consumer, so the low-end consumer is definitely still stretched. Now I would tell you, and we say this quite often, as long as she's gainfully employed, she has money and can feed her family. But she is still gainfully employed, which is great to see. And she's seeing some gains in her income levels as well. Unfortunately, that's been offset by the stubborn inflation that I mentioned and those volatile gas prices reaching $2, $4 or even above $4 a gallon, depending on what state you're in. So we believe we see that core consumer continuing to be under strain. She tells us that in all of our data. We see it very strong. But also, she tells us that she needs us more. And we see that in the traffic number as well. And so she continues to come. She comes more often but she buys less on each trip. And again, that's not dissimilar to how we see the core customer in times of distress because she really is watching every penny. She doesn't know what the next week is going to hold. So instead of doing even many stock-up trips, she buys less on each trip, but comes more during the month to ensure she can meet her family's needs. So we see that playing out. And with that, we're there for the consumer. Donny Lau: Yes. So in terms of your question on shrink and damages, obviously, really pleased to see continued improvement during the quarter. We continue to expect that shrink and damages will contribute about 50 basis points of incremental gross margin expansion of the 2025 base. And again, that's on top of the over 80 basis points of expansion we've already achieved in 2025. And so as a reminder, and you touched on this, we were initially targeting 80 basis points from just shrink alone over a 2- to 3-year period. So the takeaway here is shrink is improving at a faster and higher rate than initially anticipated. And as I mentioned, we saw continued improvement in Q2, and that's despite lapping a 108 basis point improvement from the prior year, which is obviously, great to see. In terms of damages, the improvement in 2025 was pretty much in line with our expectations, and the improvement in the first half is trending better than anticipated. So overall, also feel really good here and pleased with the progress we're making on this front. Operator: The next question is from the line of Corey Tarlowe with Jefferies. Corey Tarlowe: Great. I wanted to ask about any updates with the retail media network. It seems like it could be a very tangible upside driver to the margin profile over the next several years as we march towards that 6% to 7% operating margin profile. So I'd be curious if you could maybe share any unique updates or insights as it relates to that? Emily Taylor: Yes. I'm happy to give you a little color there. We aren't quantifying the quarter results. We did quantify it at the end of last year as $170 million in annual volume. And as you said, we are expecting that to grow meaningfully. A couple of things about our media network. Just as a reminder, our network is unique that it offers advertisers access to an unduplicated audience that they otherwise wouldn't be able to reach. And we're able to deliver high returns for our advertisers using our network, and that really is helping us to drive growth in this space. As we move ahead, we have a couple of levers that will really accelerate the growth. We are innovating in ways that are meaningful for our advertisers, increasing the number of opportunities that we have for investment. This is inside our stores as well as in our app and on our website. And then importantly, increasing the engagement in our digital platforms. This is an important one because as we continue to grow engagement, which we are seeing, that will continue to attract more advertisers. And those increases will be accelerated by some of the plans we have in place in our digital area of the business. That includes subscription and loyalty, which we will pilot at the end of this year, expect to roll that out fully in 2027. So we expect initiatives like that to not just support the growth in digital, but also help support the growth in our media network going forward. Operator: Our final question will be from the line of Robby Ohmes with Bank of America. Robert Ohmes: I was hoping maybe just an update, a little more of an update on the new store format, which you guys have seen this quarter and opportunities you think it might be opening up in new categories? Just any more color on that would be great. And then also remind me, SKU rationalization, is that done? Or could you be doing more from here? Emily Taylor: Yes, sure. I'll take both of those questions. So from a new format perspective, you're exactly right. We started this year rolling out a new format that we call our DGTP '26. And the work that the merchant team did there really was centered in customer insights to help influence the layout of that store. We opened up the front of the store. We improved sightlines for customers and employees in this new layout. And we made pretty significant adjustments to adjacencies to drive higher engagement across the store, and that's what we're seeing. We created clear destinations for food and snacks, for health and beauty, which is generating great results, and then our home and seasonal product as well. So excited about what we're seeing early days. It's rolling out both in the form of new stores as well as part of our Renovate Project as well. And then... Todd Vasos: Yes, I'll take the last one. And as you look at SKU rationalization, I first want to step back and say, we're very, very pleased with our inventory levels today. We continue to make a lot of progress on inventory per store, again, growing sales at or below our inventory growth levels, and we delivered again a very strong performance in Q2. That has also assisted our stores in being more productive, and being more productive there means getting product to the shelf faster and being there for the consumer with the right amount of items and products that she's looking for as quickly as we possibly can. And then as you think about, as we go forward, the team is looking at continued SKU rationalization, albeit probably more surgical in nature as we move forward. We're already implementing some test and learns even in the back half of this year around lower volume store type planograms, taking a substantial amount of SKUs out of the mix where it may not be as productive. And also, again, in some high shrink locations where shrink is still a bit of a headwind in some of these stores and looking at SKU rationalization a little bit differently there. So probably as we move forward a little bit more surgical than we have been, but it is still our ultimate goal to grow sales at or below -- or sales at or above the rate of inventory growth overall. Operator: Ladies and gentlemen, this will conclude our question-and-answer session and also concludes today's conference. We thank you for your participation. You may now disconnect your lines at this time, and have a wonderful day. Before you buy stock in Dollar General, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Dollar General wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years. 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As with all our articles, The Motley Fool does not assume any responsibility for your use of this content, and we strongly encourage you to do your own research, including listening to the call yourself and reading the company's SEC filings. Please see our Terms and Conditions for additional details, including our Obligatory Capitalized Disclaimers of Liability. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. Dollar General (DG) Q2 2027 Earnings Call Transcript was originally published by The Motley Fool