Dollar General Corp (NYSE:DG) stock rose 2.21% (As on December 16, 11:41:53 AM UTC-4, Source: Google Finance) after JPMorgan’s Matthew Boss upgraded the company to Overweight from Neutral with a price target of $166, up from $128. The firm sees upside to company’s 2%-3% same-store-sales growth outlook for fiscal 2026 given its exposure to the employed low-income consumer and higher level of middle income consumers trading down. Meanwhile, Boss labels these three income groups as “gainfully employed,” representing those with a stable outlook in FY26 although still facing continued inflationary pressure; middle-income with “discretionary wallet opportunity,” but with elevated AI-related employment concerns that are driving increased value focus and “trade-in”; and higher-income, those earning more than $100K with macro initiatives driving “trade-down.” The brokerage expects the company to continue to grow sales over the next few years, and noted the opening of new stores, remodeling of current ones, and a solid macro backdrop.
The upgrade reflects JPMorgan’s view that Dollar General is positioned to deliver multi-year same-store sales growth of 2-3% or more, supported by the company’s new store expansion and renovation programs, which could add 200 basis points to performance. This growth projection aligns with Dollar General’s recent revenue trends, which InvestingPro data shows have remained resilient despite economic pressures. JPMorgan cited several company-specific initiatives driving the positive outlook, including Dollar General’s discretionary reset and Value Valley program, alongside favorable macroeconomic conditions for its core consumer base and potential benefits from trade-in and trade-down trends.
The investment bank projects 2.5% same-store sales growth, 1-2% net store growth, and 30 basis points of annual gross margin expansion through improvements in initial markup, shrink reduction, product mix, DG Media, transportation efficiencies, health and beauty aids expansion, and private brand development. On the call, Vasos also noted potential macro tailwinds to Dollar General’s (DG) core low-to-middle income consumer into the first half of 2026, with no tax on tips and no tax on overtime expected to outweigh any potential headwinds from SNAP benefit changes.
JPMorgan expects these factors to generate SG&A leverage at just over 3% comparable sales, driving 12-13% EPS growth while the business generates more than $1 billion in annual free cash flow after dividends. In other recent news, Dollar General reported strong third-quarter results, achieving a notable earnings per share of $1.28, surpassing Truist Securities’ estimate of $0.96. The company’s sales reached $10.65 billion, marking a 2.5% growth in comparable sales.