Recently, Dollar General released their Q2 2025 earnings report on October 28, which exceeded analysts' expectations. This has made us pay more attention to its potential. Moreover, the company's management has raised its full-year performance outlook, suggesting that good news may not be over yet.

Dollar General's stock has risen about 45% this year, but it is still down over 55% since its peak in 2022. However, the latest financial report shows that the retailer's transformation is still progressing.

What kind of company is Dollar General? Despite the name containing "Dollar," it is not just a dollar store. It sells a variety of products, from everyday essentials to clothing and seasonal items, all at affordable prices. For example, it may sell brand-name necessities like toilet paper, just like other stores, but the sizes might be smaller, and the price for a single roll is cheaper than buying in bulk.

This company is committed to serving lower-income customers by choosing to open stores in areas with smaller populations that are overlooked by large competitors. This makes it more convenient for customers to visit Dollar General than to drive to a big store, even though big stores may be cheaper. Although Dollar General stores are smaller, the company is large, with over 20,700 stores in the United States, and plans to complete over 4,800 real estate projects in fiscal year 2025, including renovating old stores and adding 575 new stores.

Looking at the performance in 2025, although the stock price has risen sharply, it has only covered a small portion of the decline since the end of 2022. This presents a significant opportunity for long-term investors. The highlights of the second quarter were its financial and operational performance: sales increased by 5.1% year-on-year, reaching $10.7 billion, while same-store sales grew by 2.8%, attributed to an increase in customer numbers and a rise in spending per visit.

Earnings per share for this quarter were $1.86, a year-on-year increase of 9%, significantly surpassing Wall Street analysts' expectations, being about 18% higher than the consensus. The company improved its gross margin by 137 basis points, thanks to reduced waste, increased inventory prices, and decreased inventory losses.

These all indicate that the transformation is taking effect, and the management's latest full-year guidance also suggests potential for the future. Sales are expected to grow by 4.3% to 4.8%, and the updates on same-store sales also hint at better performance.

Although the stock price has risen rapidly in the short term, it still has a gap compared to historical highs, indicating room for recovery. It may not be as quick as the initial reversal, but in the long run, Dollar General and its still decent 2.1% dividend yield may be worth a closer look.

Before considering an investment in Dollar General, it is worth noting that everyone is seeking the best investment options. Some stocks that are believed to potentially yield significant returns in the coming years have now emerged. In the past, recommendations regarding Netflix and Nvidia, if adopted, would have already brought considerable gains.

Lastly, a reminder that past performance does not guarantee future results. This article is for informational reference only and does not constitute investment advice.