Dollar General Corporation

Deloitte's latest back-to-school survey shows U.S. parents are becoming more cautious with school-related spending, with households earning more than $200,000 planning to cut back-to-school spending by 20% from 2025. The survey, conducted from May 22 to May 29 among 1,207 parents with at least one child entering grades K-12 in the fall, found that families earning more than $100,000 a year expect to spend less this season. Deloitte expects overall back-to-school spending to fall to $557 per child from $570 last year, roughly a 6% decline after adjusting for inflation. Technology spending, especially on laptops and smartphones, is expected to see the steepest drop at 16%, as parents shift more dollars toward clothing, accessories, and classroom supplies. Retailers such as Walmart, Target, Kohl's, and Dollar General are leaning into promotions to attract cautious shoppers, with Walmart and Sam's Club announcing lower prices on thousands of items and Dollar General offering more than 70 items for $1 or less.

Three consumer stocks—Dollar General, Victoria's Secret, and Williams-Sonoma—are flagged for having questionable fundamentals. Dollar General's annual sales growth of 3.9% over three years lagged peers, its gross margin is a low 30.3%, and earnings per share contracted 12.6% annually. Victoria's Secret saw 2.6% annual revenue growth, an operating margin of 4.8% below the industry average, and a 6% annual EPS decline due to share issuance. Williams-Sonoma's revenue declined 2.6% annually over three years amid store closures, though same-store sales grew 2% over the past two years.

Non-discretionary retail stocks reported a satisfactory first quarter, with revenues beating analysts' consensus estimates by 1.5% and next quarter's revenue guidance in line. Target delivered the best performance, reporting revenues of $25.44 billion, up 6.7% year on year and exceeding expectations by 3.4%, while also beating EPS and EBITDA estimates. Walmart had the weakest guidance update, with revenues of $177.8 billion, up 7.3% year on year, but full-year EPS guidance and next quarter's EPS guidance missed expectations. Dollar General reported revenues of $10.79 billion, up 3.4% year on year, in line with estimates, but delivered the weakest performance against analyst estimates of the group. Grocery Outlet achieved the highest full-year guidance raise among its peers, with revenues of $1.17 billion, up 3.6% year on year, beating estimates by 1.4%. Costco delivered the fastest revenue growth, with revenues of $70.53 billion, up 11.6% year on year, beating estimates by 1.5%, though it missed EBITDA estimates.

Dollar Tree is reshaping its value retail strategy by expanding beyond the traditional single-price model. First-quarter fiscal 2026 comparable-store sales rose 3.5%, driven by a 4.5% increase in average ticket, though traffic declined 1%. Gross margin expanded 120 basis points, supported by higher mark-on, lower freight costs, and reduced shrink, while adjusted operating margin rose 110 basis points to 9.5%. The company opened 113 new stores, ending the quarter with 9,382 locations, and more than 8,800 stores are now serviceable through Uber Eats. Despite these gains, tariffs, markdowns, and cautious low-income consumer spending remain headwinds, and the stock carries a Zacks Rank #3 (Hold).

Dollar Tree's stock outlook depends on whether multi-price expansion and margin improvements can offset weak traffic and a cautious consumer backdrop following the sale of Family Dollar. The company completed the Family Dollar divestiture on July 5, 2025, leaving the Dollar Tree banner as the core operating brand. In the first quarter of fiscal 2026, gross margin expanded 120 basis points and adjusted operating income rose 22% year over year to $473.3 million, while comparable sales increased 3.5% driven by a 4.5% ticket gain that was partly offset by a 1% traffic decline. Dollar Tree raised its fiscal 2026 adjusted earnings outlook, now expecting net sales of $20.5 billion to $20.7 billion, comparable-store sales growth of 3% to 4%, and adjusted earnings per share of $6.70 to $7.10. The stock carries a Zacks Rank #3 (Hold), with a Growth Score of A, Momentum Score of A, Value Score of B, and VGM Score of A.

Shares of RH, Sprouts Farmers Market, and Dollar General declined in afternoon trading after the Federal Reserve held its benchmark rate at 3.5% to 3.75% and revised its dot plot to show a median year-end rate estimate of 3.8%, up from 3.4%. The move suggests that rate cuts delivered in late 2025 may be partially reversed, disappointing retailers that had been counting on lower rates to boost consumer confidence and household budgets. The FOMC noted that inflation at 4.2% remains too high to justify relief, while rising rate expectations increase the cost of debt refinancing for leveraged retailers and dampen mortgage activity, which in turn reduces spending on home-related goods. RH fell 3.8%, Sprouts fell 3.9%, and Dollar General fell 4%. Dollar General's decline is part of a broader downturn, with the stock down 20.1% year-to-date and trading 30% below its 52-week high of $156.24 from February 2026.