DOLLAR GENERAL CORPDG

After enduring years of severe margin compression, Dollar General engineered a massive 107-basis-point gross margin expansion to 30.7% in FY2026. This profitability breakthrough proves the discount retailer is finally overcoming the inventory shrink and markdown pressures that had severely impaired its bottom line. By aggressively curtailing inventory damages and optimizing its merchandise mix, the company stabilized its core low-cost operating model and halted a multi-year profit slide.

Despite bottom-line volatility, top-line expansion remained unbroken as revenue grew from $34.22 billion in FY2021 to $42.72 billion in FY2026. The company faced its most severe test in FY2025, when operating profit plunged 29.9% to $1.71 billion amid a punishing shift toward lower-margin consumables and a $214.2 million impairment charge. However, management aggressively corrected course the following year. In FY2026, the retailer delivered 3.0% same-store sales growth, shrank merchandise inventories by 6%, and repaid $1.7 billion in long-term debt to fortify the balance sheet.

The market’s repricing of this operational turnaround was swift. When peak inventory struggles clouded its outlook at the close of FY2025, the stock languished at $71.06 and traded at just 13.9x earnings. Just one year later, after proving its loss mitigation and margin recovery strategies were effective, shares closed FY2026 at $143.43, commanding a much richer 20.9x earnings multiple and a $31.6 billion market capitalization.