Dollar General shares jumped the most in six months following a quarterly earnings beat and an upward revision to full-year guidance, reflecting continued momentum from value-seeking, cash-strapped consumers.

Dollar General posted a strong quarter, with third-quarter EPS of $1.28, beating last year's .89 cents and coming in well above the Bloomberg consensus estimate of .94 cents. Same-store sales rose 2.5%, also ahead of BBG expectations, driven entirely by higher traffic (+2.5%) while average ticket remained flat. Gains were broad-based across consumables, seasonal, home, and apparel.

Here's a snapshot of the third quarter (courtesy of Bloomberg):

• EPS: $1.28 vs. $0.89 y/y, estimate $0.94

• Net sales: $10.65 billion, +4.6% y/y, estimate $10.62 billion

• Comparable sales: +2.5% vs. +1.3% y/y, estimate +2.47%

• Gross margin: 29.9% vs. 28.8% y/y, estimate 29.5%

• SG&A as % of revenue: 25.9% vs. 25.7% y/y, estimate 26.4%

• Operating profit: $425.9 million, +32% y/y, estimate $328.1 million

Dollar General also lifted its FY25 outlook:

• Sees comparable sales +2.5% to +2.7%, prior +2.1% to +2.6%, estimate +2.5% (Bloomberg consensus)

• Sees EPS $6.30 to $6.50, prior $5.80 to $6.30, estimate $6.12

• Sees net sales +4.7% to +4.9%, prior +4.3% to +4.8%

• Sees capital expenditure at the low end of $1.3 billion to $1.4 billion, unchanged, estimate $1.39 billion

• Still sees an effective tax rate of about 23.5%

In markets, DG shares surged nearly 11% - the biggest jump since early June. The stock had been down as much as 73% from its 2022 highs as high interest rates crushed lower-income consumer activity, but the rebound is now well underway. DG suddenly looks like a name to watch heading into next year. 

Goldman Sachs Managing Director Kate McShane is "Buy" rated on Dollar General with a 12-month price target of $126 ... 

Here's what other Wall Street analysts are saying: 

Bernstein, outperform (Zhihan Ma)

• This is another "strong beat and raise" from Dollar General, with gross margin outperformance (up 110bps y/y) the key driver amid shrink recovery, higher inventory markups, partly offset by LIFO charges 

• NOTE: "Shrink" in retail refers reduced inventory due to theft, damage or other causes of product loss before it is sold to the consumer

• Ma notes that comp. sales were "entirely led by traffic growth while ticket was flat"

• "We don't expect outsized comp sales growth from DG, like what Five Below reported yesterday, as DG doesn't benefit nearly as much from tariff-driven price increases or Temu's pullback," she says 

• For DG, she sees further gross margin recovery potential into FY26

• "Jury is still out on the retail media growth potential," which she hasn't assigned any value to

Bloomberg Intelligence, Jennifer Bartashus

• "Dollar General's efforts to improve operations by executing well on retail basics like clean stores, in-stock levels and sufficient labor are gaining traction with core and higher- income trade-down shoppers," though it remains to be seen whether those new customers will stick, Bartashus writes

• Gains in both consumable and discretionary categories in 3Q enabled the retailer to boost annual sales and profit forecasts

Jefferies (buy), Corey Tarlowe

• This is a "clean beat" on both top- and bottom-line, driven by better‑than‑expected margins and "steady traffic gains"

• Boosted guidance signals "confidence in holiday execution and continued market share gains across both departments"

• Inventory discipline is "notable"

• "Near term, the story strengthens on operational leverage and improved cost efficiency," while longer term, "store growth and remodel productivity provide visibility into sustained EPS growth"

"The Company is raising its financial expectations for the year, primarily to reflect its outperformance in the third quarter, as well as its improved outlook for the remainder of the year, while also taking into consideration the potential for uncertainty related to consumer behavior," Dollar General wrote in a press release.

Important to note: Dollar General's customer base is primarily lower- to middle-income households that have been trapped in the K-shaped economy so far this year, still dealing with lingering woes from the Biden-Harris regime years. The third-quarter beat and rosier outlook suggest improvement within these cohorts as value-seeking consumers continue to trade down.

This previous earnings season revealed that consumers are aggressively hunting for deals:

TJ Maxx Hikes Outlook As Consumers Trade Down In Ominous Economic Signal

And there is good news for working-poor households heading into next year:

And Walmart remains the discount retailer consumers gravitate to most.