Dollar General Corporation (DG Quick QuoteDG - Free Report) is likely to register an increase in the top line when it reports second-quarter fiscal 2025 results on Aug. 28, before the opening bell. Investors are closely monitoring for insights into the company's performance and strategic direction.

DG is one of the largest discount retailers in the United States, offering a wide selection of merchandise, including consumable goods, seasonal items, home products and apparel. The Zacks Consensus Estimate for its revenues is pegged at $10.67 billion, marking a 4.5% increase compared with the same quarter last year. 

Despite the expected rise in revenues, Dollar General's bottom line is likely to have faced challenges. The Zacks Consensus Estimate for second-quarter earnings per share has been unchanged at $1.56 over the past 30 days. This figure indicates a decline of 8.2% from earnings reported in the year-ago period.

Dollar General delivered a trailing four-quarter earnings surprise of 5.2%, on average. In the last reported quarter, the company’s bottom line beat the Zacks Consensus Estimate by a margin of 21.1%.

Factors Shaping Dollar General’s Q2 Outcome

Dollar General’s focus on enhancing store productivity through Project Renovate and Project Elevate remodels, alongside its ongoing new store openings, is likely to have positively contributed to revenue growth in the second quarter. The company’s competitive pricing strategy, including maintaining more than 2,000 items at or below the $1 price point, continues to resonate with value-seeking shoppers. We forecast same-store sales growth of about 2.6% in the second quarter.

The company is optimistic about several strategic initiatives, including the rapid expansion of same-day delivery through DoorDash and its own platform, which reached more than 3,000 stores. These efforts, combined with increased trade-in activity from middle and higher-income households, are likely to have driven incremental sales. Additionally, shrink reduction efforts and improved inventory management are likely to have provided a gross margin tailwind. We expect gross margin expansion of about 50 basis points year over year in the second quarter.

The company’s investments in digital capabilities, merchandising improvements and supply-chain efficiencies are also likely to have supported continued growth. Notably, improved in-stock levels and on-time supply-chain performance have been enhancing the shopping experience and helping sustain traffic momentum.

However, Dollar General faces challenges such as, uncertain tariff environment and elevated SG&A expenses, including the impact of higher incentive compensation, which is likely to have weighed most heavily in the second quarter. The company also faces continued cost headwinds from wage rate increases of 3.5% to 4%, as well as higher repairs, maintenance, utilities and depreciation expenses. These factors are likely to have pressured profitability despite sales momentum. We anticipate SG&A expenses, as a percentage of sales, to deleverage by roughly 110 basis points, resulting in operating margin contraction of around 60 basis points for the quarter.

What the Zacks Model Predicts for DG

As investors prepare for Dollar General's second-quarter announcement, the question looms regarding earnings beat or miss. Our proven model predicts an earnings beat for Dollar General this time. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat, which is exactly the case here. 

Dollar General has an Earnings ESP of +0.06% and a Zacks Rank #3. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Other Stocks With the Favorable Combination

Here are other companies you may want to consider, as our model shows that these also have the right combination of elements to post an earnings beat:

Burlington Stores (BURL Quick QuoteBURL - Free Report) currently has an Earnings ESP of +6.06% and a Zacks Rank of 3. You can see the complete list of today’s Zacks #1 Rank stocks here.

The company is likely to register an increase in the bottom line when it reports second-quarter fiscal 2025 numbers. The Zacks Consensus Estimate for the quarterly earnings per share is pegged at $1.27, which implies a 5.8% rise from the figure reported in the year-ago quarter. The Burlington Stores’ top line is expected to have increased year over year. The Zacks Consensus Estimate for quarterly revenues is pegged at $2.64 billion, which indicates a rise of 7% from the prior-year quarter. BURL delivered a trailing four-quarter earnings surprise of 12%, on average.

Five Below (FIVE Quick QuoteFIVE - Free Report) presently has an Earnings ESP of +13.35% and a Zacks Rank of 3. FIVE’s top line is anticipated to advance year over year when it reports second-quarter fiscal 2025 results. The Zacks Consensus Estimate for its quarterly revenues is pegged at $997.3 million, which implies a 20.2% rise from the figure reported in the year-ago quarter.

The company is expected to register an increase in the bottom line. The consensus estimate for Five Below’s second-quarter earnings is pegged at 61 cents per share, up 13% from the year-ago quarter. FIVE delivered a trailing four-quarter earnings surprise of 42.3%, on average.

American Eagle Outfitters (AEO Quick QuoteAEO - Free Report) has an Earnings ESP of +5.00% and a Zacks Rank of 3 at present. AEO’s top line is anticipated to decline year over year when it reports second-quarter fiscal 2025 results. The Zacks Consensus Estimate for its quarterly revenues is pegged at $1.23 billion, which indicates a 4.8% decline from the figure reported in the year-ago quarter. 

The company is expected to register a decrease in the bottom line. The consensus estimate for AEO’s second-quarter earnings is pegged at 20 cents per share, down 48.7% from the year-ago quarter. AEO delivered a trailing four-quarter negative earnings surprise of 0.3%, on average.