The fierce competition between retail titans is heating up. Walmart (NYSE: WMT) has seen its stock soar by 54% this year, outperforming expectations. In stark contrast, Dollar General (NYSE: DG) has experienced a 51% drop in its share price due to sluggish sales.

How does this striking contrast impact the investment outlook for 2025? This article explores the potential of Walmart versus Dollar General as investment choices for the current market.

Why Walmart Stands Out

Investors in Walmart have plenty of reasons to be optimistic. The stock is currently at an all-time high, supported by robust economic conditions, declining inflation costs, and improved operational efficiency that led to a rebound in earnings growth.

In its most recent second quarter, which ended on July 31, Walmart reported a 10% increase in adjusted earnings per share (EPS) compared to the previous year, with its gross margin reaching the highest point in nearly three years.

A key success factor for Walmart has been attracting higher-income shoppers looking for bargains. The company recorded a 4.2% rise in U.S. comparable sales year-over-year, bolstered by a 21% boost in e-commerce revenue.

International sales and performance in the Sam’s Club segment have also shown strength, prompting Walmart to raise its full-year growth forecast. For fiscal 2025, the company anticipates adjusted EPS between $2.23 and $2.37, marking a 10% increase at the midpoint from 2024.

This solid outlook makes Walmart an attractive option for investors, showcasing strong leadership and a global reach.

Image source: Getty Images.

What to Consider About Dollar General

Comparing Dollar General to Walmart isn’t straightforward. Dollar General focuses on everyday household essentials through more compact stores, whereas Walmart offers a broader range of products, including larger items like electronics and furniture.

Despite ambitious growth plans that include a 5.5% increase in retail space this year, Dollar General’s results have fallen short. In its second quarter, ending on August 2, same-store sales rose by only 0.5%, and diluted EPS dropped by 20% from the same period in 2023.

Management has attributed the underperformance to a challenging economic landscape that has put financial pressure on its core customers. This poses a stark contrast to Walmart’s positive performance narrative.

Nonetheless, Dollar General has fundamental strengths worth noting. The company remains profitable and generates positive free cash flow, backed by a sound balance sheet.

The company is shifting its focus back to core operations by improving product offerings, adjusting inventory, and tackling supply chain issues to achieve sustainable growth. Monitoring its ability to stabilize sales and enhance margins will be critical in the upcoming quarters, as these factors could trigger a price recovery.

Investors may find Dollar General appealing due to its reduced stock price, trading at 14 times its projected EPS for the year, compared to Walmart’s 33 times. Additionally, Dollar General offers a 3% dividend yield, whereas Walmart’s is just 1%.

DG PE Ratio (Forward) data by YCharts

The Verdict: Walmart is the Preferred Choice