Dollar General Thrives Amidst S&P 500’s Stagnation in 2025
The S&P 500 (SNPINDEX: ^GSPC) has shown little movement so far in 2025, yet the journey has been captivating. Despite the ongoing market correction, Dollar General (NYSE: DG) stands out. While the S&P 500 index has dipped, Dollar General shares have surged by approximately 15% during this same period.
Before making any purchasing decisions regarding Dollar General’s strong performance, it’s essential to examine an overlooked aspect of its growth narrative.
Understanding Dollar General’s Business Model
In a broad sense, Dollar General operates as a retailer with a focus on low-priced products. It primarily serves less affluent markets where larger retailers, such as Walmart and Target, remain absent. The company’s mission is to provide a blend of convenience and affordability for its consumers.
Image source: Getty Images.
Importantly, low price points do not equate to the lowest overall costs. For instance, Dollar General offers individual rolls of toilet paper at low prices, but these may not always compete with bulk purchases from big-box retailers. The company mainly attracts customers who may struggle to afford bulk items or prefer not to travel further distances to larger stores.
At present, Dollar General’s business approach resonates with investors on Wall Street. This model tends to excel during economic downturns. Concerns about a possible U.S. recession in 2025 due to geopolitical tensions and trade tariffs add weight to this analysis.
SPY data by YCharts
Dollar General’s Revenue Breakdown
Interest in Dollar General is understandable as its primary customer base—lower-income shoppers—will continue to seek affordable options. Additionally, higher-income customers may opt to purchase lower-priced items in light of economic fears. An in-depth look reveals more about Dollar General’s financial performance.
Dollar General primarily sells consumer staples, which account for 82.2% of its sales as of 2024. The remaining revenue stems from seasonal items (10%), home products (5.1%), and clothing (2.7%). These latter categories are crucial for the company’s profitability due to their higher margins compared to staples.
DG data by YCharts
However, a trend poses challenges: the percentage of sales from consumer staples has increased from 79.7% in 2022 to 82.2%. In contrast, sales from higher-margin categories have seen declines during this period.
While these changes may seem minor, they can significantly impact a retailer’s bottom line, particularly one catering to lower-income customers. Although Dollar General’s sales in essentials are rising, this shift is contributing to declining profit margins, as evidenced by its stock performance.
Dollar General’s Strategic Adjustments
With Dollar General emerging as a safe haven in uncertain economic times, there are underlying issues to consider. The company is currently implementing cost-cutting measures, adjusting its product offerings, and upgrading its stores to better its performance.
This presents a long-term investment opportunity for discerning investors. However, if your interest in Dollar General is solely based on expectations of recessionary success, you might overlook vital growth challenges tied to increasing sales of lower-margin products.
Is Dollar General Worth a $1,000 Investment Now?
Before investing $1,000 in Dollar General, keep the following in mind:
The Motley Fool Stock Advisor analyst team has pinpointed what they consider the 10 best stocks to buy currently—and Dollar General is not on this list. The selected stocks are projected to deliver significant returns.
For context, consider when Netflix was included on December 17, 2004; a $1,000 investment would now be worth $642,582.
Similarly, Nvidia made the list on April 15, 2005; that same $1,000 would now be valued at $829,879.
It’s worth noting that Stock Advisor boasts a total average return of 975%, far surpassing the S&P 500’s 172%.
*Stock Advisor returns as of May 12, 2025
Reuben Gregg Brewer has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Target and Walmart. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
