Image Source: Unsplash

Quick question: When was the last time you saw a major retailer’s earnings per share jump 44% in a single quarter? That happened recently with Dollar General. And if you understand what’s happening here, you could make serious money in 2026.

Dollar General reported third-quarter earnings on Friday, and the stock was seen trading sharply higher. For those of us paying attention, this isn’t just another earnings beat — it’s a window into the bifurcated American economy, and a textbook example of how great fortunes are made when companies transition from horrible to just bad.

The Tale of Two Americas

Let me start with what Dollar General tells us about the average American consumer, because this matters more than most investors realize. While headline inflation numbers have cooled, lower-income families continue to struggle with elevated prices on everyday essentials. Dollar General’s core customer base (households earning under $40,000 annually in rural America) remains financially constrained.

These families are still making hard choices at the checkout counter, buying more food and consumables while cutting back on discretionary items like home goods and apparel. But here’s the crucial insight: they’re still shopping.

Dollar General reported growing market share in both consumables and non-consumables this quarter. When budgets tighten, value matters more than ever, and Dollar General’s value proposition resonates strongest in the 75% of America that lives outside major metro areas.

This isn’t just anecdotal. Same-store sales rose 2.5% this quarter, with customer traffic up 2.5% — a remarkable achievement given the macroeconomic headwinds facing their customer base.

From Disaster to Opportunity: What Went Wrong

To understand why Dollar General represents such a compelling opportunity today, you need to understand how spectacularly things fell apart. In 2022, Dollar General’s stock peaked above $260 per share. The stock eventually bottomed early this year at $66.43. That’s a stunning 74.7% decline over the course of roughly two years — long enough to cause even the most resolute investor to throw in the towel.

What happened? Management made a classic mistake: they assumed pandemic-era sales surges would continue indefinitely and massively over-ordered inventory. Stores became cluttered disaster zones with too much merchandise in the back rooms and on the shelves. The consequences cascaded:

• Theft skyrocketed because overstuffed stores were impossible to monitor
• Damaged merchandise mounted from inadequate storage space
• Forced discounting became necessary to clear excess inventory
• Customer experience deteriorated as stores became disorganized
• Employee turnover accelerated at all levels

The profit impact was devastating. Earnings per share collapsed from $10.68 in fiscal 2022 to barely $5-$6 per share in 2023-2024. Gross margins compressed. Operating expenses ballooned. The company that had been a steady wealth compounder for years suddenly looked broken.

The Turnaround Takes Hold

But here’s where the story gets interesting for investors. In late 2022, Dollar General brought back CEO Todd Vasos, who had successfully led the company from 2015-2022. Vasos immediately diagnosed the core problems and launched his “Back to Basics” initiative focusing on:

• Drastically reducing inventory levels
• Improving in-stock positions on key items
• Reducing shrink (theft)
• Simplifying store operations
• Increasing front-of-store employee presence

By early 2024, inventory was down 7% on a per-store basis. Shrink started declining. In-stock levels improved by approximately 180 basis points. Employee turnover dropped across all levels.

The results we saw this morning demonstrate the turnaround is now producing tangible financial results:

• Earnings per share of $1.28 vs. $0.89 a year ago, a 44% increase
• Operating profit up 31.5%
• Same-store sales up 2.5% with balanced growth across categories
• Market share gains in both consumables and non-consumables
• Gross margin up 107 basis points year-over-year

Management raised full-year guidance to $6.30-$6.50 per share and announced aggressive expansion plans for 2026, including approximately 4,730 real estate projects.

Making Money When Companies Go From Horrible to Just Bad

This is where I want to connect Dollar General to a broader investment principle I’ve written about before: some of the best returns come from companies transitioning from horrible to just bad.

When a quality business with strong fundamentals hits operational problems, the market tends to overreact. Investors extrapolate current troubles indefinitely. The stock gets crushed. But if management can fix the operational issues — even partially — the stock can rebound dramatically because expectations were set so low.

Dollar General still faces challenges. Their core customer remains financially strained. Margins aren’t back to peak levels. The stock has been trading at around $114, more than 55% below its 2022 highs above $260.
 

But that’s exactly why the opportunity exists.

The company doesn’t need to reach perfection to generate strong returns from here. It just needs to continue executing on the basics: clean stores, appropriate inventory levels, growing market share in a value-conscious environment, and modest margin expansion as operational improvements compound.

If Dollar General can get back to even $8-$9 in earnings per share over the next two to three years (still well below the $10.68 they earned in 2022), and the market assigns a reasonable 18-20x multiple, you’re looking at a stock trading in the $145-$180 range—a 25%-60% upside from recent levels.

How We’re Playing It

This turnaround story caught my attention weeks ago, and on Nov. 28, I set up an aggressive position in Dollar General for my Speculative Trading Program. Friday's earnings beat has our position up more than $3,600 as I write this note.

Trades like this are exactly why my program is up 82% year-to-date as of Wednesday’s close (Dec. 3, 2025). These returns come from an actual trading account with my own capital at risk (I don’t recommend anything I’m not personally invested in).

The strategy for Dollar General’s turnaround play was straightforward:

• Identify a quality company going through a temporary operational challenge
• Wait for management to demonstrate they’re fixing the problems
• Enter a position with defined risk parameters, and let the turnaround play out

The Bottom Line

Whether or not you’re interested in my program, Dollar General deserves a spot on your watchlist. The company is firing on all cylinders. Management has credibility. The operational improvements are tangible and measurable. The stock still has significant room to run as the turnaround gains traction.

More importantly, Dollar General serves as a real-time barometer for how America’s lower and middle-income consumers are managing. As long as value matters—and it will matter even more if the economy weakens further—Dollar General should continue taking market share and rebuilding profitability.

This is a company that still faces headwinds but is demonstrably improving. The stock could have a long way to run in 2026, even if the broader market faces challenges. That’s the kind of asymmetric opportunity I built my investment approach around: protecting capital first, but positioning for substantial upside when the risk/reward is favorable.

Here’s to growing and protecting your wealth.

More By This Author: