The General Keeps Marching... 1Q Results Better-Than-Feared

Research evidence excerpt

The General Keeps Marching... 1Q Results Better-Than-Feared

June 2, 2026

(+) Seasonal Mix Ticks up +30bps YoY as Price Moves Higher. DG's discretionary category mix was up +40bps YoY

to 17.6% of sales, with Seasonal (+6.0%) and Apparel (+6.7%) categories both outpacing overall store growth +3.4%.

Seeing these categories gain share in the box, while also having a transaction-driven ticket, is encouraging. This could

partially be due to tax refunds in the quarter, but if DG can sustain these mix shifts, it should be a meaningful tailwind

to margins over time. Recall the team is targeting 100bps of mix improvement by 2027.

(+) Sales Growth Continues to Outpace Inventory Growth. Inventory was up +0.7% in 1Q vs -5.7% in 4Q, and lapping

a -5.0% in 1Q. The sales growth of +3.4% suggests continued improvement in inventory turns (4.5x in 1Q vs 4.3x in

1Q25) which is ultimately important for improving store operations.

Top Questions for Call: 1) Has the momentum continued QTD, and how sustainable is it?; 2) Cadence of the SSS guide

throughout the quarter/year?; 3) Where have project Renovate and Elevate remodels comp lifts been trending? If below

target how can we adjust the program for the next cohort; 4) How much shrink, damage, and tariff recapture is embedded

in the guide?; 5) Approach to share repurchases with FCF improving?; 6) What are you seeing from higher gas prices so

far?; 7) How fast did the retail media business grow in 1Q and outlook for this year? 8) Any updates on the tax credit

issue? And could it be reinstated?; 9) Any thoughts on a step up in promos and how that has impacted trends in 1Q

or the 2QTD trends?

Exhibit 4 - Next Stop for DG is the 50DMA at $115; Options Market Implies an almost 10% move in the stock on

earnings...

Source: Wolfe Research, Bloomberg