Best Dollar Store Stock to Buy: Dollar Tree or Dollar General?

Dollar General and Dollar Tree are trading at discounted stock prices in 2025 due to prior sluggish performance, but both are showing signs of a turnaround; however, Dollar General is the more compelling buy currently. Dollar General raised its revenue and earnings guidance, driven by store remodels and digital channels, while Dollar Tree reaffirmed its previous outlook, raising concerns about potential Q2 earnings decline of up to 50%. Analysts are raising price targets for Dollar General, while those for Dollar Tree may be tempered due to the Q2 caution.

Analysis

Discount retailers Dollar General (DG) and Dollar Tree (DLTR) are currently trading at depressed valuations in 2025, reflecting prior operational sluggishness, but both are actively pursuing turnaround strategies. While both companies reported positive comparable sales and outperformed in Q1—with DLTR's core business growing 11.3% and DG a solid 5.3%—their forward-looking guidance presents a clear divergence. Dollar General has raised its mid-point guidance for both revenue and earnings, underscoring confidence in its accelerated store remodels and digital channel initiatives, which are reportedly driving momentum; analysts are correspondingly lifting price targets, and while the consensus average price target of $108.19 suggests a slight downside from its early June price of $111.89, high-end targets indicate potential double-digit upside and a "Moderate Buy" rating supports a positive outlook. Conversely, Dollar Tree, despite a strong Q1, only reaffirmed its existing outlook and, while lifting its full-year EPS midpoint due to a reduced share count, cautioned that Q2 earnings could decline by as much as 50%. This has led to a more cautious analyst stance ("Hold" rating, average price target of $85.42 implying a 3.61% downside from its $88.62 price) and a negative per-ticker sentiment, contrasting with DG's positive sentiment. Both companies maintain healthy balance sheets and generate positive cash flow, with DG offering a dividend yield over 2% and DLTR focusing on share repurchases. The impending sale of DLTR's Family Dollar unit is expected to close in the current quarter, which could be a future catalyst, but near-term earnings volatility remains a significant risk for DLTR. Both entities face macroeconomic headwinds such as tariffs and potential consumer pullback.

Key Decisions for Investors

• Given Dollar General's stronger revenue and earnings guidance, coupled with its accelerating turnaround initiatives such as store remodels and digital channel enhancements, investors might consider it a more favorable near-term investment compared to Dollar Tree within the discount retail sector.
• Investors should closely monitor Dollar Tree's Q2 earnings for the actual impact of anticipated headwinds, particularly the potential 50% decline, and the effectiveness of management's mitigation strategies, as a more certain outlook later in the year, potentially post-Family Dollar divestiture, could present a tactical entry point.
• Evaluate the different capital return profiles: Dollar General offers a reliable dividend yielding over 2% and a history of share buybacks, while Dollar Tree currently focuses on reducing its share count, which will be a key factor post the Family Dollar sale.
• Remain cognizant of macroeconomic risks, including tariffs and shifts in consumer spending patterns, which could impact the profitability and growth trajectory of both discount retailers despite their value-oriented business models.