Best Stock to Buy Right Now: Walmart vs. Dollar General
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It's a matchup between the world's largest retailer and its smaller discount store rival. In one corner, Walmart (NYSE: WMT) stock is having a banner year, up 54% amid a string of better-than-expected results. On the other side, Dollar General (NYSE: DG) has struggled to manage weak sales, sending shares lower by 51% year to date.
What does this night-and-day difference in the performance between these two consumer goods giants mean for each stock heading into 2025? Let's discuss whether shares of Walmart or Dollar General may offer the best buying opportunity right now.
The case for Walmart
Walmart investors have a lot to cheer about with the stock trading at a record high. Resilient macroeconomic conditions coupled with easing inflationary cost pressures and steps to improve operating efficiency have driven an earnings growth rebound.
In the last reported second quarter (for the period ended July 31), Walmart posted a 10% year-over-year increase in adjusted earnings per share (EPS) as the gross margin reached its highest level in nearly three years.
A major theme for the company has been its ability to pull bargain-seeking upper-income households into its stores, which management cited as contributing to its retail industry share gains. Second-quarter U.S. comparable sales climbed by 4.2% from the period last year, including momentum from the e-commerce business, where revenue was up 21%.
Trends internationally and in the Sam's Club segment have also been solid, leading Walmart to revise its full-year growth guidance higher. For fiscal 2025, the company expects adjusted EPS in a range from $2.23 to $2.37, up around 10% at the midpoint from 2024.
Ultimately, the attraction of Walmart as a potential investment is its leadership and global diversification with a case to be made that its outlook is as strong as ever.
The case for Dollar General
Sizing up Dollar General against Walmart is far from an apples-to-apples comparison. In this case, the company specializes in everyday household necessities through a smaller convenience store format. This is in contrast to Walmart's wider selection that includes big-ticket items like furniture and electronics.
Despite an aggressive growth strategy, increasing its retail square footage by 5.5% this year, Dollar General's results have disappointed. In its second quarter (for the period ended Aug. 2), same-store sales increased by just 0.5%, while its diluted EPS was down 20% from Q2 2023.
Management has pointed to a challenging economic environment, citing its core customers feeling financially constrained. This narrative is concerning, particularly next to Walmart, which is presenting a more positive industry assessment.