<p>From “<strong><a href="https://thescienceofhitting.com/p/dg-closing-the-gap">Dollar General: Closing The Gap</a></strong>” (March 2026):</p><p><em>“The past three years presented a slew of challenges for Dollar General, which led to material changes in their unit growth strategy, capital allocation priorities, and operational focus. What we’re left with on the back end is a company more effectively serving the needs of customers, as evidenced by traffic-driven comps growth. In addition, DG continues to narrow its product focus through SKU rationalization, optimizing the range to strike the balance between convenience and value… This is the right long-term strategy, one that positions DG to add value for customers, to simplify store / supply chain operations for employees, and to generate healthy returns for owners… I remain willing to increase my DG allocation if price action pushes my hand; [at] <$120, five-year return expectations would increase to ~15% per annum.”</em></p><p>While Dollar General reported its fourth consecutive quarter of traffic growth in Q1 FY26, at +1.4%, overall comps were relatively lackluster at +2.0%. Disappointingly, this result marked a reversal of the improved SSS results relative to Walmart that we’ve seen from DG over the prior 12 - 18 months.</p><div class="captioned-image-container"><figure><a class="image-link image2 is-viewable-img" href="https://substackcdn.com/image/fetch/$s_!w0bn!,f_auto,q_auto:good,fl_progressive:steep/https%3A%2F%2Fsubstack-post-media.s3.amazonaws.com%2Fpublic%2Fimages%2F9ee1b729-9e08-4db8-91d5-c029907672e8_915x666.jpeg" target="_blank"><div class="image2-inset"><source type="image/webp" /><img alt="" class="sizing-normal" height="666" src="https://substackcdn.com/image/fetch/$s_!w0bn!,w_1456,c_limit,f_auto,q_auto:good,fl_progressive:steep/https%3A%2F%2Fsubstack-post-media.s3.amazonaws.com%2Fpublic%2Fimages%2F9ee1b729-9e08-4db8-91d5-c029907672e8_915x666.jpeg" width="915" /><div class="image-link-expand"><div class="pencraft pc-display-flex pc-gap-8 pc-reset"><button class="pencraft pc-reset pencraft icon-container restack-image" tabindex="0" type="button"><svg fill="none" height="20" stroke="var(--color-fg-primary)" stroke-linecap="round" stroke-linejoin="round" stroke-width="1.5" viewBox="0 0 20 20" width="20" xmlns="http://www.w3.org/2000/svg"><g><title></title><path d="M2.53001 7.81595C3.49179 4.73911 6.43281 2.5 9.91173 2.5C13.1684 2.5 15.9537 4.46214 17.0852 7.23684L17.6179 8.67647M17.6179 8.67647L18.5002 4.26471M17.6179 8.67647L13.6473 6.91176M17.4995 12.1841C16.5378 15.2609 13.5967 17.5 10.1178 17.5C6.86118 17.5 4.07589 15.5379 2.94432 12.7632L2.41165 11.3235M2.41165 11.3235L1.5293 15.7353M2.41165 11.3235L6.38224 13.0882"></path></g></svg></button><button class="pencraft pc-reset pencraft icon-container view-image" tabindex="0" type="button"><svg class="lucide lucide-maximize2 lucide-maximize-2" fill="none" height="20" stroke="currentColor" stroke-linecap="round" stroke-linejoin="round" stroke-width="2" viewBox="0 0 24 24" width="20" xmlns="http://www.w3.org/2000/svg"><polyline points="15 3 21 3 21 9"></polyline><polyline points="9 21 3 21 3 15"></polyline><line x1="21" x2="14" y1="3" y2="10"></line><line x1="3" x2="10" y1="21" y2="14"></line></svg></button></div></div></div></a></figure></div><p>As we think about this comparison, note the increasing importance of Walmart’s e-commerce business, and in particular delivery: e-commerce contributed >500 basis points to Walmart U.S. comps in the past two quarters, or ~2x the contribution of 2 - 3 years ago. <a href="https://stock.walmart.com/_assets/_5813cf69129ed45d080396680f549a44/walmart/db/950/9988/annual_report/Walmart+2026+Annual+Report.pdf">In FY26</a>, eCommerce was a ~$100 billion business for Walmart U.S., accounting for <a href="https://x.com/TSOH_Investing/status/2062922519368061314?s=20">~21% of revenues</a>; for context, those figures were ~$18 billion and ~5%, respectively, in FY19.</p><div class="captioned-image-container"><figure><a class="image-link image2 is-viewable-img" href="https://substackcdn.com/image/fetch/$s_!0CnI!,f_auto,q_auto:good,fl_progressive:steep/https%3A%2F%2Fsubstack-post-media.s3.amazonaws.com%2Fpublic%2Fimages%2F83491949-8e1f-41f2-a6fc-100d65c34a78_915x667.jpeg" target="_blank"><div class="image2-inset"><source type="image/webp" /><img alt="" class="sizing-normal" height="667" src="https://substackcdn.com/image/fetch/$s_!0CnI!,w_1456,c_limit,f_auto,q_auto:good,fl_progressive:steep/https%3A%2F%2Fsubstack-post-media.s3.amazonaws.com%2Fpublic%2Fimages%2F83491949-8e1f-41f2-a6fc-100d65c34a78_915x667.jpeg" width="915" /><div class="image-link-expand"><div class="pencraft pc-display-flex pc-gap-8 pc-reset"><button class="pencraft pc-reset pencraft icon-container restack-image" tabindex="0" type="button"><svg fill="none" height="20" stroke="var(--color-fg-primary)" stroke-linecap="round" stroke-linejoin="round" stroke-width="1.5" viewBox="0 0 20 20" width="20" xmlns="http://www.w3.org/2000/svg"><g><title></title><path d="M2.53001 7.81595C3.49179 4.73911 6.43281 2.5 9.91173 2.5C13.1684 2.5 15.9537 4.46214 17.0852 7.23684L17.6179 8.67647M17.6179 8.67647L18.5002 4.26471M17.6179 8.67647L13.6473 6.91176M17.4995 12.1841C16.5378 15.2609 13.5967 17.5 10.1178 17.5C6.86118 17.5 4.07589 15.5379 2.94432 12.7632L2.41165 11.3235M2.41165 11.3235L1.5293 15.7353M2.41165 11.3235L6.38224 13.0882"></path></g></svg></button><button class="pencraft pc-reset pencraft icon-container view-image" tabindex="0" type="button"><svg class="lucide lucide-maximize2 lucide-maximize-2" fill="none" height="20" stroke="currentColor" stroke-linecap="round" stroke-linejoin="round" stroke-width="2" viewBox="0 0 24 24" width="20" xmlns="http://www.w3.org/2000/svg"><polyline points="15 3 21 3 21 9"></polyline><polyline points="9 21 3 21 3 15"></polyline><line x1="21" x2="14" y1="3" y2="10"></line><line x1="3" x2="10" y1="21" y2="14"></line></svg></button></div></div></div></a></figure></div><p>Here’s another way to frame the data, which provides a clearer perspective on how e-commerce is driving Walmart’s outperformance relative to DG:</p>
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