Why UBS thinks Dollar General the best retailer for current economic environment

Dollar General Corp (NYSE: DG) rallied more than 15% this morning after reporting better-than-expected earnings for its fiscal Q1.  

Investors have rewarded the DG share because the retailer raised its full-year guidance as well, indicating Americans are turning to discount stores amidst fears of a slowdown ahead.

Including today’s gain, Dollar General stock is up more than 60% versus its year-to-date low.   

Is there any upside left in Dollar General stock?

Despite significant gains in recent months, Michael Lasser, a senior UBS analyst, remains as bullish as ever on DG shares for the remainder of 2025.

In fact, “there’s no better retailer” than Dollar General for the current macroeconomic landscape, he told CNBC in an interview this week.

The numbers the discount retailer recorded today sure bear good news for its shareholders. However, the underlying reason for its quarterly strength may be less encouraging for the broader economy.

According to the UBS analyst, the growing success of Dollar General reflects a broader consumer trend of trading down, which raises concerns about the resilience of the broader economy.

Note that a healthy 2.13% dividend yield makes Dollar General stock all the more exciting to own in 2025.

DG shares are well-positioned to navigate tariffs

Lasser cited tariff-related cost pressures and a constrained consumer as factors making discount shopping more appealing.

In his CNBC interview, he described DG’s strong domestic supply chain, which reduces exposure to tariffs, as a competitive advantage, allowing the company to maintain its value proposition even amidst price adjustments.

Dollar general is still going to look relatively attractive on both an absolute and relative basis. So, the value proposition in the mind of the consumer should still be quite good.

UBS currently has a “buy” rating on DG shares with a price target of $120, which indicates potential for another 10% gain from current levels.

Temu, Shein’s loss may translate to Dollar General’s gain

Investors should also note that recent regulatory changes are playing in favour of Dollar General as well.

For example, new restrictions on duty-free imports are hurting Chinese e-commerce platforms like Temu and Shein. As they now face steeper costs to ship goods into the US, DG becomes an even more compelling option for budget-conscious shoppers.

Michael Lasser also expects the discount store chain’s continued expansion, especially in rural areas, to further solidify its role as a staple of the American retail landscape.

“We’re over-boxed as a nation, but as other retailers close, it puts more volume in the hands of well-positioned players like Dollar General,” he added.

That said, other Wall Street analysts do not share Lasser’s optimism on Dollar General stock. The consensus rating on DG shares currently sits at “hold,” only with the mean target of about $94, indicating potential downside of nearly 15% from current levels.

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