REVENUEBeat +0.9%
EPSBeat +23.4%
Actuals vs. estimates
| Metric | Actual | Consensus | Surprise |
|---|---|---|---|
| RevenueNet sales | $11.30B | $11.20B | ▲ Beat +0.9% |
| EPS(Diluted EPS, includes approximately $0.25 benefit from tariff refunds after related reinvestments) | $2.48 | $2.01 | ▲ Beat +23.4% |
Revenue — API Ninjas actual does not reconcile with a unique Quartr consolidated revenue
EPS — API Ninjas actual does not reconcile with a unique Quartr EPS basis
Verdict
- Net sales of $11.3bn beat the estimate by 0.9% and diluted EPS of $2.48 beat by 23.4%, up 33% year over year.
- Roughly $0.25 of that EPS came from tariff refunds after related reinvestments, and about 81 of the 127 basis points of gross margin expansion came from the same source.
- Same-store sales rose 3.5% on 2% traffic growth and 1.5% basket growth, the fifth consecutive quarter of traffic gains.
- Full-year EPS guidance was raised to $7.80-$8.00 and buybacks resume in Q3, with up to $700m planned for the second half.
Guidance & KPIs
| Item | New guidance | Prior guidance |
|---|---|---|
| FY2026 net sales growth | 4%-4.3% | — |
| FY2026 same-store sales growth | 2.5%-2.9% | — |
| FY2026 EPS | $7.80-$8, including the approximate $0.25 Q2 benefit from tariff refunds after related reinvestments | — |
| Second-half share repurchases | up to $700 million | — |
| Quarterly cash dividend | $0.59 per share for Q2 2026 | — |
| Shrink and damages contribution to gross margin | about 50 basis points of incremental expansion off the 2025 base | — |
Management commentary
- CFO Donny Lau raised full-year EPS guidance to $7.80-$8.00 and confirmed buybacks resume in Q3, up to $700m in the second half funded with cash on hand.
- Shrink and damages are now expected to add about 50 basis points of gross margin off the 2025 base, on top of the over 80 basis points already achieved in 2025.
- CEO Todd Vasos described the core customer as still stretched: "She comes more often, but she buys less on each trip."
- Management said Q3 has started strongly, with the traffic and ticket balance expected to hold through the second half.
- The DG Media Network was last quantified at $170m of annual volume and was not quantified for the quarter.
Quality of earnings
- Diluted EPS of $2.48 includes approximately $0.25 from tariff refunds after related reinvestments, and gross margin's 127 basis point expansion includes about 81 basis points from the same refunds.
- Operating margin rose 126 basis points to 6.8%, of which roughly 66 basis points came from tariff refunds after reinvestment.
Gotchas & watch items
- Full-year guidance reflects tariff levels in place today, and management said the tariff landscape continues to evolve.
- Fuel prices reaching $4 a gallon or above are pressuring both the core customer's budget and transportation costs into the second half.
- The 3.5% comp rests on traffic rather than basket: management describes the core customer shopping more often and buying less per trip.
- Up to $700m of second-half buybacks is now embedded in the raised $7.80-$8.00 EPS guide.