How is Walmart stock hitting an all-time high while Dollar General and Dollar Tree just hit 5-year lows?

Businesses face the same macroeconomic challenges: higher interest rates and selective consumer spending. But that doesn’t mean every retailer is seeing a drop in earnings.

Year to date, Walmart (WMT -0.42%) is the best performing component of Dow Jones Industrial Average. In its recent earnings release, it reported strong results and raised its guidance for the full year.

Meanwhile, general dollar (DG 2.70%) and The dollar tree (DLTR -2.88%) both reported disappointing results and cut their guidance for the full year. Both core consumer stocks are now hovering around five-year lows.

Here’s how Walmart continues to outshine the competition and why investors are so disappointed in Dollar General and Dollar Tree.

Image source: Getty Images.

Walmart is still in growth mode

Just last year, Walmart was in the midst of margin compression and slowing growth as it battled inflationary pressures and supply chain challenges. But Walmart has turned its business around in a relatively short period of time — forecasting record earnings for the full fiscal year. Meanwhile, Dollar General and Dollar Tree forecast negative earnings growth.

Data sources: Walmart, Dollar General, Dollar Tree.

Low-income earners have been hit particularly hard by higher interest rates and inflation, so they’re pulling back on spending even at dollar stores. Walmart has a different business model than dollar stores. Its product mix contains a wide variety of staples such as food, household goods and discretionary goods. Walmart’s goal is to offer the best price on all these goods while offering convenient services like free shipping on orders over $35 for Walmart+ subscribers. This mix of products and services helps Walmart attract a wide range of customers.

Walmart has done a masterful job of holding back the spending of lower-income consumers while capturing higher-income customers looking for value. Like most retailers, Walmart has higher margins on discretionary goods. Dollar stores, by default, don’t have high-ticket items, meaning they rely on high volumes.

Walmart CEO Doug McMillon said the following on the fiscal second quarter 2025 earnings call in response to an analyst question about lower versus higher revenue sales:

We’re seeing differences in behavior at the lower income levels, more focus on opening price points, month-end behavior looks different, and all the things you’d expect, but they still need us for the overall price points of the goods. And as for people with higher incomes, they can buy more discretionary goods and pay more for convenience, and we provide them all. So, you know, I think our future seems to have a distribution across income levels that is different from our past because of convenience. I think the Walmart+ membership, the delivery, the things we’re doing with the remodeling and the US stores, I think all of those things are coming together to give us a chance to continue to have growth with higher revenue levels, no matter what happens in the economy.

Walmart has ramped up capital spending to fund the build-out of Walmart+, store improvements, automation and even investments in artificial intelligence. It works to be more efficient in terms of operations while improving the customer experience in store and the convenience of curbside pickup and home delivery. The results show that these improvements are paying off and giving Walmart an edge over the competition.

Walmart’s diverse customer base and ability to go head-to-head with dollar stores have made it a winner even in a challenging environment.

Dollar General and Dollar Tree look really cheap

Even after lowering guidance, Dollar General and Dollar Tree have fallen so far that they’re cheaper than Walmart based on earnings multiples. Assuming each company hits the midpoint of its full-year guidance, Walmart would have a price-to-earnings ratio of 32.3, compared to 13.9 for Dollar General and 11.8 for Dollar Tree.

Dollar General and Dollar Tree appear to be trading at cheap bargain levels — making them worthy of consideration for investors looking to trade expenses for lower income. However, Walmart might still be the best long-term buy.

Long-term investors care more about what a company’s earnings will be in a few years than where they are today. By satisfying value-oriented customers and offering a new level of convenience, Walmart is entering its next phase of growth. And given that Walmart+ is still relatively new, I think it will continue to exceed expectations with in-store sales and online orders.

So while Walmart isn’t as cheap on a valuation basis, its earnings quality is much higher than Dollar General and Dollar Tree.

Walmart generates enough earnings to buy back stock, increase its dividend and reinvest in the business. Walmart only has 1.1%, which is too small to be considered a worthy passive income source. But Walmart’s most recent dividend hike was 9%, and there’s reason to believe we could see significant increases in the future as well.

Meanwhile, Dollar Tree does not pay a dividend, and Dollar General has nearly tripled its payout since it began its dividend program in 2015. Dollar General’s dividend expense is less than half of its estimated earnings, implying that that the dividend is easily accessible.

In this regard, Dollar General has an edge over Dollar Tree and may appeal more to passive income investors with its 2.9% yield than Walmart, but Walmart is the overall better business.

Walmart deserves its premium rating

Walmart is firing on all cylinders when so many of its peers are struggling, which is a big reason why the stock is on fire. Dollar Tree and Dollar General could be attractive turnaround plays, but some investors may want to wait for concrete signs of progress instead of simply hoping both companies get back on track.

Walmart is a great example of the importance of brand strength, an effective management team, and a willingness to make investments that can help accelerate future growth. Walmart may no longer be a bargain stock, but it’s also a much better deal than it used to be — which is why Wall Street is putting such a premium on the stock right now.