By Chelsey Dulaney

Dollar General Corp.'s profit edged above expectations for its second quarter, though revenue growth missed views despite continued gains in store traffic and transaction value.

Dollar General is seeing more people visit its stores and growth in profitable categories as its core customers benefit from things such as wage growth, lower unemployment and cheap gas.

Meanwhile, the company is bracing for heightened competition as rivals Dollar Tree Inc. and Family Dollar Stores Inc. merge and is ramping up spending on labor this year. Dollar General has said it plans to increase the hours allocated to employees to help improve the quality of stores and draw in traffic as big-box retailers like Target Corp. pick up traffic.

In the latest quarter, Dollar General's sales at existing locations grew 2.8%. The company said items such as candy and snacks, tobacco products and seasonal items also saw growth.

Analysts, however, had expected same-store sales to increase by 3.6%, according to Consensus Metrix.

Gross margin ticked up to 31.2% from 30.8% a year earlier amid higher inventory markups and lower transportation costs.

Overall, Dollar General posted a profit of $282.3 million, or 95 cents a share, up from $251.3 million, or 83 cents a share, a year earlier.

Sales grew 7.9% to $5.1 billion.

Analysts polled by Thomson Reuters had projected earnings of 94 cents a share and revenue of $5.14 billion.

The company backed its outlook for the year.

Write to Chelsey Dulaney at Chelsey.Dulaney@wsj.com

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(END) Dow Jones Newswires

August 27, 2015 07:37 ET (11:37 GMT)

Copyright (c) 2015 Dow Jones & Company, Inc.
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