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Bloomberg
Shares of Dollar General Corp. and Dollar Tree Inc. tumbled after the discount retailers posted disappointing sales, a sign that cuts in food-stamp programs are taking a toll.
Dollar General’s second-quarter revenue and profit both missed analysts’ estimates. Its same-store sales — a closely watched measure — grew just 0.7 percent in the period, compared with the 2.6 percent gain predicted by analysts. Dollar Tree, which acquired rival Family Dollar Stores Inc. last year, reduced its annual sales forecast.
Enrollment in the Supplemental Nutrition Assistance Program, known as SNAP, has been declining — a trend that may disproportionately affect dollar-store chains. In May, 43.5 million Americans were receiving food stamps, down 9 percent from the 2012 peak. Dollar General Chief Executive Officer Todd Vasos also blamed pressure on food prices and heavier competition for the slowdown.
“Retail food deflation and a reduction in both SNAP participation rates and benefit levels, coupled with unseasonably mild spring weather, proved to be stronger than expected headwinds to our business,†he said in a statement.
Dollar General plunged as much as 14 percent to $79.14 in New York trading, its worst decline since it began trading in 2009. The shares had been up 28 percent this year before Thursday. Dollar Tree, meanwhile, fell as much as 8.3 percent to $87.04. It had been up 23 percent in 2016 before the tumble.
Dollar General’s earnings amounted to $1.08 a share last quarter, excluding some items. Analysts had predicted $1.09 on average. Its net sales were $5.39 billion, short of the $5.5 billion estimate.
To reward investors, the company’s board approved an additional $1 billion in share repurchases, bringing the total authorization to $1.4 billion.