Photographer: Luke Sharrett/Bloomberg

Dollar-Store Chains Tumble After Food-Stamp Cuts Hurt Sales

Shares of Dollar General Corp. and Dollar Tree Inc. tumbled on Thursday 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.

Ending Waivers

Food-stamp enrollment is falling in part because some states are ending benefits earlier than they were required to. Seven states, all led by Republicans, decided year to end waivers for some able-bodied recipients that were made available in the 2009 federal stimulus bill, even though the benefits are federally funded.

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.

“We remain focused on our long-term strategy to invest for growth while also returning cash to shareholders through consistent share repurchases and anticipated quarterly dividends,” Vasos said.

At Dollar Tree, management now expects sales of about $20.7 billion to $20.9 billion. It had previously predicted a range as high as $21.1 billion.

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