Government cuts to food stamp benefits aren't making life easy for the nation's major dollar store chains.
Dollar General (DG) reported Thursday that third-quarter earnings came in at 84 cents a share, falling well short of Wall Street forecasts for 93 cents a share. Net sales rose 5% from the prior year to $5.32 billion, missing analysts estimates for $5.37 billion.
The sour news didn't stop there.
Dollar General's same-store sales, a key retail measure that reflects sales at stores open more than a year, dropped 0.1%. In last year's third quarter, which was prior to reductions in food stamp benefits by several states, Dollar General's same-store sales rose a solid 2.3%. Dollar General's main rival Dollar Tree (DLTR) has also seen sales growth slow sharply in the post inflated food stamp benefit world, with third-quarter same-store sales rising 1.7% vs. a 2.1% increase a year earlier.
Meanwhile, Dollar General reduced its profit outlook for the year, saying earnings will come in below its long-term goal of 10% to 15% growth. Dollar General's stock plunged as much as 8% in early trading Thursday to $71.57. Over the past six months, shares of Dollar General and Dollar Tree have fallen 22% and 5%, respectively.
In May, 43.5 million Americans were receiving food stamps, down 9% from the 2012 peak. Food stamp enrollment is on the wane as several states have ended benefits earlier than they were required. Seven states -- all Republican-led -- opted to end waivers for some enrollees that were created in the 2009 government stimulus package, despite the benefits being federally funded.