Fewer customers visited the dollar store chain. As Fred Katayama reports, reductions in food stamp coverage hurt sales at existing stores.
Fewer customers are visiting Dollar General, and that's hurting results. Quarterly sales at existing stores dropped. One factor keeping visitors away: reductions in food stamp coverage. About one million Americans are expected to lose their food stamp benefits by year-end due to changes in the program's criteria. And some of the states implementing those changes are in the South - the very region where many Dollar General stores are situated. That resulted in weak sales in seasonal, clothing, and home products. Also hurting same-store sales at the dollar store chain: deflation. Falling food prices have negatively impacted grocery sales. That also bit into profit at the U.S.' largest supermarket chain, Kroger. In a bid to win back market share, Dollar General has been cutting prices, intensifying a price war with Wal-Mart. The higher markdowns ate into profit, and earnings fell much more than expected. RBC analyst Scot Ciccarelli said, "Dollar Tree's performance looks particularly impressive following today's disappointing print by Dollar General." Dollar General shares fell sharply at the start of trading, roughly wiping out their nearly 8 percent gain this year.