Great ResignationInflationSupply ChainsLeadership

Dollar Store Stocks Drop After President Trump’s Budget Proposes Slashing Food Stamp Payouts

February 12, 2018, 9:26 PM UTC

A Trump administration proposal to reduce food-stamp benefits is casting a cloud over U.S. dollar-store chains.

Shares of Dollar Tree Inc. and Dollar General Corp. both dropped on Monday after President Donald Trump unveiled the plan, which would slash cash payments and substitute them with packages of food — potentially one of the biggest shake-ups in the history of the Supplemental Nutrition Assistance Program, or SNAP.

The dollar chains are particularly vulnerable to the changes because they cater to less affluent shoppers. Dollar General and Dollar Tree’s Family Dollar division have signaled that food stamps account for roughly 5 percent of sales, according to Gordon Haskett Research Advisors analyst Chuck Grom.

But the changes — if implemented — would extend to a broad swath of the grocery industry, including Walmart Inc. and Kroger Co. The food-stamp program served 42.2 million people during the 2017 fiscal year, with many spending the benefits at supermarkets.

“Whenever the low-income consumer feels pressured, there’s going to be an effect,” said Poonam Goyal, an analyst at Bloomberg Intelligence.

Dollar Tree fell as much as 3.7 percent to $103.68, while Dollar General was down 4.9 percent to $93.48. The declines largely wiped out gains by the two companies this year.

The plan to overhaul SNAP would save a projected $214 billion over a decade, according to the administration. It would give all households receiving more than $90 a month in cash a food-aid package that would include items such as shelf-stable milk, peanut butter, cereal and meat.